The Adairs Ltd (ASX: ADH) share price has made a quick turnaround today, first surging higher 4.4% higher, to now 4.15% lower. This wild price swing follows the release of a trading update and AGM to shareholders.
In late-morning trade, shares in the manchester and homewares retailer are down 3.8% to $3.71. In comparison, the All Ordinaries Index (ASX: XAO) is up 0.3% to 6,391 points.
Let's see how Adairs performed for the first 17 weeks of FY21 and what was said in its AGM.
Trading update
For the period ending October 25, Adairs reported a robust result despite COVID-19 closing 43 Melbourne stores.
Total sales increased 22% over the prior corresponding period (pcp), underpinned by its online segment which grew 134%. Adairs reported sales stayed up across all channels, and that it was well ahead of the same time last year.
Online sales represented 41% of total sales versus 17% over the pcp.
Management advised that gross margins were above FY20 levels, remaining a key focus with the pricing and outsourcing measures undertaken. Underlying trading gross margin is roughly 600 bps higher than last year's period, and its Mocka business 150 bps higher.
Gross margins are expected to moderate from current levels as FY21 continues. This is due to consumers having more options for discretionary spend as coronavirus restrictions lift further.
Inventory levels were reduced over the past 6 months to manage cost and liquidity. As Adairs saw stronger than expected sales, inventory levels have increased ahead of the Christmas holiday period.
Overall costs within the business are being kept in line, with most spend occurring in marketing to capture new customers. In addition, government wage subsidies have helped Adairs support team members stood down from government-mandated store closures.
With the ongoing uncertainty around COVID-19, the board did not provide a guidance for FY21.
What did management say at the AGM?
Adairs CEO and managing director Mark Ronan said:
I am pleased that the momentum seen in the second half of FY20 has continued into FY21. These results highlight the strength and continued success of our brands, supported by our omni channel strategy and operational agility. We continue to see our customers invest more in the comfort of their homes, where many are spending more time working and studying.
Mr Ronan said the Adairs team had delivered a great product range under challenging circumstances, with all categories performing well.
This has been supported by all team members across the business working collectively to enable customers to shop via their preferred channel in a safe manner over this period. I have been so proud to see the passion and commitment of our team to work through the challenges and focus on what really matters – inspiring and delighting our customers.
