Lockdowns have cost Adairs sales and earnings

Homewares retailer Adairs believes lockdowns from Melbourne to Auckland have cost it as much as $32m in lost sales since July.

Lockdowns across NSW, Victoria, ACT and Auckland have cost Adairs as much as $32 million in lost sales since July. Picture: Richard Walker

The chief executive of home furnishings retailer Adairs has warned that forced closure of its stores from Melbourne to Auckland since July have cost it of as much as $32m in lost sales and seen almost half its trading days across its store network lost.

The value of those lost sales to its earnings was between $12m and $15m.

In a trading update at the company’s annual meeting on Wednesday, Mark Ronan revealed this had seen Adairs’ sales growth switch to negative for the 16 weeks to October 17 although against the performance in 2020 the company had rung up strong sales growth, with online sales rocketing 172.8 per cent.

The mandatory lockdowns of non-essential retail across NSW, Victoria, the ACT and Auckland had done damage to the sales trajectory at Adairs and seen it lose out on sales.

Management estimated the value of sales foregone in Adairs as a result of store closures over the 16 weeks to be around $28m-$32m, net of the estimated sales benefit captured in the online channel. The EBIT impact of these lost sales are estimated to be $12m-$15m.

“The trading environment is operationally challenging due to the ongoing impact Covid-19 is having across the Australian economy,” Mr Ronan said in his AGM speech.

“As a group we remain focused on dealing with the Covid-19 challenges including government mandated store closures, vaccination requirements, impact of 14-day isolation periods combined with international and domestic supply chain challenges.”

Mr Ronan said electing to bring stock in early, together with carrying additional inventory in core lines and being prepared to pay higher than usual freight costs had ensured Adairs was in a strong inventory position.

There had been a strong rebound since lockdowns were ended in NSW.

“The reopening of our NSW stores last week has delivered strong sales results, giving us early insight into the strength of the demand from the consumers as we come out of lockdown. We expect to see continued strength in retail stores as customers elect to shop in store given the domestic freight challenges.”

Mr Ronan said there was “no doubt” freight challenges were significantly impacting retail customers and their online experience across all sectors.

For the year to date total group sales are 8.5 per cent lower than 2021 but 8.2 per cent higher on a like-for-like basis.

Adairs said when compared to pre-Covid levels, sales were up 14.6 per cent against 2020.

For the 16 weeks to October 17, like for like sales were up 67.1 per cent against 2020, up by 8.2 per cent against 2021.

Its online platform posted sales growth for the period of 15 per cent against 2021, and up 172.8 per cent against 2020.

At the AGM the retailer did cop a strong negative’ vote for its remuneration report and the awarding of options to executives including Mr Ronan. There was a 15.69 per cent vote against the adoption of the remuneration report, avoiding a first strike, as well as a 14.09 per cent vote against the awarding of long-term incentive options to Mr Ronan and executive director Michael Cherubino.

Adairs shares closed up 2.3 per cent at $4.10.