Focus on Furniture Faces Millions in Losses Amid Cost-of-Living Squeeze

Adairs Limited has announced a substantial non-cash impairment charge of between $62 million and $68 million for its Focus on Furniture subsidiary, contributing to an anticipated statutory net loss after tax of approximately $43 million for the 2026 financial year. While Adairs' flagship business and the Mocka brand showed positive growth, Focus on Furniture experienced a decline in performance during the latter half of the year.

The company cited aggressive competitor promotional activity and ongoing management transitions as factors affecting Focus on Furniture. Adairs stated that operational changes are underway to improve performance in the upcoming financial year.

Retail expert Professor Gary Mortimer of Queensland University of Technology attributes the disparity in performance directly to the cost-of-living crisis. He explained that consumers are more willing to spend on smaller home decor items but are hesitant to make significant investments in large furniture pieces like couches or dining tables, which can cost thousands of dollars.

"People are less willing to spend that much money, particularly at this economic time," Mortimer told the Daily Mail. He also noted the competitive landscape, where strong players like Nick Scali can sustain frequent sales, making it difficult for others to compete.

Professor Mortimer drew parallels to Barbeques Galore, which announced store closures earlier in the year, questioning the necessity of expensive purchases like a $1,000 barbecue. He further pointed to macroeconomic factors, such as a housing crisis and fewer new home constructions, leading to reduced demand for large furniture items.

"Aussie families are very focused on paying their rent or mortgages, putting fuel in their car and putting food on the table," Mortimer said. He added that discretionary spending is likely directed towards essential bills and rising insurance costs, leaving less for major purchases such as sofas or dining sets.

This cautious consumer behavior is expected to persist for the next six to 12 months, influenced by sensitivity to potential interest rate changes and ongoing food price increases. Mortimer highlighted that consumers are actively seeking ways to cut costs, making major purchases, including appliances and furniture, a primary area for reduction.

Adairs acquired Focus on Furniture for $80 million in 2021 as part of an expansion into the furniture market. However, the subsidiary's struggles were not unforeseen. In October last year, Adairs chief executive Elle Roseby indicated that Focus on Furniture had underperformed for two years, with promotions failing to yield the desired turnaround. Roseby described the business's value proposition as sound but requiring a refresh in certain areas.

The company has since appointed two new executives to the leadership team and is undertaking store upgrades, with three to five refurbishments planned over 18 months. Adairs also made the decision earlier this year to cease operations in New Zealand as part of a strategic reset, reportedly due to the commercial unviability of those stores.

Professor Mortimer characterized the New Zealand exit as a "smart, strategic" move, stating that "sometimes, in order to grow, you need to shrink." He noted that divesting loss-making operations or markets can result in a smaller but more profitable business, a strategy also observed with retailers like Myer and David Jones closing stores to improve profitability.