Adairs Faces Profit Pressure Despite Sales Growth as Focus on Furniture Struggles

Solid Sales Growth with Mixed Earnings Performance

Adairs Limited has delivered a solid sales performance for the 52 weeks ended 29 June 2025, with group revenue climbing 6.5% to $618.1 million. This growth was primarily driven by the Adairs brand, which posted a 9.5% sales increase, and Mocka, which surged 14.7%, particularly in the Australian market. However, Focus on Furniture experienced a 6.5% sales decline, reflecting challenging trading conditions and increased promotional activity.

Underlying earnings before interest and tax (EBIT) for the group remained broadly flat at $55.2 million. While Adairs and Mocka both recorded double-digit EBIT growth, these gains were offset by a 36.6% EBIT decline at Focus on Furniture. Statutory net profit after tax fell 17.4% to $25.7 million, impacted by non-recurring costs including leadership transitions and technology investments.

Leadership Renewal and Strategic Reset Under New CEO

January 2025 saw the appointment of Elle Roseby as Managing Director and Group CEO, marking a pivotal leadership renewal. Roseby, with extensive retail experience, has launched a comprehensive strategic reset dubbed Vision 2030. This plan focuses on customer-led growth, operational excellence, and elevating each business unit from “good to great.”

Adairs is leading the transformation with initiatives such as store upsizing, enhanced visual merchandising, and a data-driven approach to product assortment. The Linen Lover loyalty program remains central, accounting for over 80% of Adairs sales, and has been expanded with new benefits including a partnership with Qantas Frequent Flyer.

Mocka is progressing well with a refreshed leadership team and system upgrades, preparing for physical retail expansion in FY26 following successful shop-in-shop trials. Focus on Furniture is undergoing a strategic review to address sales and margin pressures, with plans for new store openings and refurbishments to improve customer experience.

Sustainability and Operational Efficiency Gains

Adairs has advanced its sustainability agenda with the installation of solar panels at select stores, packaging improvements aligned with the Australian Packaging Covenant targets, and ongoing ethical sourcing and modern slavery oversight. The group’s carbon footprint rose slightly due to store expansion and warmer weather but remains 12.8% below the 2021 base year.

Operational efficiencies were achieved at the National Distribution Centre, where direct control and a new warehouse management system have boosted productivity by nearly 20%. Cost of doing business as a percentage of sales declined by 30 basis points, reflecting disciplined cost management despite inflationary pressures.

Financial Position and Dividend

The group’s financial position remains robust with net debt of $67.6 million, slightly higher than the prior year, supported by available revolving credit facilities totaling $135 million. Capital expenditure of $13.5 million was invested in store development, office relocations, and technology upgrades.

The Board declared a fully franked final dividend of 4.0 cents per share, bringing the total dividend for FY25 to 10.5 cents per share, consistent with the company’s payout policy of 65-80% of net profit after tax. The dividend reinvestment plan continues with a 1.5% discount and no participation limit.

Governance and Outlook

Board renewal continued with the appointment of Rachel Kelly as a Non-Executive Director, bringing retail and fintech expertise. The group has strengthened governance over its business units with advisory committees to support agility and growth.

Looking ahead, Adairs is optimistic about the improving discretionary retail environment in Australia, supported by stabilizing macroeconomic conditions and consumer sentiment. The focus remains on executing Vision 2030, improving productivity, and converting sales growth into earnings growth.