Nick Scali Ltd (ASX: NCK) shares have soared 244% over the past 5 years. Over the past month alone, shares have risen 10.29% and are now, as of Thursday afternoon, trading at $18.72.

Now, in a note to investors, top broker Macquarie Group Ltd (ASX: MQG) has revealed what it expects next from the furniture retailer's shares.

Macquarie's outlook for Nick Scali shares

Macquarie has maintained its outperform rating and has kept its share target price unchanged at $19.90.

That represents a potential upside of around 6.3% from today's valuation.

"We expect further GM% upside to be driven by Nick Scali products delivered to UK stores, with consensus well below our GM% forecasts. Potential for further store openings in the UK would provide upside to current forecasts", the note said.

Macquarie highlighted the retailer's improved foot traffic and rebounded sales throughout February and March this year. 

"Overall, NCK foot traffic was below prior years in Jan-25. This was indicated in the trading update provided at the 1H25 result which indicated sales were down -8.5% in Jan-25 vs pcp".

"However, further commentary suggested that sales rebounded in Feb-25, up +5% vs pcp, which is reflected in our foot traffic data showing levels well ahead of previous years".

Stable consumer spending figures also support Macquarie's decision to maintain its rating and target price on the stock. Home furniture spend as a proportion of total volume has tracked largely in line with the prior year.

The note also points to Nick Scali's UK store refurbishments as a reason for the stable valuation.

Nick Scali bought Fabb Furniture in April 2024. The acquisition provided an immediate entry point into the large UK market with a 21-store network across key locations.

All Fabb Furniture stores are located in out-of-town retail parks and predominantly in large-scale format. Since April 2024, Nick Scali has closed one of its 21 stores permanently.

At its H1 2025 results, management noted 4 stores had been refurbished, with the target "to complete eight further rebranded Nick Scali stores by the 30th of June".

As of 13 May 2025, a total of 9 stores have been refurbished. Another 3 stores require refurbishment by 30 June 2025 to meet management guidance, the note says.

"The Nick Scali rebranded stores in the UK were the top three performing stores in January 2025 for written sales orders. The top-selling ANZ product is now the top-selling product in the UK".

The top-selling ANZ product is now the top-selling product in the UK. 

"Further upside potential from store rollout in the UK, with our current forecasts not expecting any UK store rollout", Macquarie said.

Key risks facing Nick Scali shares

Macquarie notes that while it has maintained its outperform rating and share target price, its investment thesis comes with some risk.

A shift in spending away from the Home Furniture category could spell problems for the share price.

Another key downside risk for Nick Scali is a lower gross margin relative to forecasts.

"Specific to execution of Fabb furniture in the UK market, we see upside risk should the GM% and revenue uplift from Fabb furniture roll-out be faster/better than expected," Macquarie says.