'Significant' COVID-19-related disruptions: Adairs (ASX:ADH) share price sinks 5% following horror first-half results

Investors are selling off Adairs shares following a disappointing first half performance.

| More on:
a young woman props her hand under the face as she pokes her head out from under a luxurious doona in a bedroom decorated with flowers and a stylish lamp.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Adairs shares down 6% to $2.92 on the back of a weakened H1 FY22 performance
  • Key metrics, excluding total sales, for the first-half period fell in the double-digits
  • The Board declared an interim dividend of 8 cents per share

The Adairs Ltd (ASX: ADH) share price is deep in the red on Monday afternoon. This comes after the company released its first-half results for the 2022 financial year before market open.

At the time of writing, the homewares and furniture retailer's shares are swapping hands for $2.95, down 5.14%.

Adairs delivers disappointing result for H1 FY22

The Adairs share price is heading south following the company's performance for the 26 weeks ending 26 December 2021. Here are some of the key highlights:

What happened in H1 FY22 for Adairs?

The Adairs result was significantly impacted by government-mandated store closures, with store sales down 13.8% to $131.7 million.

Gross margin fell 380 basis points against the prior comparable period. This was due to global supply chain cost increases, higher delivery costs, and an increase in promotional activity.

In the Mocka business, sales jumped 22.8% to $34.3 million, attributed to strong growth in website traffic and search activity.

However, operations in Australia in the second quarter were significantly impacted by COVID-19-related customer delivery challenges. Although the company said this issue has now been resolved with a new delivery partner onboard.

Higher import freight costs, courier delays, and promotional activity resulted in a decline in delivered gross profit margin to 38.3%.

What did management say?

Adairs managing director and CEO Mark Ronan commented:

The first half of FY22 brought significant one-off operational disruptions related to COVID-19 which impacted our portfolio of brands and our overall financial results. Despite this we continued to progress our strategic priorities with Adairs' National Distribution Centre commencing operations, two new stores opened, four stores upsized, continuing range expansion with pleasing results and continued investment in digital capabilities.

The finalisation of the Mocka earn-out allowed us to build out our team to support our growth strategies and we added to our portfolio of vertical omni-channel retail brands by acquiring Focus on Furniture. With all brands having strong opportunities for growth, and all benefiting from good in-country inventory levels, we are confident about the prospects for the Group in 2H FY22 and beyond.

What's next for Adairs?

Looking ahead, Adairs noted forecasted 'clear opportunities for growth through 2H FY22'. This is based on the macro-economic environment which is supportive of strong employment and higher wages growth.

Whilst the COVID-19 operating environment can be unpredictable, the company refrained from providing guidance for the FY22 full year.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended ADAIRS FPO. The Motley Fool Australia owns and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Earnings Results

ASX 200 stock jumps 10% on strong FY24 results

How did this KFC restaurant operator perform in FY 2024?

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just slashed its final dividend by 23%

This retailer had a tough time during the 12 months. Here's how it performed.

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »

increasing rural asx share price represented by happy looking sheep
Earnings Results

Why is this ASX All Ords stock staying strong as profits crash 76%

How is this company's share price marching higher after mowing down more than three-quarters of its profits compared to a…

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces as they react to the action in front of them in a home setting.
Earnings Results

Guess which ASX 200 stock is surging 11% on an 'outstanding' result

This ASX gaming giant just posted a 17% jump in profits, and its shareholders are basking in the glory.

Read more »