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Adairs (ASX:ADH) share price pushes higher despite sales slump

Here’s how this retailer is performing in FY 2022…
The post Adairs (ASX:ADH) share price pushes higher despite sales slump appeared first on The Motley Fool Australia. –

The Adairs Ltd (ASX: ADH) share price is pushing higher on Wednesday morning.

At the time of writing, the furniture and homewares retailer’s shares are up 2.5% to $4.02.

Why is the Adairs share price rising?

Investors have been bidding the Adairs share price higher today following the release of a trading update at its annual general meeting.

That update reveals that, as was widely expected, the company’s sales have fallen year on year during the first 16 weeks of FY 2022.

According to the release, group sales were down 8.5% compared to the same period last year. This was driven largely by long and widespread mandated store closures in NSW, Victoria, the ACT, and Auckland. In fact, the company reported a ~47% reduction in the overall number of store trading days across its store network. The good news is that these store closures are now coming to an end.

Management estimates the value of total sales foregone in Adairs as a result of these mandated store closures is ~$28 million to $32 million. This is net of the estimated sales benefit captured in the Adairs online channel. The earnings before interest and tax impact of these lost sales is estimated to be in the range of $12 million to $15 million.

Management also advised that gross margins have moderated from the record levels achieved in FY 2021. However, they are expected to remain above FY 2020 levels.

What’s next?

Pleasingly, the company expects its sales to rebound now lockdowns are ending. It anticipates that pent-up demand, combined with the current online delivery delays, will encourage customers to shop in stores to secure their purchases in the lead up to Christmas.

In preparation, the company took steps earlier in the year to bring forward inventory purchases to ensure stock levels are in line with our operating requirements for the peak Christmas season.

The company has also elected to temporarily maintain the operation of one of its existing Distribution Centres in conjunction with the new DHL facility to help mitigate the risk of COVID-19 impacting its domestic supply chain.

Adairs CEO and Managing Director, Mark Ronan, commented: “While store closures in our key markets have made the start of FY22 operationally challenging, the key drivers of our growth remain and are all positively balanced. Our products are resonating well with customers, household savings remain elevated, the housing market is strong, and more than ever the home is seen as a sanctuary.”

“We are excited to be on a clear path to our stores reopening and, as NSW has shown, will benefit from pent up demand as stores re-open in Victoria, the ACT and Auckland. Our customers in these markets will undoubtedly enjoy welcoming family and friends back into their homes,” he added.

The post Adairs (ASX:ADH) share price pushes higher despite sales slump appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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