Shares in linen and homewares seller Adairs slumped more than 20% yesterday after the company joined the list of retail chains warning of damage done to sales and earnings by last year’s lockdowns and the emergence of the Covid omicron variant.
In an update issued before trading started, Adairs warned that its earnings for the first half of the new financial year are likely to halve due to a difficult trading period caused by lockdowns and severe supply chain disruptions.
That saw the shares slide to a day’s low of $2.93, and close off 21.5% at $2.99.
That’s a long way from the peak of $4.90 in April, 2021.
Adairs CEO Mark Ronan revealed the company has managed to keep its total sales for the half relatively flat, falling 0.5%. On a like-for-like basis, they rose 2.7%.
But the slide would have looked even uglier if not for a $12.5 million contribution from recently acquired sofa seller Focus on Furniture and a 22.8 % sales surge at online only furniture division Mocka.
Companies like Wesfarmers (for its Kmart and Officeworks chains) and JB Hi Fi have warned of sales slowdowns and the impact on lowering first half earnings, as well as the continuing problems with omicron and supply chain disruptions.
As a result of the slide in sales in the core retail outlets Adairs’ interim earnings are expected to be in the range of $32 million to $33 million, almost half last year’s $60.2 million.
Mr Ronan said this was due to COVID-related issues wreaking havoc on the company’s supply chain and its efforts to establish a new centralised national distribution centre, along with significant government-imposed lockdowns during the half, which cost the business as much as $18 million in lost earnings.
Stock flow into Australia and New Zealand from Asia remains inconsistent due to factory and shipping capacity disruptions across the region,” he said.
“The initial issues with the new National Distribution Centre were significant and combined with ongoing workforce shortages, within our own operations and those of our supply chain partners, significantly impacted our online and store delivery capacity.”
Adairs will release its final half-year results on February 21.