Adairs' bumper half means fewer bargains
Home furnishings group Adairs has had a bumper first half and customers will see fewer discounts as the company tries to maintain sizeable profit margins.
The company on Tuesday reported a 233 per cent-plus jump in net profit to $43.9 million for the first 26 weeks of 2020/21.
Consumers have focused on improving their homes rather than travel during the pandemic.
Despite Australia mostly keeping coronavirus at bay, chief executive Mark Ronan believes these preferences won't change soon.
"The environment at the moment makes it very difficult for people to think interstate travel is easy to do," he said of lockdowns such as the one in Victoria.
Customers can expect fewer discounts as the company tries to maintain improved profit margins on sales, which have come about during the pandemic.
Mr Ronan told analysts: "We continue to maximise margin by, in my words, not giving it away too cheap."
He said stores were having fewer discount days and he did not plan to revert to more frequent sales promotions.
Mr Ronan said he wanted customers who felt they were paying a slightly higher price at Adairs to believe it was due to gaining a higher-quality product.
The strong sales have continued in the first seven weeks of its second half, up 25 per cent.
Adairs will also return millions of dollars in JobKeeper payments.
Adairs collected $6.1 million from the government during its first half.
"The company will repay the JobKeeper wage subsidy for the period," the company said.
Most workers were stood down in the 2019/20 financial year, when the impact of the pandemic was greatest.
Adairs also felt the effects of the Melbourne lockdown in the back half of 2020 when 43 stores had to close.
The company had received $10.7 million in total JobKeeper assistance as of December 27.
If the JobKeeper payment is excluded from the results, Adairs generated healthy underlying earnings of $60.2 million, up 166 per cent - which was much better than expected.
The company is not the first to promise to repay taxpayers' money. Nick Scali and Super Retail Group are among those to have pledged to do so.
Executives were delighted with the performance of the Mocka business, bought in December 2019.
Mocka is based in New Zealand but also trades in Australia.
Its sales rose 44.4 per cent to $28 million.
Adairs chief financial officer Ashley Gardner said Mocka's results continued to track ahead of expectations.
Shareholders will receive an interim dividend of 13 cents per share, fully franked. This was better than the previous interim fully franked payout of seven cents per share.
Shares were down 3.81 per cent to $4.04 at 1440 AEDT.
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