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Date : 05/09/2022

Adairs Share Price Slump Despite Record Sales in FY22

Adairs Ltd (ASX: ADH) is a major household goods and decor retailer in Australia and New Zealand. The firm’s retail and online operations are geared toward customers in the middle class.

Adairs, Focus, and Mocka are Adairs’ three business divisions. In 2015, Adairs share price went public at $2.40 despite owning only the Adairs brand. Those two were purchases made after news of the company went public; New Zealand’s Mocka in 2019 and California’s Focus on Furniture in 2021. Adairs purchased both to increase its visibility in the digital market.

Since Adairs announced its FY22 results, Adairs share price has been on a roller coaster ride since then. ADH shares first fell into a slump and lost value, then rebounded; even though the company announced record sales in FY22, it lost around 15% in value since then.

ADH: FY22 Results

Adairs share price are trading at $2.22, and its market cap is around 380.32 Million AUD.

ASX ADH on adairs share price trend and forecast

  1. Sales for Adairs increased 12.9% from the same period last year to an all-time high of $564.5 million.
  2. The company’s NPAT dropped by 29.6% to $44.9m.
  3. The company’s underlying earnings before interest and taxes (EBIT) dropped 30% to $76.4 million.
  4. 35% of ADH’s revenue came from online sales, totaling $195.4 million (4.5% increase year over year.
  5. The company’s net debt after FY22 was $93.2 million.
  6. Adairs announced a final dividend of $0.10 per share, increasing the annual dividend distribution to $0.18.

ASX: ADH: Was it all Doom and Gloom in the Previous Year?

Adairs share price is at a low right now, but things were different a year ago. ADH shares were soaring as Adairs benefited from the COVID-19 pandemic’s elevated retail spending. As was previously mentioned, in FY22, it saw a 13% increase to $564.5m in sales, 35% of which came from online channels. Some indicators, though, were less encouraging.

Optimistic Outlook: Adairs Share Price Forecast

Adairs is optimistic that its sales rise will persist in the upcoming fiscal year 2023. This fiscal year, sales are projected to be between $625 and $665 million. That’s the equivalent of a possible 17.8% from the previous year. It forecasts $75-$85 million in EBIT and $12-$15 million in capital expenditures.

The company’s trading update covered the first seven weeks of FY23.

There was a 44.8% increase in its unaudited sales compared to the PCP. It showed a 3.9% growth when Focus on Furniture sales were removed from the equation.

Be Aware of Other Variables

There are, however, grounds for caution. The most significant is growing inflation, which will cause people to reduce their expenditure on luxuries.

Adairs, which cater to the middle class, are more likely to be affected than a more upscale store. The company has a strong dividend yield but will have to reduce those payouts if things don’t go as planned.

Disruptions in the company’s global supply chain are also expected to continue. For the sake of customer convenience, it has pledged to maintain intentionally high inventory levels. That could lead to an oversupply, which has hurt companies like Kogan (ASX: KGN) in the past.

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