Furniture retailer Nick Scali (NCK) has halved from its late 2021 high posing the obvious question, has it gone too far? 1H numbers were largely in line with expectations with slightly weaker sales offset by higher margins but sales/orders were noticeably trending lower. Fixed costs make up a significant portion of the total for the company, so a small change in sales has a leveraged detrimental impact on earnings. While this is likely to weigh on performance near term, we expect this can reverse to become a tailwind over the medium term with the stock a great way to play a recovery in housing & retail.
- We can see the current negativity towards discretionary spending taking NCK below its 2022 low where value will start to look very attractive for this high quality retailer.
MM will be interested in NCK under $7
Add To Hit List
