The Adairs Ltd (ASX: ADH) share price has been one of the worst-performers on the ASX today. It has dropped a remarkable 15% to $1.20 following the release of a less-than-impressive half-year result from the homeware retailer.
Here's what you need to know:
- Sales increased 5.7% on the prior corresponding period to $124.5 million.
- Like-for-like sales declined 4%.
- Gross margin of 59.4%.
- EBITDA fell 34.3% to $14.8 million.
- Net profit after tax down 35.3% to $8.6 million.
- Fully franked interim dividend of 3.5 cents per share.
In November the Adairs share price took a tumble after management advised that bedlinen sales were trading below expectations for the first four months of FY 2017.
This led to the company downgrading its full-year sales guidance to between $265 million to $275 million from $275 million to $285 million. As well as this the company reduced its gross margin guidance to between 58.5% to 60.5%.
Unfortunately things have not improved and management had no choice but to lower its guidance yet again following a poor start to the second half.
The new guidance for FY 2017 is sales between $255 million and $265 million with its gross margin expected in the range of 58% and 59.5%.
Should you buy the dip?
Management has advised that it expects earnings per share to be between 11 and 13 cents this year, down from 16.4 cents in FY 2016.
Even at the low end of its guidance range its shares are changing hands at under 11x forward earnings. This makes it look incredibly cheap in comparison to fellow retailers Nick Scali Limited (ASX: NCK) and Harvey Norman Holdings Limited (ASX: HVN).
But considering the company has downgraded its full-year guidance twice in just a matter of months, I don't have a lot of confidence in their ability to forecast their results. For this reason I would suggest investors give Adairs' shares a wide berth.
