Why the Adairs (ASX:ADH) share price is crashing 17% lower today

Adairs had a tough first half due to COVID…
The post Why the Adairs (ASX:ADH) share price is crashing 17% lower today appeared first on The Motley Fool Australia. –

Key points

Adairs had a tough first half due to COVID-19 impacts
While its sales were largely flat, its earnings almost halved
Gross margin impacts from supply chain cost increases also weighed on Adairs’ performance

In morning trade, the Adairs Ltd (ASX: ADH) share price has crashed lower following the release of a first half trading update.

At the time of writing, the furniture and homewares retailer’s shares are down 17% to a 52-week low of $3.15.

Adairs share price crashes amid near halving of first half profit

Group sales broadly flat at $242 million including $12.5 million contribution from Focus on Furniture acquisition.
Like for like sales growth of 2.7% adjusted for closures
Online sales growth of 8.2% to $97.6 million
Underlying earnings before interest and tax (EBIT) down between 45% and 47% to $32 million to $33 million

What happened during the first half?

Adairs had a mixed first half to FY 2022. Although its sales were largely in line with the prior corresponding period, a collapse in its margins saw its earnings almost halve.

Management notes that government mandated store closures reduced the overall number of store trading days by ~31%. This is estimated to have reduced Adairs’ sales by $30 million to $36 million and EBIT by ~$14 million to $18 million during the half.

Also weighing on Adairs’ earnings were gross margin pressures. The company revealed that it has been impacted by global supply chain cost increases, higher delivery costs to online customers, and additional promotional activity. One positive, though, is that its gross margin remains well ahead of the first half of FY 2020, which was prior to the pandemic.

Management commentary

Adairs’ CEO and Managing Director, Mark Ronan, appeared somewhat pleased with the company’s performance given the significant disruptions it was facing.

He said: “During the half, despite significant operational disruptions, we have made strides in progressing our strategic priorities by commissioning our new National Distribution Centre, upsizing selected stores, continuing to expand our range and adding to our omni channel capabilities. We also built our portfolio of vertical omni-channel retail brands by bringing forward the finalisation of the Mocka acquisition, and completing the acquisition of Focus on Furniture. The progress we’ve made against these priorities gives us confidence in the growth prospects of the Group.”

Adairs will release its half year results on 21 February.

The post Why the Adairs (ASX:ADH) share price is crashing 17% lower today appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More reading

2 ASX dividend shares with large and growing yields

These 3 ASX retail shares have grossed-up dividend yields over 8% right now

2 buy-rated ASX dividend shares with fully franked yields

2 ASX dividend shares rated highly by analysts

2 cheap ASX shares for value investors

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 and has recommended ADAIRS FPO. The Motley Fool Australia owns 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.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US & HK* Trades. Click Here!