S&P/ASX 200 Index (ASX: XJO) stock Nick Scali Ltd (ASX: NCK) has endured a tough 12 months.
Nick Scali is one of Australia's largest furniture retailers, competing in the middle to upper end of the Australian furniture market and expanding its global presence through its UK entry.
Its share price has come under heavy pressure this year and is down almost 28% in 2026.
However, a new report from Bell Potter indicates there could be light at the end of the tunnel following FY26 results released late last week.
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What did the company report?
The ASX 200 company released full-year results last Friday, which included:
- Group revenue up 4% to $516.7 million
- Group net profit after tax (NPAT) rose 22% to $75.7 million
- EBITDA increased, with strong gross margin improvement (up 210 basis points to 65.1%)
- Australia and New Zealand NPAT up 10% to $80.5 million
- UK segment improved: second-half profit of $0.8 million after first-half loss
- Fully-franked final dividend of 39 cents per share declared
Investors reacted positively to the news as the share price climbed on results day.
Speaking on the results, Anthony Scali, Executive Chair and CEO, said:
FY26 was another strong year for Nick Scali, with group Net Profit After Tax increasing 22% and group revenue growing 4% despite a subdued retail environment. The group delivered a 210 basis point improvement in gross margin, reflecting disciplined pricing, sourcing and inventory management.
What is Bell Potter's view?
In yesterday's report, the team at Bell Potter said key wins in the result were strong gross margins and UK EBIT/NPAT profitability during 2H26.
However, the ANZ business is weakening, with 2H written sales orders down 3.7% year on year and the first five weeks of FY27 showing flat growth, suggesting the difficult consumer environment is persisting despite resilient average transaction values.
The UK is the standout, with written sales orders up 35% in the first five weeks and management seeing potential for 60 to 70 stores.
Overall, the report suggests near-term earnings pressure from Australia is being partly offset by strong margins and an increasingly attractive UK growth opportunity.
Strong upside for ASX 200 stock
Based on this analysis, Bell Potter slightly reduced its price target on Nick Scali shares to $21 (previously $22).
Despite lowering the target, this still indicates an upside potential of almost 23% over the next 12 months.
With a cautiously optimistic view on the broader Consumer Discretionary sector and looking through to CY27 opportunities, we see NCK's gross margins better placed vs our coverage in a potential downside than expected in our revenue assumptions. We view NCK among the highest quality retailers in our coverage and UK offering sufficient growth levers.
