No wonder the manchester and homewares retailer Adairs’ (ADH) first half results yesterday were treated badly by investors after the company also downgraded its full year outlook and guidance.
The company released the results on the second last day of the reporting period (today, February 28) for December balancing companies.
Adairs balanced its books on January 1 – but that had no impact on what was a very poor result – so weak that the shares plunged more than 14%.
Half-year profit slumped 35.3% to $8.6 million.
The shares ended down 14.50% at $1.20.
But Adairs’ total sales were up 5.7% to $124.5 million in the six months to January 1, but comparable sales fell 4% – a very weak result. Adairs pointed it that that was compared to a 15% jump in the previous period in 2015-16.
But directors said that the slide had continued in the first seven weeks of 2017 with comparable sales still negative being down 2%.
Adairs said sales growth had been cut by around $10 million for the full year to a range of $255 to $265 million (against an actual $247 million in 2015-16).
Earnings before interest and tax though are forecast to fall from $39.2 million, to a range of $27 million to $32 million – a fall of up to $30, further explaining yesterday’s share crunch.
The company has declared a fully franked interim dividend of 3.5 cents a share, down 30% from the 5 cents a share paid for the buoyant first half of 2015-16.
Adairs floated in mid 2015 at $2.40 a share and an initial surge saw the shares jump from $2.57 to a high of $2.95 in mid-August.
Since then the shares have battled to hold the $2.40 float price as it became clear the trading performance wasn’t up to scratch.
But last early November it issued a profit downgrade and the shares plunged around $1 in two days to end at $1.52.
Since then the shares have slid until yesterday when the actual result saw another sharp sell off. “The past six months have been a challenging trading period for Adairs. In addition to the missed opportunities in the fashion linen product category, Adairs observed a softer Christmas trade than expected with key trading days under performing,” chief executive Mark Ronan said in yesterday’s statement.
“Our like-for-like sales in the first quarter was flat, however we saw a further deterioration in trading emerge progressively over the second quarter. In response we acted quickly to stimulate sales activity, mark down and clear slow moving inventory.”
Mr Ronan added the company’s actions to address the first-half malaise had shown signs of traction, but it was too early to call a turnaround as like-for-like sales were off 2 per cent through the first seven weeks of the second-half.
"While this is an improvement, and in line with our expectations, we are seeing higher than usual sales volatility across product categories," he said.
"It is too early to forecast a consistent improvement in our trading performance."
He said the group understood the issues that led to its disappointing first half results, which included a softer than expected Christmas trade and missed opportunities in the fashion linen product category.
"As the new season fashion linen has started arriving in store there are early reads on product which support the emergence of a turnaround in performance," he said.
"However given the short time available and the apparent retail sector softness, we believe it could take longer for the results to materialise."
