Adairs flags impairment of up to $68m as Focus on Furniture drags on group earnings

Homewares and furniture retailer Adairs Limited (ASX: ADH) has warned investors its Focus on Furniture business unit has deteriorated sharply in the second half of FY26, triggering a non-cash goodwill and brand impairment of $62 million to $68 million that will push the group to a statutory net loss of about $39 million to $46 million.

The trading update, released to the ASX today, projects group sales of $640 million to $641.5 million for FY26, up about 3.7 per cent on the prior year's $618.1 million.

However, underlying EBIT is expected to come in at $53.5 million to $55.5 million, down about 1.3 per cent on FY25's $55.2 million, as weakness at Focus on Furniture offsets gains elsewhere in the portfolio.

Focus on Furniture sales are expected to fall 5.7 per cent to between $111 million and $111.5 million, down from $117.9 million in FY25.

More strikingly, underlying EBIT at the furniture chain is projected to collapse 68.3 per cent to just $3.5 million to $4 million, from $11.8 million the prior year.

The result marks a significant deterioration from the first half of FY26, when Focus on Furniture posted underlying EBIT of $5.8 million - already down 31.7 per cent year-on-year.

"The business is transitioning under new management, and trading has been subject to more aggressive competitor promotional activity," says Adairs.

"H2 has been an important period of operational change at Focus on Furniture, laying the foundations for improving performance as FY27 progresses."

Adairs will recognise the $62 million to $68 million non-cash impairment against Focus on Furniture goodwill and brand intangible assets, equating to $56 million to $60 million after tax.

Combined with SaaS and enterprise resource planning project costs of $18 million to $19 million and New Zealand exit costs of $3.5 million to $4 million - both excluded from underlying earnings -the charges will drive the statutory net loss.

The core Adairs brand and fast-growing online furniture retailer Mocka both performed strongly, partially masking the Focus on Furniture drag.

"The Adairs and Mocka business units have delivered pleasing growth on the prior year and current trade momentum has remained positive," says the company.

The Adairs brand is expected to deliver sales of about $458.5 million to $459 million, up 3.7 per cent on FY25, with underlying EBIT rising 14.6 per cent.

Mocka continued its growth trajectory with sales projected at $70.5 million to $71 million, up 22.1 per cent, and underlying EBIT growth of 28.1 per cent.

Mocka opened its first standalone physical store in mid-June 2026, slightly later than the May timeline flagged at the half-year results.

The group's balance sheet improved over the period, with net debt reduced to $49 million from $67.6 million at the end of FY25, well within the company's $135 million facility limits.