Shares in fabric, linens, and millinery and homewares group Adairs jumped more than 5% at one stage yesterday after the group produced another update to its performance.
This time it was for the six months to December which looks like being a record-breaking performance.
Adairs told investors on Tuesday to expect an “outstanding” first half of the new financial year after revealing earnings guidance for the first time since the COVID-19 hit.
After hearing that the share shit a days high of $3.70 before retracing to close at $3.31, up a more modest 2.8% for the day.
The retailer said it expects its underlying earnings for the half to be between $62 million and $66 million, nearly triple the $23.2 million it posted in the prior corresponding half and higher than the total earnings recorded for the 2020 financial year.
Sales are also expected to boom, likely to come in between $235 million and $245 million compared to $179 million in the first half of 2020.
“With three weeks remaining in the first half of FY21, sales have continued to remain elevated across all channels and are well ahead of the same period last year. This is despite 43 stores in the Melbourne Metropolitan area being closed for c.12 weeks1 of this period as a result of COVID-19 Government restrictions<“ the company said in the update.
Online sales represented 39% of total sales (comprising Adairs online 27% and Mocka 12%) versus 20% for the same period last year. That’s more than $ 90 million.
“Consistent with our heightened focus over the last 18 months, gross margins in both the Adairs and Mocka businesses have been well above prior year levels due to the continuation of pricing, promotion and sourcing initiatives outlined with the FY20 results,” Adairs said.
“This has remained the case since the AGM update, a period which included our November Linen Lovers and Black Friday sales events.
Adairs said inventory levels “are in line with plan going into Christmas while Mocka inventory levels have improved but remain below plan given stronger than expected sales and its longer product lead times to market.”
CEO Mark Ronan said in the statement:
“With a few weeks to go, it is now clear our first half FY21 result will be outstanding and builds on the excellent result in FY20. Whilst we have clearly been a COVID-19 beneficiary, the result has been delivered through the team’s strong execution against our articulated business strategies and the fundamental strength of our vertical business model,” the CEO said in the statement.
“These gains extend across all aspects of our business with Adairs achieving strong growth through our integrated omni-channel model and Mocka delivering strong results as we continue to build momentum and scale.
“For the group to achieve an expected EBIT outcome in six months that exceeds the EBIT of the full prior year, which was itself a record for the company, is testament to the strategic health and operational excellence of our business.”
There was no mention of the second half which is when the current sales rush started as the pandemic hit and lockdowns drove most retailing online.
With a high set of performance numbers as the basis for second half comparison, it’s likely Adairs and other retailers will produce a weaker performance.
Coles, Woolies, Myer, The Reject Shop, Kogan, Temple and Webster, JB Hi Fi all face the same problem with the June 30, 2020 half year. It was a one off with enormous gains in sales because of the pandemic and all the fears that went with it.
In reality a better comparison for the June 30, 2021 half-year might be to also compare the sales results for the second half of the 2018-19 financial year. That’s if the pandemic is as muted in Australia as it is now.
