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Adairs signals strength for year ahead

AdairsBedding retailer Adairs has enjoyed another bump with investors following its full-year result, with CEO Mark Ronan providing comprehensive guidance that momentum from 2H17 will continue into FY18.

Adairs booked a 19.6 per cent decrease in net profit after tax to $21 million for the year ended 30 June and a 21.5 per cent decline in earnings before interest and tax to $30.8 million, but the result was somewhat expected given the multiple trading updates previously provided by the company.

Ronan has twice reiterated the sharp uptick in Adair’s trading performance in the second half, with LFL sales spiking to 10.4 per cent in July, but it was a forecasted EBIT range of $33 – 37 million, specificity that’s been hard to come by in retail earnings thus far, that was focused on.

FY18 sales are predicted to be between $285 – 300 million, up from $265 million in FY17, on the addition of two-new stores, while gross margins are slated to remain steady after falling 1.8 per cent to 59.2 per cent in FY17.

1H17 LFL sales decreased by 1.4 per cent, but 2H17 LFL sales increased by 1 per cent, with -0.5 LFL growth in April and May offset by 9.1 per cent growth in June and 10.4 per cent growth in July.

“The last 12 months saw a tale of two halves,” said Ronan. “The first half of FY17 was a challenging period, as range issues in some product categories together with a softer than expected Christmas period impacting the performance of the business.”

“The pleasing second half result has positioned the business for growth in FY18. The previous product range issues have been largely addressed and we have seen the business return to like-for-like sales growth in June. With renewed confidence in our product execution, and continual improvement in our promotional and in store execution, there is improved momentum within the business,” Ronan said.

“FY18 sales growth will be driven by a return to LFL sales growth, further new store roll outs in ANZ and ongoing growth in our online channel,” he continued.

The bedding chain will open between four and six stores, in addition to upsizing six more locations in Australia. Two more stores are planned for New Zealand, in a move to get “closer to profitability”, as the retailer looks to build its brand and consumer awareness across the Tasman.

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