Adairs drops guidance on expected consumer downturn


Bedding retailer Adairs grew sales and profit over the six months to 30 December 2018, despite a weakening housing market, but dropped its EBIT guidance in anticipation of a potential downturn in consumer spending.

The business is now forecasting EBIT of between $46 million and $50 million – slightly below the previously announced $47.5 to $51.5 million.

“The moderation of our EBIT guidance range relates primarily to the expected impact of the depreciating AUD and a potentially more challenging consumer environment,” Adairs managing director and chief executive Matt Ronan said.

The brand expects  sales of between $340 million and $355 million over the financial year – below the $345 million to $360 million range previously announced.

Net profit grew 9.1 per cent to $14.9 million in the first half of FY19, with online sales increasing 42 per cent to $24.3 million – or 15 per cent of sales.

Sales grew 10.6 per cent to $164.4 million, with like-for-like sales having grown 7.3 per cent, with two stores having been upsized over the period, with a further four refurbished.

The business has previously outlined a focus on larger format stores, with the intention of capitalising on the success the brand enjoys in homemaker centres – with nearly half of the retailer’s sales coming from the larger centres.

Five stores were closed over the period, while a further four were opened.

Ronan said the brand is confident its strategic priorities will deliver further growth, and that the results highlight this potential.

“Adairs’ growth over the first half, despite a weaker housing market, shows that our focus on delivering great product at a good price, combined with our relatively low average transaction value, positions the business well to navigate a continually changing market,” Ronan said in a note to investors.

“Customers continue to decorate and update their homes despite the deterioration in house prices and tightening credit availability.”

The company’s online performance saw e-commerce sales grow 42 per cent over the period, as a result of optimised search engine marketing and optimisation, an enhanced social media strategy and an growing ‘Linen Lovers’ loyalty program.

The retailer’s New Zealand business performance has improved, with sales up 30 per cent year-on-year. This is a result of a reworked price-point for the “basics offer”, which allows it to better appeal to first-time buyers, improvements to brand awareness, and an improved supply chain.

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