Adairs shares rise and fall after sales increase

The online and brick and mortar furniture saw shared drop even as an online sales boom lift the performance of the entire business.

Adairs has benefitted from a large jump in online sales.

Shares in homewares retailer Adairs dropped by more than five per cent on Monday despite the company unveiling a total sales increase of 22 per cent through this financial year ahead of its annual general meeting.

The company told the market that in the 17 weeks to October 25, sales remain elevated across all channels, despite 43 stores in the Melbourne area being affected by renewed coronavirus lockdowns.

As a result, sales in physical Adairs stores shrunk by 0.6 per cent – but the decline was more than offset in the Adairs online division, which saw sales increase by 134 per cent.

After adjusting for the Melbourne closures, store sales on a like-for-like basis grew by 17 per cent.

Sales at the newly-acquired Mocka online furniture store, purchased for $75m last December, grew by 48 per cent.

Overall, online sales now account for 41 per cent of total group sales.

Speaking at the AGM, chairman Michael Butler said that Adairs benefited “significantly” from the COVID-19 driven surge in online shopping.

“We have been fortunate. While COVID-19 has caused significant damage to many industries – some of which may take years to fully recover – it is clear that many people continued to shop online and that the Home category was front of mind in their shopping,” he said.

“As a leader in this category, with one of the best online platforms of any retailer, we benefited significantly from this trend.”

Mr Butler said he expected the growth in online shopping activity will continue.

“We expect these benefits will be long lasting as many of our store-only customers were introduced to our online platform for the first time, and of course we also saw significant numbers of new customers shop with us for the first time,” he said.

Mr Butler also announced he would be stepping down from the board, with Trent Peterson to act as interim chair while the board conducts a search.

Managing director and CEO Mark Ronan told shareholders that a key factor in ensuring in-store sales remained strong through a disruptive period was by offering “call and collect” options.

“Recently we have been trialling both a “call and collect” and a “call and same-day delivery” service from a range of stores across Victoria, New South Wales and Queensland,” he said.

“We have seen a rapid adoption of these services and in the case of Greater Melbourne it allowed us to recover a good portion of our store sales.”

Mr Ronan said that the company will open two to four new stores over the next year and “upsize” a further five to seven, with significant complimentary investment in online capability.

The company said that margins grew alongside sales, with Adairs margins on average 600 basis points higher than last year, and Mocka’s, 150 basis points.

Despite the optimistic tone of the address, Adairs did not offer guidance for the next year due to the ongoing uncertainty of the pandemic.

However, Mr Ronan did say that inventory levels that were depleted during the pandemic are at adequate levels for the Christmas period.

“Inventory levels were well below ideal levels throughout this period, due to the actions taken to manage the inventory and liquidity position in the second half of FY20 and the stronger than anticipated sales results since stores reopened in May 2020,” he said.

“Pleasingly, these are now returning to levels more in line with last year and will be in a good position to support the key Christmas trading period.”

Adairs closed at $3.64 a share, down 5.7 per cent.