Thriving manchester retailer Adairs to open several new stores

Adairs is bucking the trend with plans to open several new bricks-and-mortar stores while others are set to be upsized.

Adairs will open three-to-five new physical stores in the next 12 months and a further three-to-five stores will be up-scaled.

Adairs is bucking the trend with plans to open several new bricks-and-mortar stores while others are set to be upsized, even as the manchester retailer has been forced to shut its metropolitan stores in Melbourne given the round of coronavirus lockdowns

Three-to-five new physical stores are set to be opened in the next 12 months and further three-to-five stores will be up-scaled to showcase more products and support the company’s digital offering.

“We firmly believe that the home category is better with stores,” chief executive Mark Ronan said.

“They provide our customers with the ability to engage with the product and the team in an environment that inspires them to create the look that is right for them.

“While online can easily allow you to find what you want, it is harder to recreate the experience of discovery that exists as you walk through a store, touching and feeling the product.”

Mr Ronan said the company had deliberately created a flexible store portfolio, with 72 per cent of store leases expiring within three years, while its larger and more profitable stores had longer lease periods.

“This allows us to strategically manage our store portfolio through opening new stores, upsizing existing stores, of planning more favourable terms on renewals, or closing stores that simply don’t meet our return hurdles,” he said.

“Adairs is well placed to both increase market share as more customers move online, while continuing to support the customers who want the instore experience.”

Shares in Adairs shot up more than 17 per cent to a record high of $3.21 on Monday, before closing 11.3 per cent higher at $3.05 after the company touted strong sales growth for the first five weeks of the new financial year and unveiled a rise in full-year profit for 2020.

A surge in online sales, combined with strong sales in the Mocka furniture business Adairs acquired during the year, prompted an unaudited net profit after tax figure up 19 per cent to $35.3m for the full-year through June. Earnings before interest and tax jumped 39.7 per cent to $60.7m.

The company declared a final dividend of 11c per share fully franked, up from 8c a share a year ago. The company cancelled its interim dividend this year at the beginning of the COVID-19 outbreak to preserve cash.

For the first five weeks of fiscal year 2021, Adairs said group sales were up 32.3 per cent.

“COVID-19 has reminded Australians of the importance of a comfortable home, and we believe this is motivating them to spend more on their homes at this time,” Mr Ronan said.

“We expect this behaviour to continue while COVID-19 persist and other areas of the economy remain constrained.”

The company said that COVID-19 had accelerated its online penetration and growth rate and that it was well placed to continue to benefit from a pivot to online shopping, though it did not provide a full-year guidance due to COVID-19 uncertainties.

Mr Ronan said that the company would continue to invest in its digital capability this financial year, where it sees material upside, given that 63 per cent of its Linen Lover loyalty members had not yet shopped online.

Mr Ronan acknowledged the work of the Australian and New Zealand governments which introduced employment support packages and enabled Adairs to continue to pay its teams while they were stood down in response to the coronavirus restrictions.

“During the period Adairs stores were closed most of our team were asked to stand down, with a smaller group tasked with managing Adairs as an online only retailer,” Mr Ronan said.

“They did this with unwavering professionalism and understanding, ensuring that we successfully navigated the store closure period and emerged well placed to manage and capitalise on the new aretail environment.

“Shareholders should be comforted that at Adairs and Mocka they have teams who are committed to their customers and delivering ongoing profitable growth.”