Adairs Ltd (ASX:ADH) (Q2 2026) Earnings Call Highlights: Record Sales Amidst Margin Challenges

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Mon, February 23, 2026 at 6:00 PM GMT+9 3 min read

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This article first appeared on GuruFocus.

Release Date: February 23, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Adairs Ltd (ASX:ADH) achieved record group sales of 329 million, up 5.9% in the first half of FY26.

The company saw strong performance during key trading events like Black Friday, Christmas, and Boxing Day, contributing significantly to sales.

Moka, one of Adairs Ltd's brands, delivered an outstanding half with sales up 29.8%, driven by new product innovation.

The company improved cost efficiency and service levels from the national distribution center, achieving cost reductions despite sales growth.

Adairs Ltd's technology upgrade is progressing well, with a planned go-live in the first half of FY27, supporting future growth.

Negative Points

Despite record sales, Adairs Ltd did not achieve profit growth due to aggressive clearance activity in Q1.

Gross margin was down 170 basis points to 60.7%, impacted by clearance activities and promotional events.

Focus on Furniture, another brand under Adairs Ltd, faced challenges with like-for-like sales down 3.3% and profit declining by 32%.

The company plans to close 6 to 7 smaller, less profitable stores in the next 6 months due to rising rents and pressure on smaller stores.

Underlying EBIT for the group was down 9.1% from last year, primarily due to Q1 clearance activities.

Q & A Highlights

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Q: Can you explain the discrepancy between the expected and actual gross margins for Adairs in the first half? A: Ashley Gardner, Outgoing CFO: The discrepancy was primarily due to the overperformance in key promotional events like Black Friday and Christmas, which had higher promotional levels than anticipated. This led to a lower gross margin than initially expected.

Q: Does focusing on key promotional events impact the medium-term outlook for gross margins? A: Elle Roseby, CEO: We learned that we didn’t need to be as aggressive with discounts. Some categories sold out quickly, so we are reviewing the depth of discounting for future events.

Q: What is driving the strong sales performance in the first seven weeks of the second half for Adairs? A: Elle Roseby, CEO: The momentum from Q2 and improvements in product profiles are driving strong growth, indicating market share gains.

Q: Can you provide more detail on the product mix and promotional strategy for Adairs? A: Elle Roseby, CEO: Growth is coming from bed linen and toweling. We are experimenting with different promotional strategies, particularly for our Linen Lovers program, and adjusting offers based on category competitiveness.

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Q: How is the Qantas Frequent Flyer partnership impacting customer acquisition and spending? A: Ashley Gardner, Outgoing CFO: The partnership is attracting new customers and increasing spending among those who tag their Qantas Frequent Flyer number. We are monitoring the program’s impact on customer behavior and acquisition costs.

Q: How are you managing foreign exchange impacts and hedging strategies for FY27? A: Ashley Gardner, Outgoing CFO: We are averaging out our hedging strategy to create certainty. Currently, about 40% of FY27 is covered, and we expect a better rate compared to FY26, which should positively impact margins.

Q: Are you still targeting a gross margin of 62%+ for the second half of FY26? A: Ashley Gardner, Outgoing CFO: Yes, we expect to recover margins through better buying patterns and improved product quality, particularly in key categories like bed linen and bathrooms.

Q: What is the strategy for store refurbishments and their impact on sales? A: Elle Roseby, CEO: We have refurbished around four stores, and while the impact on gross profits varies, investments in fixtures have significantly boosted sales during key periods. We are opening a new concept store in Bondi, which will guide future refurbishments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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