The progress of Nick Scali’s (ASX: NCK) big foray into the UK has been posted for the first time today, with the segment performing better than expected in the first half of FY25 despite disruptions caused by major refurbishments to its acquired Fabb Furniture stores.

The group posted a net loss after tax of $2.8 million, an improvement on initial guidance of $3.3 million to $3.8 million. It was also a similar story for the Australia and New Zealand (ANZ) arm, with net profit after tax coming in at $36 million, above the $30 million to $33 million profit guidance provided at its annual general meeting (AGM) four months ago.

Investors have drummed up support for the group’s results sitting above guidance, with shares up 13 per cent to $18.43 each at the time of writing.

The retailer noted UK stores are continuing to be refurbished to sit under the Nick Scali brand. The start of the year saw a marketing push for the four new rebranded stores in Thurrock, Leicester, Coventry and Farnborough.

“Re-branded Nick Scali UK stores were the top 3 performing UK stores in January 2025 for written sales orders, only one of which was in the top five under Fabb,” Nick Scali managing director Anthony Scali said.

“Our aim is to complete the refurbishment and re-branding of a further eight stores by 30th June 2025.

“The top selling Nick Scali sofa in ANZ is now the top selling sofa in our UK Stores. This supports our belief that the Nick Scali product range will appeal to UK customers.”

The UK refurbishment programme will continue into 2HY25, resulting in further disruption to sales orders as Fabb Furniture stores are closed for a rebrand. Nick Scali UK online launched mid-January 2025 and a “number of potential new UK stores” are currently being reviewed.

The furniture retailer expects the UK gross profit margin on products to sit between 57 per cent to 59 per cent, compared to the gross profit margin at acquisition of 41 per cent.

The decision to move into the UK saw a big vote of confidence from institutional investors, who provided $46 million to Nick Scali before an additional $10 million was also raised from retail shareholders for the expansion.

Meanwhile, in ANZ, a new Nick Scali store in Artarmon, NSW was opened for the half while two Plush stores in Newcastle and Prospect in NSW were relocated to a larger store with a new look.

A one-off expense of $2.8 million was run up from extensive detention fees caused by the appointment of a liquidator to one of the group’s main freight forwarders, restricting access to containers that landed into Australia for several weeks. The news comes three months after the group sought aFederal Court order to release stock held up at the port.

The group posted a 10.8 per cent lift in half-year revenue to $251.07 million, while profit fell by 30.2 per cent to $30 million. The drop was attributed to lower revenue, gross margin reduction and increased operating expenses compared to the previous period.

Looking ahead, Nick Scali noted that trading continues to be volatile for the group, with sales down 8.5 per cent in January, while the first week of February saw a 5 per cent lift. In December, the group saw sales rise by 4.2 per cent.

During the second half, an additional Plush store will open in Melton, Victoria while it’s anticipated that other locations that were expected to launch in the half will be delayed to FY26.

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