Adairs, Nick Scali Provide “Good News Story” For Retail

Two more bullish trading updates for the start of the 20120-21 financial year from retailers Nick Scali and Adairs.

In both cases, the retailers saw a sharp rise in sales (much of it coming from online) in the first quarter to continue the surge seen in the final months of the year to June when much of the country was under varying degrees of lockdowns.

And both retailers seem on track to report higher earnings as well as sales for the six months to December.

But that didn’t please investors with the entire retail sector seemingly undergoing a re-rating yesterday which saw sharp price falls.

Adairs shares fell 5.7% to $3.64 and Nick Scali shares lost 5.9% to $8.42.

The falls happened after Victorian premier Dan Andrews announced that locked down Melbourne will start re-opening from today and tomorrow.

Adairs told investors on Monday that its latest trading numbers were still a “good news story”, especially online.

The update was released ahead of the company’s AGM and delivered to the meeting.

Adairs said sales were up 22% for the first 17 weeks of the new financial year with much of that coming from a 134% jump in online sales.
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By way of contrast. in-store sales fell 0.6%, largely due to Adairs still having 43 stores shut within locked-down metro Melbourne.

Excluding those stores, like-for-like sales rose 17%.

Adairs said that online sales now make up 41% of total sales which is more than double the share a year ago.

Gross margins also jumped 6% for the period, which the company expects will ease as restrictions are relaxed further, but Adairs is predicting they will stay above fiscal 2020 levels for the remainder of the financial year.

Inventory at the company is “well below” ideal levels due to heightened lockdown spending, but Adairs expects to return stock levels to more normal levels before Christmas.

“I am pleased that the momentum seen in the second half of FY20 has continued into FY21. These results highlight the strength and continued success of our brands, supported by our omnichannel strategy and operational agility,” CEO Mark Ronan said.

“We continue to see our customers invest more in the comfort of their homes, where many are spending more time working and studying.”

Meanwhile, furniture retailer Nick Scali also told investors on Monday that sales have remained elevated after the COVID-boosted 2019-20 financial year, with orders jumping 45% for the first three months of the new financial year.

This trend has continued into October, the company said.

Excluding its stores closed in Melbourne currently and the stores which were closed for four weeks in Auckland, comparable-store sales rose 59% for the quarter.

Online sales have jumped 47% for the quarter, and Nick Scali says it now expects the earnings contribution from online for the year to be higher than previously expected.

“Nick Scali had previously provided guidance in August that NPAT for the first half would be 50-60% more than the previous year,” the company said.

“However, even allowing for delays in our supply chain caused by the current reduction of inbound shipping and the reduced availability of containers, the company now anticipates that the first half NPAT for FY21 will be 70-80% more than FY20.”

Obviously with Melbourne and NZ normalising these big gains can’t continue but the question is how far sales growth will fall as the re-openings in Melbourne take effect?

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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