Adairs’ profit jumps over 60 per cent

AdairsBedding retailer Adairs’ has closed the book on its horror half-year result in fiscal 17, unveiling a 62.5 per cent jump in net profit to $13.9 million.

The retailer’s earnings before interest and tax (EBIT) increased by 73 per cent to $20.9 million in the six-months ended 31 December, on the back of a 19.7 per cent increase in top-line sales to $149 million.

The result comes after more than six-months of continuous sales improvements at Adairs following what management now concedes was a mistake-ridden 1H17.

Like-for-like (LFL) sales were up 14.8 per cent, compared to negative 4 per cent in the prior corresponding period, following efforts to reshape its product mix in 2H17.

“Over the first half the team have focused on delivering a fashionable well coordinated product range together with a superior retail experience,” Adair’s managing director and CEO Mark Ronan said.

“Our continued focus on operational excellence has come through in our results…this half has put Adairs back on a growth trajectory, regaining our sales momentum given our improved product and in store execution.”

Strong trading has continued in the first seven weeks of the second-half, with LFL sales growth of 13 per cent across the network, although management did not update its guidance following a recent upgrade.

Adairs still expects EBIT in the $40 – $44 million range for FY18, with between $300 – $310 million in top-line sales.

There are now 164 Adairs stores, with four opened during the first half, three upsized and two refurbished. The company is targeting between 166-168 stores by the end of FY18.

Adairs’ gross profit increased by 22.2 per cent on a 130-basis point increase in margins to 60.6 per cent, as management moved to tighten its promotional calendar to reduce markdowns.

Cost-of-doing business fell by 44.4 per cent (47.4 per cent in PCP) as Adairs’ store roll-out began to fractionalise costs, driving operating leverage.

Occupancy expenses also fell by 1.2 per cent to 13.3 per cent, on the achievement of rent reductions on leases up for renewal during the half.

Speaking on its New Zealand expansion, Adairs said that stores across the pond are meeting initial expectations, although said that gross margins were impacted by inventory and supply chain issues, which drove a lower-than forecasted EBIT.

Two new stores are slated to open in NZ in the second-half.

Online sales increased by 98.7 per cent to $17.1 million in the first-half, representing 11.5 per cent of total sales, following the launch of a re-platformed website and a broadening of its online product range.

“We are confident that the issues of last year have been resolved. Our focus on excellence in retail execution together with effective management of both the gross profit and cost of doing business will underpin Adair’s continued growth,” Ronan concluded.

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