Shares in homewares retailer Adairs staged a rare rise amid yesterday’s wider sell-off, even though it revealed a weaker 2018-19 result.
A combination of meeting guidance, solid sales growth in 2018-19 and expectations of more to come this financial year helped the shares go against yesterday’s very negative trend.
The company told the ASX that the weak Australian dollar and tough retail trading environment were behind a small, 1.3% dip in, net profit after tax to $29.6 million despite growth in online sales which now makes up 17% of sales or close to $59 million a year.
The company revealed like-for-like sales were up 7.2% for the year to June with group revenue up a solid 9.7% to $344.4 million.
Shares jumped more than 12% in morning trade after the company met its revised June guidance and it was meeting that which helped the shares end the day up just over 1% at $1.755.
Also helping investor confidence was a solid dividend decision. Adairs’ board revealed a final payout of 8 cents a share, making a total for the year to June of 14.5 cents, up 7.4%.
CEO Mark Ronan said in yesterday’s statement: “The FY19 results show that we continue to deliver above-market sales growth thanks to our unrelenting focus on delivering excellence in retail execution and our understanding of what our customers want both instore and online.”
“Our New Zealand business also performed well, delivering strong growth and materially improving profitability.
“Our success however brought with it some growing pains within our distribution network that materially increased our operating costs and this, coupled with the weaker Australian dollar, offset the benefits of our sales growth,” he said.
Looking to the coming year Mr. Ronan was upbeat, saying yesterday: Over the first seven weeks of FY20, Adairs generated like for like sales growth of 4.8% across its business with online continuing to grow strongly with sales up 26.9% on the same period last year.”
“Top line revenue growth is expected to remain strong with like for like growth to be underpinned by continued growth in both stores and online. We expect to open 4-6 net new stores (including New Zealand) during FY20.”
“Weakness in the Australian dollar will likely remain a headwind in FY20 however we have worked with suppliers on landed costs and reviewed price points and discount depth to improve margins in FY20.”
Despite this optimism, the company is looking for more growth this year, but a touch is slower than seen in 2018-19 (but not in online sales where another strong double digital rise is forecast).
The company is looking for sales growth of 4.5% to 8.8% this year 9against 9.7%) and growth in earnings before interest and taxation (EBIT) in a range of a 0.9% fall to a 6% rise.
“While the macro environment is challenging, our strategies of product differentiation, range expansion, more inspiring and larger store formats, and an unwavering focus on customer service will all play a key role in growing both like-for-like and total sales in FY20,” Mr. Ronan added.
