Adairs double: returns JobKeeper, pays dividend

Furnishings retailer Adairs has repaid $6.1m in JobKeeper while also almost doubling its interim payout, after profits soared.

Adairs Fortitude Valley store manager Julie Wedrat. Picture: Peter Wallis

Home furnishings and bedding group Adairs has pulled off a double act of returning $6.1m in JobKeeper funds to the federal government while almost doubling its interim dividend, placing pressure on other retailers that benefited from the wage subsidy to pay back the money.

Earlier this month furniture chain Nick Scali came under scrutiny for keeping $3.6m in JobKeeper while also ramping up its dividends and then relenting to the pressure by announcing it would return the funds to the government. In recent weeks it has been joined by fast-food chain Collins Foods to return JobKeeper payments.

Now Adairs has added its name to a growing list of retailers sending a cheque back to Treasurer Josh Frydenberg as it enjoyed a boom in sales and profitability through the December half that was dominated by COVID-19, extended lockdowns and people investing money in their homes and new home offices.

Adairs on Tuesday reported that first-half revenue was up 34.8 per cent to $243m and net profit increased by 233.4 per cent to $43.9m.

Its sales and underlying earnings exceeded the December 2020 guidance after adjusting for the $6.1m repayment of JobKeeper subsidies.

Adairs announced an interim dividend of 13c per share, up from 7c in 2020, and payable on April 16.

The retailer delivered record sales and profitability at a time when its 43 greater Melbourne Adairs stores were closed for almost half the period due to COVID-19 restrictions. Chief executive Mark Ronan said the first half of fiscal 2020 was significant for Adairs with record levels of sales and profitability, the acquisition of Mocka and the finalisation of its domestic supply chain strategy.

“We continued to deliver above market sales growth with group like for like sales up 6.9 per cent and online sales up 31.6 per cent (excluding Mocka),” Mr Ronan said.

The robust conditions for the first half looked to have spilt into the June half, with Adairs reporting that in the first seven weeks of the second half Adairs generated like-for-like sales growth of 2.3 per cent and gross profit growth of 8.5 per cent.

Adairs is forecasting full-year 2020 EBIT of $48m to $52m.

“While COVID-19 has seen people invest more in their homes, these results highlight the benefits of investing early in our omni-channel strategy, having a passionate team, great unique product, a large and loyal customer base, and a platform that allows our customers to shop with us when, where and how they want,” Mr Ronan said.

“Our focus continues to be on delighting and inspiring our customers with new product and outstanding customer experiences both in store and online. Combined with our vertically integrated business model this will deliver continued growth in shareholder value.”

For the first half of fiscal 2021, Adairs said it managed the cost of doing business with operating leverage achieved in stores and online.

The company said COVID-19 rent rebates related to the store closures between April and June 2020 of $2.2m were recognised in the first half. Online costs were lower due to improved pick-and-pack productivity and lower delivery costs despite greater marketing investment to drive higher return on investment.

At its Adairs retail chain online sales grew by 95.3 per cent to $62.2m. While this channel benefited from the Greater Melbourne store closures the online channel performed strongly across the entire half and accounted for 28.9 per cent of total Adairs sales (up from 17.9 per cent in the first half), the company said.

Mocka, the New Zealand chain bought by Adairs a year ago, continued to perform above the expectations it had for the business when it was acquired. Mocka’s sales in the first half were $28m up 44.4 per cent. The strong sales growth and improved gross margin rate, coupled with ongoing cost control initiatives, delivered an underlying EBIT of $7m, up 100 per cent.

Shares in Adairs closed down 3.8 per cent at $4.04 each.