The well-timed acquisition of online furniture store Mocka and a rise in online sales have boosted the FY20 financial results of homewares retailer Adairs.
The company posted a 19 per cent rise in net profit to $35.3 million, and a 40 per cent increase to $60.7 million in earnings before interest and tax (EBIT). EBIT from the Adairs chain rose 24 per cent to $54 million and Mocka contributed $6.7 million on sales of $29 million.
“Our results confirm the strength of our brands and the competitive advantage our omni-channel model provides in these volatile times,” said Mark Ronan, company CEO and managing director.
“The acceleration in online penetration and growth rate brought about by the Covid-19 restrictions has long term benefits for us as more of our customers shop across our brands,” Ronan said.
The company said its strong like-for-like sales growth of 15.9 per cent was driven by its omnichannel model, high engagement from Linen Lovers members, the continued success of its core strategies and the increasing focus of customers on their home, particularly during the Covid-19 restrictions.
Online sales grew by 61.4 per cent to $95.2 million. This accounted for 26.5 per cent of total sales, up from 17.1 per cent in FY19.
“While this channel clearly benefited from store closures in April/May, our online business performed strongly across the entire year,” the company said.
Store like-for-like sales were up 3.9 per cent after adjusting for the period where the company’s stores were closed due to government restrictions to stem the spread of the coronavirus. Store like-for-like sales in June once all stores re-opened was 18 per cent, while online continued to trade very strongly with sales in June up 66 per cent.
“Throughout the year we continued to optimise our store portfolio, opening five new stores, closing three stores, upsizing four and refurbishing two stores,” Adairs reported. “Our store rollout and upsizing strategy is delivering healthy profit growth and return on investment, with all stores increasing their sales and profitability following upsizing.”
The company said its inventory will return to more normal levels by early October, with inventory management remaining a focus throughout FY21 given uncertainties around the trading environment.
According to Adairs, since its acquisition in December 2019, Mocka has performed above company expectations in terms of both sales and profitability. The Covid-19 pandemic resulted in the Mocka New Zealand business being unable to trade for seven weeks during Stage 4 restrictions in New Zealand, while the Australian business traded throughout the period.
Sales over the 30 weeks of Adairs ownership in FY20 were up 50.2 per cent over the prior corresponding period to $29.0 million. Across the whole FY20 year, part of which was not under Adairs ownership, Mocka delivered total sales of $45.9 million, representing total growth of 30.4 per cent over FY19.
The company also announced its chair Michael Butler advised he would not be seeking reelection at this year’s AGM.