Nick Scali delivered 1H26 EBIT of $68.5 million, up 25%. NPAT of $41 million was ahead of both guidance and Visible Alpha consensus. The group gross margin increase of 318bp, surprised to the upside and resulted in 65.4% for the half. Nick Scali’s ANZ trading update for January like-for-like written sales orders at 3.1% highlighted a deterioration in momentum. We have lowered our sales forecasts but lifted gross margin expectations.

Nick Scali delivered EBIT of $106 million, down 18%. Gross margins in ANZ were down 100bp but remain elevated on history at 65%. The UK losses at $9.6 million exceeded expectations, with losses guided to continue. Our EPS revisions are a downgrade of 1.6% to FY26e but upgrades of 2.5% and 1.5% to FY27e and FY28e. A large sales uplift is required to break even in the UK, with current conditions supportive domestically. Nick Scali will have to deliver on the UK and on growth in the domestic market.

Nick Scali delivered a better than expected earnings result and the gross margin recovery since the AGM guidance was a standout. We see 2H gross margin holding flat on last year for ANZ, with group gross margins at 62.3% for FY25e. Initial signs of UK improvement and hints of greenfield expansion has seen confidence grow in the UK rollout. There is, however, now little room for error in execution.

Nick Scali reported an EBIT result of $130 million for FY24, down 16%. Gross margin of 65.5% for the group and 66.0% the Australia and New Zealand (ANZ) division was a standout and record. For FY25e we expect to see modest store openings, an improvement in per store sales growth momentum from ANZ and moderate cost growth. A catalyst to the upside would be a lower sea freight rate environment and progress in the UK.