Nick Scali delivered a sharp recovery in FY26 earnings, with net profit rising 31.2% to $75.7 million as gross margins widened and the UK loss narrowed. The furniture retailer is entering FY27 with a larger showroom network, a new distribution centre and four further ANZ openings planned.
- Revenue up 4.3% to $516.7 million
- Gross margin expands 210 basis points to 65.6%
- UK loss narrows to $4.8 million after showroom rebranding
- Operating cash flow rises to $154.4 million
- Fully franked final dividend of 39 cents per share declared
Margin expansion drives FY26 earnings rebound
Nick Scali Limited (ASX:NCK) turned a modest sales increase into a much larger profit recovery in FY26. Revenue rose 4.3% to $516.7 million, while statutory net profit after tax climbed 31.2% to $75.7 million. Gross margin expanded by 210 basis points to 65.6%, which the company attributed to disciplined pricing, sourcing and inventory management.
Earnings per share followed the same trajectory, rising to 88.5 cents from 67.5 cents. Underlying NPAT increased 22.1% after allowing for the prior year’s restructuring and freight-forwarder costs, giving a cleaner comparison than the headline statutory growth rate.
ANZ remains the earnings engine
Australia and New Zealand supplied the bulk of the improvement. Revenue increased 5.1% to $476.7 million, written sales orders rose 2.7% to $472.5 million and gross margin reached 66%, up from 65% a year earlier. ANZ net profit after tax rose to $80.5 million, despite higher employment costs and additional marketing investment.
The early FY27 read-through is more restrained. Written sales orders were flat for the first five weeks against a high-growth comparison period, although the four stores opened during FY26 and two opened in July are expected to contribute as they mature. Management expects another four ANZ showrooms to open during FY27.
UK refurbishment improves the economics
The UK remains loss-making, but the numbers are moving in the intended direction. Sixteen showrooms have now been converted to the Nick Scali brand and format, with the refurbishment and rebranding programme completed in December 2025. Written sales orders jumped 31.4% to $45.0 million, while gross margin surged to 60.3% from 47.1%.
Revenue fell 4.3% to $40.0 million because store closures disrupted the first half, but the statutory loss narrowed materially to $4.8 million from $13.6 million. The first five weeks of FY27 brought a further 35% increase in written sales orders, and one new UK store is expected to open in October. That progress is also the central test behind the $32.8 million of UK goodwill: the annual report says impairment would arise if the five-year revenue CAGR fell below 4.9%, gross margin dropped below 57%, or the discount rate rose by more than 2.7%, with other assumptions held constant.
Cash generation funds stores and shareholder returns
Net cash from operating activities rose 33.7% to $154.4 million, helping fund $22.0 million of property, plant and equipment purchases, including the Campbelltown acquisition, showroom refurbishments and land in South Australia for a new distribution centre. Construction of that facility began during the year and is expected to finish in the first half of FY27.
Cash and deposits ended the year at $106.6 million, while net cash after borrowings was $34.9 million. Borrowings were unchanged at $71.7 million, although the group’s current liabilities exceeded current assets, partly because customer deposits are recorded as deferred revenue before furniture is delivered. The company also disclosed a $22 million Richmond retail property acquisition expected to be debt-funded, creating a further capital allocation point for FY27.
Dividend rises as climate reporting begins
The board declared a fully franked final dividend of 39 cents per share, taking FY26 dividends declared to 78 cents per share. The final payment is scheduled for 22 October 2026. During FY26, Nick Scali returned $61.6 million to shareholders through the prior year’s final dividend and the FY26 interim payment.
The annual report also contains the group’s first sustainability report under AASB S2. Nick Scali reported baseline Scope 1 and Scope 2 emissions of 7,735 tonnes of carbon dioxide equivalent, but has not yet adopted a transition plan or formal emissions-reduction target. KPMG provided limited assurance over specified disclosures, and the report did not include Scope 3 emissions under the first-year transition relief.
Bottom Line?
The earnings recovery is tangible, but FY27 will test whether stronger UK orders convert into sustained profit while new property and distribution investment increases the capital burden.
Questions in the middle?
- Can the UK showroom network move from a narrower loss to sustained profitability as refurbishment benefits flow through?
- Will flat early FY27 ANZ orders improve as the newly opened stores mature and four more locations are added?
- How will the Richmond acquisition and South Australian distribution centre affect borrowings, cash returns and operating flexibility?