Adairs enters Black Friday period without FY27 earnings guidance

Consumer slowdown deepens into peak season

Adairs Limited (ASX:ADH) is heading into its most important trading window of the year with sales momentum weakening and no FY27 earnings guidance to anchor expectations. Group sales fell 1.5% in the second quarter to date, taking the first 19 weeks of the financial year to a 0.6% decline against the prior corresponding period.

The deterioration is concentrated in the latest six weeks. Group sales had been down 4.5% after the first eight weeks, before the subsequent period produced a 2.2% increase, but management said the consumer environment had become more challenging and growth had slowed across all businesses. It cited cost-of-living pressures, higher interest rates and a further rate increase this month as weighing on household budgets and discretionary spending.

Focus on Furniture remains the earnings pressure point

Focus on Furniture continues to stand apart from the stronger-performing brands. Its written sales were down 15.1% for the first 19 weeks, although the second quarter to date was closer to flat at 3.8% lower. Written sales are recognised as revenue only when products are delivered, so the measure is not directly comparable with the group's real-time sales figures.

Margin pressure is more pronounced. Focus on Furniture's gross margin is tracking 300 to 400 basis points below the prior corresponding period as the business uses more price-led promotions to rebuild traffic and conversion. That weakness follows the Focus on Furniture impairment, which was reported alongside Adairs' FY26 result and highlights the extent of the turnaround still required.

Mocka growth offsets part of the decline

The group's brands are not moving in lockstep. Adairs Australia sales rose 1.7% over the 19-week period, although its second quarter to date was down 2.3% after 4.3% growth in the first quarter. Mocka was the clear growth engine, with sales up 12.2% year to date and 9.4% higher in the second quarter to date. Gross margin for both Adairs Australia and Mocka remains ahead of the prior period on a year-to-date basis.

At group level, gross margin is also ahead of the prior corresponding period. That provides some protection, but it does not remove the central problem: the remaining seven weeks of the first half contain Black Friday, Christmas and Boxing Day, which together contributed about one-third of first-half sales in the prior corresponding period.

Seven weeks now carry disproportionate weight

Adairs said inventory is well positioned for peak trading, while the Board expects the consumer environment to remain difficult. The company is concentrating on customer service, product and value propositions, cost control, inventory discipline and simpler operations, with FY27 framed around moderate gross margin expansion, cost productivity and disciplined capital allocation.

Those priorities will be tested quickly. The company has not provided FY27 earnings guidance, including for the first half, and has warned that the first-half result will depend heavily on peak-period trading. The Board is also still searching for a successor to Group CEO Elle Roseby, adding a separate leadership question while Focus on Furniture works through its operational pressure.