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Store closures and higher delivery costs impact Adairs’ performance

(Source: Supplied)

In a trading update on Monday, homeware retailer Adairs announced group sales for the first half landed at $242 million – including a $12.5 million contribution from Focus on Furniture sales in its first 26 days of ownership.

Earnings before income and taxes is expected to finalise around $32 to $33 million – a far cry from the $60.2 million in the first half of FY21, but still above the $22.6 million in the first half of FY20.

As outlined in the report, one of the major factors impacting Adairs’ sales performance during this period was mandated store closures which reduced the number of overall trading days by 31 per cent. 

Furthermore, global supply chain costs increases, coupled with higher delivery costs to online customers including additional promotional activity, weighed heavily on the gross margins of this half. 

Rent rebates, higher wages for staff members, disruption in warehouse operations following the slow transition into a single national distribution centre whilst the pandemic were also reflected in the result.

According to Adairs, stock flow into Australia and New Zealand from Asia has been inconsistent due to disruptions in factory and shipping capacities. Though inventory was successfully managed, domestic supply chain disruptions and ongoing workforce shortages within operations and supply chains also contributed to the challenges faced by the business.

“During the half, despite significant operational disruptions, we have made strides in progressing our strategic priorities by commissioning our new national distribution centre, upsizing selected stores, continuing to expand our range and adding to our omni channel capabilities,” chief executive Mark Ronan said.

The group finished with a net debt of $90.9 million, including $29.1 million of cash on hand, $120 million in drawn debt and the final payment of Mocka founders with $45.7 million. 

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