Nick Scali (NCK) $18.43

Nick Scali (NCK) has now corrected 35% from its 2026 high after a soft January trading update raised concerns about near-term demand for big-ticket items as interest rates rise. There 1H result was better than expected but the market looked through the numbers focusing on the next chapter.

The markets concern was that January written sales were up just 3.1% in Australia/NZ (Like-for like +3.2%), suggesting the order book is going to miss consensus 2H26 revenue assumptions. Furniture is a discretionary bellwether, and any hint of slowing demand tends to be punished, particularly with interest rates moving higher. CEO Anthony Scali pointed to November sales pulling demand forward, leaving January softer than usual, with foot traffic down ~7%. This same theme was spoken about by JB Hi Fi (JBH), with Black Friday sales pulling forward demand that would otherwise fall in the post-Christmas sale period.

• NCK was also likely to have been a victim of its own success, with analysts and investors alike keen on the stock, leaving few buyers left into weakness.

In our opinion, this was far from a disastrous result that would usually lead to such an aggressive rerating. Australia/NZ revenue still rose 13.1% in the half, ahead of NCK internal expectations, and the UK story is improving, with impressive LFL growth of 32% across converted Nick Scali stores, highlighting the benefit of the brand reset. The UK business, which is an exciting growth story for NCK, posted a $5.6m loss in the half but is already nearing breakeven; scale remains the key lever, with the company’s long-term ambition remaining 60–70 UK stores.

Discretionary retail is on the proverbial nose at the moment, not helped by the RBA hiking interest rates and the likes of Temple & Webster (TPW) and Lovisa (LOV) delivering disappointing trading updates in recent weeks. The sector is down ~6% so far in 2026, in a market that traded at fresh all-time highs last week. This sentiment is unlikely to change overnight, but it will deliver an opportunity to buy quality retailers like NCK and JB Hi-Fi at compelling levels.

• We felt NCK delivered a good result, which was overshadowed by a cautious trading update into a scarred retailing space – MM is long NCK in our Emerging Companies Portfolio.