Luxury furniture retailer Nick Scali (ASX: NCK) has faced a challenging year, marked by declining revenue but is making strikes in its expansion efforts in its bid to strengthen their position in the high-end furniture market. 

The Company made strides post-acquisition of Fabb Furniture, particularly in its UK growth strategy. Rodney Orrock, formerly the CEO of Best & Less, was appointed to lead the UK transformation. Nick Scali products have been adapted to UK compliance standards, with store refurbishments underway and products expected to arrive in UK showrooms by September 2024.

The Company faced a decline in revenue and profit in their FY24 results, with revenue down 7.8% to $468.2 million and net profit after tax (NPAT) falling 20.3% to $80.6 million. The underlying NPAT, excluding one-time costs related to the acquisition of UK-based Fabb Furniture, was $82.1 million, down 18.8%. Basic earnings per share (EPS) dropped 20.9% to 98.7 cents, while total dividends per share decreased by 9.3% to 68.0 cents (interim and final, fully franked).

Despite these declines, the Company saw positive momentum in its core Australian and New Zealand (ANZ) markets, with written sales orders up 2.4% to $447.4 million. The acquisition of Fabb Furniture in May 2024 contributed $6.8 million in sales orders and $8.3 million in revenue to the Group’s results. Nick Scali’s gross margin improved to 65.5%, with ANZ achieving a margin of 66.0%, up 2.5% from the previous year. Increased operating expenses, including $3.3 million related to the UK acquisition, affected overall profitability.

The Company also focused on strengthening its financial position, completing an equity raise in April 2024 to support its UK expansion, raising $54.8 million, with CEO Anthony Scali committing an additional $4 million, pending shareholder approval in October 2024. 

In the ANZ market, the store network continued to expand, with the addition of three new Plush stores and the closure of two underperforming showrooms as part of ongoing optimisation efforts. The acquisition of Fabb Furniture added 204 stores to Nick Scali’s UK network, and the Company has identified potential long-term growth opportunities for up to 86 Nick Scali stores and 90-100 Plush stores, though UK expansion plans are still being finalised.

Looking ahead, the Company expects mixed results in its key markets. While June 2024 saw strong trading in ANZ, July’s performance was weaker due to fewer trading weekends, resulting in a slight decline in combined sales order growth for the two months. The Company plans to open two Nick Scali stores and three to five Plush stores in FY25. 

In the UK, challenging market conditions and supply chain disruptions are expected to impact sales further, particularly as store refurbishments continue.

At the end of June 2024, Nick Scali’s cash and bank deposits stood at $111.3 million, with net cash and deposits amounting to $39.6 million after accounting for borrowings.