The Adairs share price is down 54% in 2022. What’s happened?

It has been a tough couple of months for Adairs shareholders.

| More on:
Man's legs poking out of a brown sofa while his body is sinking down into the back of it, dog looking on

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 have continued to fall this year on the back of weakened investor sentiment, particularly since the start of May
  • The RBA's rate hikes along with soaring inflation could cause a drop in consumer spending for the remaining part of the year
  • Some economists are predicting the official cash rate to reach as high as 2.35% by the end of 2022

The Adairs Ltd (ASX: ADH) share price has fallen on hard times this year.

Despite finishing 3.64% higher to $1.85 yesterday, the homewares and furniture retailer’ shares are down 54.32% in 2022.

Down, but not quite as low, the S&P/ASX 200 Consumer Discretionary (ASX: XDJ) sector is also in the red this year by 25.54%.

Let’s take a look at what’s impacted Adairs shares lately.

What’s driving Adairs shares lower these past few months?

The Adairs share price has continued to head south following weakened investor confidence on the ASX.

With inflation levels spiking to 5.1% in the quarter ending 31 March, the Reserve Bank of Australia (RBA) tightened its monetary policy.

This saw the central bank use its toolkit to cool down the hot inflation by raising interest rates.

The monthly household spending report for April indicated an uptick in buying furnishings and household equipment, up 14.9%. However, with May’s report set to be released on 12 July, this could show a drop-off in consumer spending.

This follows the RBA’s decision to aggressively ramp up the official cash rate by 0.5% this month to 0.85%.

Furthermore, the RBA governor, Philip Lowe, warned that more rate hikes in 2022 will impact the cost of living.

A number of economists expect the cash rate to lift to 2.35% by the end of the calendar year.

In Adairs’ first-half result, there was a drop-off across key metrics compared to the prior corresponding period.

Earnings before interest and tax (EBIT) and net profit after tax (NPAT) took a significant hit brought on by COVID-related operational disruptions.

However, with the COVID-19 era almost behind us, the headwinds outlined above could weigh down the company’s current financial performance.

Adairs share price snapshot

A disappointing 12 months has led the Adairs share price to register a loss of almost 60%.

It’s worth noting that its shares reached a 52-week low of $1.65 last week, before recovering some lost ground.

Based on valuation metrics, Adairs commands a market capitalisation of approximately $305.8 million.

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. has positions in and has recommended ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the Electro Optic Systems share price declines today on news the CEO has resigned
Share Fallers

Why Baby Bunting, PointsBet, ResMed, and Suncorp shares are dropping today

These ASX shares are ending the week in the red...

Read more »

a woman looks exhausted and overwhelmed as she slumps forward into her hand while looking at her laptop screen.
Share Fallers

Why AMP, OFX, Rio Tinto, and Telstra shares are dropping

These ASX shares are missing out on the good times today...

Read more »

ASX shares downgrade A young woman with tattoos puts both thumbs down and scrunches her face with the bad news.
Share Fallers

Why A2 Milk, Appen, Boral, and REA shares are dropping today

These ASX shares are having bad days...

Read more »

A couple sit at a desk with tissues and tears in their eyes while they look at a laptop computer screen with a camera set up in the foreground suggesting they are making a video.
Technology Shares

What’s going so wrong for ASX 200 tech shares on Wednesday?

ASX 200 tech shares are leading the market's losses today. What's going on?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the Electro Optic Systems share price declines today on news the CEO has resigned
Share Fallers

Why Block, CBA, Mesoblast, and NAB shares are dropping today

These ASX shares are dropping on Tuesday...

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Alliance, Aurizon, MVP, and Suncorp shares are dropping today

These ASX shares are out of form on Monday...

Read more »

A person plunges into the pool with only their feet visible above the surface, diving through a heart-shaped inflatable ring.
Share Fallers

Here’s why the Medical Developments share price is sinking 17% on Monday

The share has caught sellers attention today.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Amcor, Arafura, Block, and Janus Henderson shares are dropping

These ASX shares are ending the week in the red...

Read more »