Nick Scali Ltd (ASX: NCK) operates as one of the most recognisable companies in the consumer discretionary sector.
It is one of Australia's largest furniture retailers competing within the middle to upper end of the Australian furniture market. It also has a growing global presence via its UK entry.
In general, it has been a tough year for consumer discretionary shares. Inflation and high interest rates have impacted consumer spending.
This has been reflected in the performance of Nick Scali shares, which are down over 30% in 2026.
However, a new report from Bell Potter has suggested Nick Scali shares may have been oversold, creating a buy-low opportunity.
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Strength into close of FY26 – cautious on FY27
In yesterday's report, Bell Potter said it expects Nick Scali to finish FY26 strongly.
Recent sales indicators have been positive, giving the broker confidence that the company's seasonally strong fourth quarter met expectations.
However, Bell Potter is more cautious about FY27 because consumer confidence is weak in both Australia and the UK, especially for big-ticket household purchases like furniture.
The broker expects challenging trading conditions over the next nine months and believes FY27 will be the low point in the retail cycle.
Even so, Bell Potter expects Nick Scali to perform better than the average retailer during this difficult period.
There are also some early signs that improving housing activity in Australia and better industry trends in the UK could support a gradual recovery.
Bell Potter has reduced its FY27 and FY28 earnings forecasts, mainly because it now expects slower sales growth in the UK than previously forecast.
While our FY26e estimates remain unchanged, we apply some conservatism to our forward estimates within our revenue assumptions for NCK's mid-market brand Plush in Australia and in the UK. Majority of our earnings changes are driven by revenue assumptions in the UK vs our previous assumptions for a sizable ramp-up in average store revenues.
Price target reduced but upside remains
Based on this guidance, Bell Potter has reduced its price target on Nick Scali shares to $22.00 (previously $25.00).
It has retained its buy recommendation.
Despite lowering its target, the broker still forecasts over 36% upside from current levels.
With a cautiously optimistic view on the broader Consumer Discretionary sector and looking through to mid-term opportunities, we continue to favour category outperformers such as NCK and see lower risk on margins in manoeuvring revenue growth vs other retailers in our coverage.
This sees us sitting ahead of median Consensus in FY27/28e (below in FY26e). We view NCK among the highest quality retailers in our coverage, with a stable market share in ANZ and UK offering sufficient growth levers.
