Adairs Ltd (ASX: ADH) shares are sliding on Wednesday after the homewares retailer released its latest trading update.
At the time of writing, the Adairs share price is down 4.03% to $1.43.
The fall comes after a better recent run for the ASX retail stock. Adairs shares are still up around 14% over the past month, although they remain down 18% since the start of 2026.
The update had a few moving parts, with growth in parts of the business offset by a weaker result elsewhere.
Here's what the company told investors.
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Weak furniture sales weigh on Adairs
In its trading update, Adairs expects FY26 group sales to land between $640 million and $641.5 million.
At the midpoint, this represents an increase of 3.7% on FY25.
However, group underlying EBIT is expected to come in between $53.5 million and $55.5 million, which would be down 1.3% on FY25.
The main drag is Focus on Furniture, where Adairs now expects to recognise a non-cash impairment of between $62 million and $68 million against goodwill and brand intangible assets.
After the impairment and other significant items, the company expects to report a statutory net loss after tax of around $43 million for FY26.
Focus on Furniture drags
Adairs said its core retail business and Mocka both delivered sales and earnings growth in FY26.
The Adairs division is expected to report sales of about $458.5 million to $459 million, up 3.7%, with underlying EBIT up 14.6%.
Mocka also had a strong year, with sales expected to rise 22.1% and underlying EBIT up 28.1%.
However, the furniture side of the group was much weaker.
Focus on Furniture sales are expected to fall 5.7% to between $111 million and $111.5 million. Underlying EBIT is expected to drop 68.3% to between $3.5 million and $4 million.
Management pointed to heavy competitor discounting, weaker conversion, product underperformance, and execution challenges.
Adairs has brought in new management and is working through changes across the business, including clearing poorly positioned stock and improving operations.
Balance sheet holds up
Adairs said net debt was about $49 million at the end of June, down from $67.6 million a year earlier. It was also well below the company's $135 million facility limit.
The Focus on Furniture impairment is also non-cash. Adairs said it shouldn't cause any issues with its lenders, franking account, or ability to pay a dividend.
Still, the update gives shareholders a lot to think about.
The core Adairs business is growing, and Mocka is having a strong run. But Focus on Furniture is bringing down group earnings and now needs a proper turnaround.
Attention now turns to when Adairs will release its FY26 results on 24 August.
