Adairs Faces Margin Pressure as Focus on Furniture Sales Slow Before Peak Period

Trading Update Overview

Adairs Limited (ASX, ADH), a leading home furnishings retailer in Australia and New Zealand, has provided an updated trading update and guidance for the first half of fiscal year 2026 ahead of its Annual General Meeting. The company’s year-to-date performance aligns broadly with expectations set in August 2025, though sales growth has slowed as Adairs strategically scaled back promotional intensity.

Brand Performance Divergence

The update reveals a mixed picture across Adairs’ three core brands. Focus on Furniture experienced a slowdown in sales despite ongoing promotions, which has contributed to a lower than planned gross profit margin. Conversely, Mocka continues to build on its strong sales momentum, buoyed by positive customer reception to new product offerings. The flagship Adairs brand remains steady, with sales and gross margin expected to fall within revised guidance ranges.

Revised Financial Guidance

Adairs has adjusted its group sales guidance for H1 FY26 to a range of $225 million to $232 million, slightly below the prior forecast of $229 million to $236 million. Gross margin guidance has been narrowed to between 61.4% and 61.9%, reflecting a cautious but optimistic outlook. The company’s individual business units also show nuanced shifts, Focus on Furniture’s gross margin is expected between 50.2% and 50.7%, down from flat prior guidance, while Mocka’s margin guidance remains robust.

Critical Upcoming Trading Period

The next 10 weeks represent the most significant trading window for Adairs, accounting for approximately 55% of half-year sales. Key events such as the Linen Lover Sale, Black Friday, Christmas, and Boxing Day sales will heavily influence the final results. The company reports being well-stocked and prepared to capitalize on these peak periods, though the outcome remains dependent on consumer response during this critical timeframe.

Outlook and Market Positioning

While Adairs remains cautiously optimistic, the tempered sales growth and margin pressures at Focus on Furniture highlight the challenges of balancing promotional activity with profitability. The sustained strength at Mocka offers a bright spot and suggests that innovation and new product introductions remain key drivers. Investors will be watching closely to see how the company navigates the peak trading season and whether it can regain momentum heading into the second half of FY26.