Nick Scali Faces Continued UK Losses as Freight Disruptions Hit ANZ Profits

Steady Growth in ANZ Amid Operational Challenges

Nick Scali Limited has delivered a mixed but largely positive FY25 performance, with its core Australia and New Zealand (ANZ) business showing resilience despite a slight dip in revenue and profit. Written sales orders in ANZ grew by 2.8% over the year, accelerating to 7.3% in the second half, reflecting a strong recovery in consumer demand. The company maintained a robust gross profit margin of 65%, underscoring its pricing discipline and product appeal in a competitive market.

Online sales were a standout, surging 21.8% to $42.4 million, driven by enhancements to the eCommerce platform. This digital momentum is a critical growth lever as consumer shopping habits continue to evolve. However, underlying net profit after tax (NPAT) in ANZ declined by 12.3% to $73.2 million, impacted by higher operating expenses, including increased employment costs and a $2.8 million hit from freight forwarder disruptions in the first half.

UK Expansion – Progress Amid Losses

The UK segment remains a work in progress. The group reported an underlying net loss after tax of $11.2 million, widening from the prior year, largely due to ongoing costs associated with store refurbishments and integration. The refurbishment and rebranding program is well underway, with 12 stores now transformed into Nick Scali outlets. Encouragingly, gross margins in these rebranded stores have improved significantly, reaching 58% in May and June compared to 42% at acquisition.

Despite the losses, the margin improvement signals that the UK strategy is beginning to take hold. The company expects to complete the refurbishment of all remaining stores by the first half of FY26. However, losses are anticipated to continue until the rollout is complete and store sales stabilize.

Dividend and Store Network Developments

Reflecting confidence in its underlying business, Nick Scali declared a fully franked final dividend of 33 cents per share. The company also expanded its footprint with new store openings in Australia, including a Nick Scali store in Artarmon, NSW, and Plush stores in Melton, Newcastle, and Prospect, NSW. Meanwhile, the UK closed its Peterborough store as part of network optimisation.

Looking ahead, the company sees long-term potential for up to 86 Nick Scali stores and 90-100 Plush stores in ANZ, though the UK store network’s growth remains uncertain. The outlook for FY26 is cautiously optimistic, with July sales orders up 7.7% year-on-year and further store openings planned.

Navigating Challenges and Opportunities

Nick Scali’s FY25 results highlight a company balancing steady growth in its established markets with the complexities of international expansion. The ANZ business remains solid, supported by strong online growth and disciplined margin management. The UK venture, while loss-making, shows promising signs of margin recovery as the rebranding program progresses.

Investors will be watching closely how quickly the UK turnaround can translate into profitability and whether the company can sustain its momentum in ANZ amid rising costs and supply chain challenges. The freight forwarder disruption serves as a reminder of the operational risks inherent in global retail supply chains.