Adairs share price soars 14% following results announcement

The Adairs share price was up as high as $3.24 this morning following the release of the company's preliminary final result for FY2020.

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At the time of writing, the Adairs Ltd (ASX: ADH) share price was up 13.5% to $3.11 after the company released its preliminary final result for the 2020 financial year. At one point during this morning's trade, the Adairs share price soared by more than 18% before seeing a pull back. Here we take a look at the details that prompted the Adairs share price to rally.

What was in the announcement?

According to the company, group online sales were up 110.5% to $124.2 million with online sales representing 34.8% of total sales. Total group sales were up 12.9%, however, in store sales were down 7.3%.

Adairs' underlying earnings before interest and tax were up 39.7% to $60.7 million. Statutory net profit after tax was up 19.0% to $35.3 million with earnings per share up 17.3% to 21 cents per share.

The company stated that its recently acquired Mocka brand had performed well since the acquisition and during COVID-19. Financial year 2020 sales and earnings before interest and tax for the brand were above expectations despite low inventory levels during the fourth quarter.

Adairs had net debt of $1.0 million at 30 June, this was down $7.2 million versus FY 2019.

The company announced a final dividend of 11 cents per share, fully franked. This was an improvement on the final dividend of 8 cents per share announced in FY 2019 and represented 72% of underlying net profit after tax.

Adairs Managing Director and CEO, Mark Ronan commented on the result, stating;

"We have seen strong trading since re-opening our stores and websites throughout May, which has continued up to today. Our results confirm the strength of our brands and the competitive advantage our omni-channel model provides in these volatile times. The acceleration in online penetration and growth rate brought about by COVID-19 restrictions has long term benefits for us as more of our customers shop across our brands."

About the Adairs share price

Adairs is a retailer that provides manchester, homewares, furniture and children's products. It operates in Australia and New Zealand. Adairs has over 160 physical stores along with online stores.

In March 2020, Adairs temporarily closed its Australian stores for five weeks due to the lockdowns put in place as a result of the pandemic.

Last year in December, the company announced that it had acquired online retail brand Mocka for an enterprise value of $75.5 million. As consideration for the acquisition, $43.4 million was paid in cash with the rest paid in Adairs shares and from the future earnings of the acquired company.

The Adairs share price is up 607% from its 52 week low of 44 cents, it has returned 37% since the beginning of the year. The Adairs share price is up 114.5% since this time last year.

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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