Adairs Limited (ASX: ADH)

Adairs Limited is an Australia-based omni-channel specialty retailer of home furnishings, home furniture and home decoration products. The company has three vertically integrated brands, Adairs, Mocka, and Focus on Furniture.

Recommendation Rationale - SELL at AUD 2.420

• Surpassed Resistance: ADH has surpassed the ‘Resistance 1’ level recommended on 3 April 2025. Therefore, ADH can face resistance at the current levels.
• Weak Performance in Focus on Furniture: During H1 FY24, Sales declined 4.1% year-over-year. Gross Profit Margin dropped by 250 basis points, indicating rising cost pressures or discounting. It is exposed to the Victorian market (14 out of 25 stores), which underperformed due to local economic challenges.
• Sales Decline in Mocka New Zealand: Mocka’s New Zealand operations saw a 10.2% drop in sales, reflecting subdued demand in that region despite digital platform improvements.
• Lower Net Margin: During H1 FY25, ADH’s net margin was 6.1%, while industry median is 6.6%.

Daily Price Chart

Daily Technical Chart, Data Source: REFINITIV

Valuation Methodology: Price/Cash Flow Approach (FY Jun'26E) (Illustrative)

ADH is expected to trade at a slight discount to its peers considering the sales decline in Mocka New Zealand, weak performance in focus on furniture, and persistent cost-of-living pressures. For conducting valuation, the following peers have been considered: Baby Bunting Group Ltd (ASX: BBN), Reject Shop Ltd (ASX: TRS), and City Chic Collective Ltd (ASX: CCX).

Considering the rally in share price movement, current trading level, and risks associated, the share price can witness resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 2.420, as of 1 May 2025, at 12:45 PM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 1 May 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.    

Note 4: Dividend Yield may vary as per the stock price movement.

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.