Adairs plans a big writedown on its Focus on Furniture business that will push it into the red for FY26, sending the stock down more than 5%. Investors had been bracing for softer conditions, but the size of the impairment and the move to a net loss have sharpened worries about how hard higher rates and discounting are biting discretionary retailers. Management says the loss should not breach debt covenants and is not expected to stop the company paying a final dividend.
The retailer now expects to book a non-cash impairment charge of about $62m to $68m on Focus on Furniture, which has been hit by sluggish trading and weak second-half sales. After this hit, Adairs is forecasting a statutory net loss after tax of roughly $43m for FY26, with guidance indicating a possible range of around $39m to $46m.
Group sales for the year to June 30 are projected at $640m to $641.5m, up 3.7% on the prior year, showing top-line growth has not translated into higher profit. Net debt is set to end June at about $49m, a level the company argues remains manageable.
Underlying earnings are also under pressure, with group underlying EBIT expected between $53.5m and $55.5m, a slight 1.3% decline on FY25 despite the rise in sales. Margin compression, heavier discounting and higher costs are eroding profitability across the business.
Focus on Furniture has been the clear weak link, forcing Adairs to reassess the value of the chain’s assets and future cash flows. Investors reacted quickly, pushing the share price down to about $1.43 by late morning as the writedown forced a reset of earnings expectations.
Adairs’ warning comes just weeks before the August results season. Companies are now closing their books for the year to June 30, gaining a clear view of whether they have met or missed previous earnings guidance.
Under disclosure rules, boards must move fast if results fall materially short, so more trading updates and impairments are likely as they finalise accounts.
