Nick Scali Faces $13.6m UK Loss Amid Store Refurbishments and Leadership Shift

Strong Financial Performance Amid Strategic Expansion

Nick Scali Limited closed FY25 with an underlying profit of $62 million, reflecting solid operational execution across its core markets of Australia and New Zealand (ANZ) and early-stage investment in the United Kingdom (UK). The company successfully completed a $58.6 million equity raise initiated in FY24 to fund its acquisition of Anglia Home Furnishing Limited, marking a significant milestone in its international growth ambitions.

While revenue in ANZ experienced a slight dip of 1.4% to $453.5 million, total written sales orders increased by nearly 3%, buoyed by a strong 7.3% uplift in the second half. Gross margins held steady at 65%, despite unexpected shipping cost pressures in the first half. However, operating expenses rose by $6.1 million, driven mainly by property and employment costs, alongside a one-off $2.8 million freight forwarder failure cost.

UK Challenges and Progress

The UK operation, newly acquired in May 2024, reported $41.8 million in revenue but posted a net loss of $13.6 million after tax. This loss was largely attributed to extensive store refurbishments, rebranding efforts, and the clearance of legacy product lines, which caused prolonged store closures and business disruption. Encouragingly, gross margins in the UK improved significantly to 47.1% for the year and 51.8% in the second half, up from approximately 41% prior to acquisition.

Management has been actively streamlining overheads, restructuring distribution, and enhancing retail leadership in the UK. Early signs of recovery are evident, with August and September sales orders in Nick Scali-branded UK stores up 10% compared to the previous Fabb-branded period. The company expects UK losses to narrow in the second quarter of FY26 as refurbishments conclude and trading normalises.

Operational Expansion and Cashflow Strength

Nick Scali expanded its store network to 130 locations by June 2025, adding two new showrooms in ANZ and converting 11 UK stores to the Nick Scali brand. The company also invested $14.6 million in property and capital projects, including refurbishments, new store openings, and distribution centre developments in Western Australia and South Australia.

Cash generation remained robust, with $54.7 million generated from operating activities and cash reserves of $101 million at year-end. Borrowings were stable at $71.7 million, with ample covenant headroom. The company returned $53.8 million to shareholders through dividends, including a fully franked final dividend of 33 cents per share, bringing the total FY25 dividend to 63 cents per share.

Leadership Transition and Positive Outlook

After 21 years as Chair, John Ingram retired, passing the baton to Managing Director Anthony Scali, who was appointed Executive Chair to lead the company’s next growth phase. To maintain governance balance, Bill Koeck was named Deputy Chair and Lead Independent Director, while new board member Niran Peiris brings additional finance and risk expertise.

Looking ahead, FY26 has started strongly with ANZ sales orders up 11.6% in the first quarter and UK sales improving as store refurbishments complete. The group expects statutory net profit after tax of $33-35 million in H1 FY26, supported by continued revenue growth and margin expansion. The company plans to open five new stores in ANZ during FY26, further underpinning its growth trajectory.