Fund Manager Summary
The fund managers believe that Adairs Ltd presents a promising opportunity despite recent challenges. They note that while the company underperformed in June and guided to FY25 EBIT 10% below expectations due to heavy discounting impacting margins, the outlook remains positive. In their opinion, Adairs is performing well with projected sales growth of +9% on 2024 numbers. They acknowledge that Focus on Furniture is struggling, particularly in Victoria, but highlight that new and refurbished stores are showing improvement. The fund managers anticipate further clarity on pricing and inventory plans during the upcoming half-year results, which could provide additional insights for investors.
Source: Trading View
Commentary From The Managers
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LSN Capital Partners
5 Nov 2025
$2.09
Summary
- Adairs is encountering ongoing margin pressure due to increased promotional activity.
- The upcoming Black Friday and Christmas trading period is anticipated to be a critical test for the company.
- This period will assess the effectiveness of the new management's refreshed strategic direction.
- LSN Capital Partners continues to hold their position as they monitor these developments.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
LSN Capital Partners
5 Nov 2025
$2.09
- Adairs is encountering ongoing margin pressure due to increased promotional activity.
- The upcoming Black Friday and Christmas trading period is anticipated to be a critical test for the company.
- This period will assess the effectiveness of the new management's refreshed strategic direction.
- LSN Capital Partners continues to hold their position as they monitor these developments.
Summary
Ten Cap
31 Aug 2025
$2.60
- Ten Cap has increased its position in Adairs (ADH), aligning with their strategy focused on domestic cyclicals.
- Both Adairs and its peer demonstrate disciplined cost control.
- They maintain solid balance sheets, which is a positive indicator for stability.
- There is potential for operating leverage as market demand begins to stabilize.
Summary
Firetrail Investments
30 June 2025
$2.09
- Firetrail Investments notes that Adairs underperformed in June after guiding to FY25 EBIT 10% below expectations.
- The downgrade was attributed to heavy discounting across both Adairs and Focus on Furniture, impacting margins.
- Focus continues to face challenges, particularly in Victoria, although new and refurbished stores are showing improvement.
- Adairs is expected to perform well, with sales projected to grow +9% on 2024 numbers.
- More details on pricing and inventory plans are anticipated at the half-year result.
Summary
Cerutty Macro Fund
30 Apr 2025
$2.36
- Cerutty Macro Fund identifies potential investment opportunities amidst Australia's rate cutting cycle, which began in March.
- Expecting three additional rate cuts by the end of CY25, the Fund seeks exposure to well-valued companies.
- Australia has seen a 2% decline in real disposable income, contrasting with growth in the U.S. and OECD.
- High exposure to variable rate home loans and significant mortgage size increases have impacted Australians' financial resilience.
- Anticipation of a positive 'torque' on disposable incomes as rate cuts provide material financial relief.
- Australian retailers are expected to benefit from forthcoming rate relief, which is not yet fully reflected in valuations.
- The Fund has taken a position in Adairs, a homewares retailer trading at ~10x FY26 earnings.
- Adairs is highly cash generative and management is aligned for near-term success.
- Post-Covid, Adairs is readjusting costs and is expected to see margin improvement as revenues grow.
- Potential for further margin expansion due to U.S. trade war impacts on sourcing costs.
- New CEO Elle Roseby brings extensive experience, having previously doubled revenue and quadrupled earnings at Country Road.
- The board has established Long-Term Incentives (LTIs) for management, aligning them with performance beyond market expectations.
- Management's incentive plan vests fully if consensus earnings are beaten by ~25%, indicating a strong commitment to performance.
- With a refreshed leadership, supportive macro tailwinds, and focus on operational efficiency, Adairs is well positioned for future growth.
- Cerutty Macro Fund will continue to monitor Adairs' progress under new leadership, focusing on margins, store rollouts, and the Focus on Furniture division.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"While Adairs appears to be navigating a challenging landscape with heavy discounting pressures, the anticipated 9% sales growth suggests a potential rebound. Investors should keep an eye on upcoming half-year results for clarity on pricing and inventory strategies."
Last Updated: 05 Nov 2025
Query The Data
Frequently Asked Questions
Who is investing in Adairs Ltd (ASX:ADH)?
Fund managers including Firetrail Investments , Cerutty Macro Fund, Ten Cap and LSN Capital Partners have invested in Adairs Ltd (ASX:ADH).
Why do fund managers invest in Adairs Ltd?
Fund managers have invested in Adairs Ltd due to its anticipated sales growth of 9% in FY25, despite recent underperformance and margin pressures from discounting. While challenges remain, particularly with the Focus on Furniture brand, the overall positive sales trajectory and upcoming clarity on pricing and inventory strategies make Adairs a compelling investment.
What happened to Adairs Ltd (ASX:ADH)?
Fund managers are investing in Adairs Ltd due to its strong fundamentals, including disciplined cost control and a solid balance sheet, which position the company well for potential operating leverage as market demand stabilizes. Despite facing margin pressures from increased promotional activities, upcoming key trading periods like Black Friday and Christmas are seen as critical for assessing the effectiveness of the new management's strategic direction.