Homewares retailer Adairs has reported a huge jump in sales and profit for the 2020 financial year, in part thanks to a significant stimulus from the government’s JobKeeper program.
Shares in the company soared as much as 16.7 per cent to a new all-time high of $3.24 after the retailer released its unaudited full-year accounts, which showed a 12.9 per cent jump in full-year sales to $388.9 million, with like-for-like sales rising 15.9 per cent. Adairs' shares finished the trading day up 11.3 per cent at $3.05.
Statutory net profit after tax rocketed up 19 per cent to $35.3 million, and Adairs' net debt reduced to just $1 million, down from $8.2 million at the end of the 2019 financial year.
Adairs chief executive Mark Ronan.Credit:
The better-than-expected result was helped by $11.3 million in wage subsidies claimed from the Australian and New Zealand governments, which stripped $5.3 million out of the retailer's cost of doing business as some staff continued to work while being paid under the scheme.
Excluding the direct benefit from the subsidy, profit would have only increased marginally, but chief executive Mark Ronan said the company would have posted a record result even without the wage subsidies.
However, Mr Ronan admitted Adairs' result would not have been anywhere near as strong if not for the broader economic benefits induced by the $85 billion subsidy.
"There's no doubt that JobKeeper and wage subsidies in New Zealand enabled customers and consumers to continue to spend on retail," he said.
"Without them, we would have seen a much more dire economic response overall."
Adairs has been a major beneficiary of Australia's pandemic spending habits, with housebound Australians spending big on their homes during the country's lockdowns in April and May.
This was reflected in the company's jump in online sales, which doubled over the period and now accounts for 34.8 per cent of total sales. Adairs’ recently acquired online furniture and homewares retailer Mocka also performed better than expected, with revenue up 50.2 per cent for the period to $29 million.
Adairs' digital channel will be a renewed focus for the business, Mr Ronan said, with the company hoping to leverage its Mocka acquisition to better target the nascent online homewares and furniture sector.
"[The pandemic] really highlighted the benefit of being omnichannel and that in itself should see us continue to invest in that pathway," he said. Adairs is constructing a new Melbourne-based national distribution centre to help it grow its online channel.
Morgans analyst Jo Little said the result was well above expectations and highlighted the company's "negligible" debt position of just $1 million as a major positive.
"We think buoyant trading conditions can continue over the balance of [the first half of the current financial year]," she said.
The retailer has continued to see strong trading at its stores and online into the new financial year. For the first five weeks of the 2021 financial year, online sales have doubled and like-for-like store sales are up 15.8 per cent, however, the business did not provide profit guidance.
The company declared a full franked dividend of 11 cents per share, which will be paid on September 24.
Business Briefing
Start the day with major stories, exclusive coverage and expert opinion from our leading business journalists delivered to your inbox. Sign up for the Herald's here and The Age's here.