Nick Scali's Strong Result Couldn't Save It From a Sales Growth Scare

Record profit growth and a promising UK rollout weren't enough to stop a sharp sell-off after like-for-like sales growth badly missed expectations.

6 Oct 2026 · 3 min read

Nick Scali fell 40 to 50 percent from its 2025 highs despite delivering one of its strongest reporting seasons yet and a promising UK expansion, as a weaker than expected trading update overshadowed genuinely strong earnings, leaving fund managers to argue the market had thrown out one of the ASX's highest-quality retailers with the sector-wide bathwater.

A strong result overshadowed by a soft trading update

Auscap Asset Management singled out Nick Scali as a stock that had dropped 40 to 50 percent despite having some of the best return on equity metrics on the ASX, arguing a broadly positive February result and a successful UK expansion should have been catalysts, but instead left the stock trading at lower multiples than before its global rollout even began. Perpetual Asset Management said the stock fell 33.5 percent for the quarter, a significant detractor, dropping sharply on result day despite gross margins, EBITDA and first-half profit all improving materially year on year, overshadowed by a weaker than expected trading update showing like-for-like weekly sales growth of just 3.2 percent in Australia and New Zealand, well below market expectations. Auscap Asset Management, which has held the position in its High Conviction fund for a long time and in its Ex-20 fund since inception, said the half-year results were very strong, probably one of the company's strongest reporting seasons yet, with Australian net profit up 37 percent year on year and gross margin continuing to expand, while UK performance was genuinely exciting.

You've got one of the highest-quality ASX businesses and it's now trading at lower multiples, around where it was before the global rollout even began.

— Auscap Asset Management, Article, March 2026

A high-quality, capital-light compounder

Auscap Asset Management said it has invested in Nick Scali for many years, describing a high-quality furniture retailer with 110 stores in Australia and 19 in the UK, a high-returning, capital-light operation that has delivered strong earnings growth over more than 20 years listed on the ASX, built on a value proposition of quality, custom-made furniture at affordable prices. Wilson Asset Management grouped Nick Scali with Eagers Automotive, Zip Co, Skin Kandy and Lovisa as consumer discretionary names well placed to benefit once domestic rates pivot to cuts in calendar 2027, acknowledging near-term conditions remain tough as consumers are stretched by high rates and federal budget changes have added pressure on housing, but arguing Australian rates have peaked and positioning across these stocks is close to washed out.

It is a high-quality furniture retailer with 110 stores in the Australian market and 19 stores in the UK. It is a high returning, capital light operation that has delivered strong earnings growth over the 20 plus years it has been listed on the ASX.

— Auscap Asset Management, Newsletter, July 2026

What fund managers say they are watching next is whether like-for-like sales growth reaccelerates from the disappointing 3.2 percent level, continued momentum in the UK store rollout, delivery on earnings growth once domestic rates ease in 2027, and whether the market's valuation catches up to the high-quality fundamentals Auscap describes.