Adairs Rides Online Sales Wave

By Glenn Dyer | More Articles by Glenn Dyer

Shares in linen and homewares retailer Adairs has emerged as an unlikely big winner from COVID-19 and the move to online selling.

Yes, the company had warned in updates that its online business was doing well, but yesterday’s full-year report reveals that the surge in online sales was stronger than expected and profit-enhancing.

So much so that the shares surged 18% to a new record highs of $3.24 and the company’s market capitalisation rose above $500 million at one stage but eased as the shares slipped back to close up 11.3% at $3.05.

Adairs reported a 12.9% jump in full-year sales to $388.9 million, with like-for-like sales rising 15.9%.

The company said that sales under the Adairs brand were up 4.5% overall after store sakes fell 7.3% because of the lockdowns and hit to trading, while comparable-store sales were up a solid 3.9%.

But online leapt 61.4%. Sales at the Mocka online business (owned for half the year) jumped 50.2% in the back half of the year.

Overall the surge in online sales saw group online sales rise to nearly 32% of total turnover or $124.2 million and the underlining gross margin improved by 2.26 percentage points to a fat 61%.

That’s why underlying Group earnings before interest and tax (EBIT) was up 39.7% to $60.7 million from 2018-19’s $43.4 million and statutory after-tax profit rose 19% to $35.3 million.

And in turn, the surge in online sales in the year to June helped the board decide to pay a final dividend after the interim was scrapped amid the surge in virus infections in March.

Shareholders will be paid a fully franked 11 cents a share or 72% or second-half net profit.

And before anyone goes haring off to boost forecasts for 2020-21, the current Victorian restrictions and lockdown in Melbourne have to be surmounted.

That has required Adairs to close 43 stores in the Greater Melbourne area for a period of six weeks.

“Our Distribution Centre (DC) operations and online channel remain operational after complying with the additional restrictions. In most instances our Customer Support Office team have transitioned to working from home where possible,” the company told the ASX on Monday.

“Based on the previous store closure period and our experience to date we expect to see a significant increase in online sales into the Greater Melbourne area, reducing the impact the closure of these stores may have on group sales and profitability.

“For all other areas, Adairs continues to operate its store network with processes and protocols in place to support the safety and wellbeing of our team and customers. Mocka’s Australian operations are based in Brisbane and remain unaffected.

“For the first 5 weeks of FY21 sales have remained well ahead of the prior year. Adairs Online sales were +103.2%, Mocka +46.8%, while like-for-like store sales were +15.8%,” Adairs told the market.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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