Adairs (ASX: ADH) has released a trading update as part of its annual general meeting (AGM).
Adairs is a home furnishings retailer that opened its first store in Victoria in 1981. Around 90% of Adairs’ range that is sold is private brand. Adairs has over 160 stores in Australia in five formats: Adairs, Adairs Homemaker, Adairs Kids, UHR and Adairs Outlets.
Adairs AGM
As part of the AGM, Adairs management took shareholders through its FY19 result telling them that during FY19 total sales grew by 9.7%, like for like sales grew by 7.2%, online sales grew by 42% and EBIT (click here to learn what EBIT means) fell by 2.4%.
Management also told shareholders that the New Zealand division was profitable in FY19 with “solid growth” in sales across all stores and online.
Adairs said that it exceeded capacity in its primary distribution centres and had to use secondary centres which were much more inefficient and contributed to higher operating costs. That’s why it’s going to change to a single facility in Victoria whilst also upgrading its warehouse management system and introducing other better technologies.
This restructuring will take place over the next two years, with it expected to be operational by the beginning of FY22.
Adairs Trading Update
The company said that in the first 16 weeks of FY20 it has delivered like for like sales growth of 3.3% with store sale growth of 0.8% and online sales growth of 16.6%.
This is a slowing of growth, but the focus has been growing its gross margin in the environment of a weak Australian dollar. Management said it’s doing well by working with suppliers and managing its discounting & promotional activity levels.
Due to the decent performance so far, Adairs is still guiding that sales will be between $360 million to $375 million and EBIT will be between $43 million to $46 million.
Is The Adairs Share Price A Buy?
Some investors may be a little disappointed that growth is slowing. Adairs isn’t in one of the industries that I want to add to my portfolio, but I am very pleased to see that growth is continuing.
Nick Scali (ASX: NCK) recently announced a disappointing trading update. So for Australia’s economy’s sake I’m glad to see that Adairs is still doing quite well with it being a fairly discretionary type of business. We also heard that JB Hi-Fi (ASX: JBH) Australia is still growing sales too. It seems we’re not in the midst of a recession with how people are still spending.
Even so, I’m glad my portfolio is full of reliable businesses like the ones in the free report below.
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