Australians and Kiwis are likely to be very comfortable at home through pandemic isolation if the record sales of homemaker retailer Adairs (ASX: ADH) are an indicator, with the Company’s online sales up 110.5% for FY20.
Although the pandemic caused closures of their retail stores across Australia and New Zealand for a few months, Adairs was still able to deliver an increase of 12.9% in total Group sales to $388.9 million, of which $124.2m (31.9%) came via online sales.
“We have seen strong trading since re-opening our stores and websites throughout May, which has continued up to today,” said Adairs CEO, Mark Ronan.
“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”
While COVID-19 has caused an inconvenience for many businesses, the shift to online mediums has optimised Adairs, whose goods retailed at an gross margin of 61.4%, a rise of 2.26% for the Company to report FY20 $35.3m NPAT which represented a 19% increase on the previous year.
Core to the major improvement in operating efficiencies through FY20 were inventory management improvements where strong online marketing enabled the Company to reduce their inventory by 18% while being assisted by Australia’s JobKeeper and New Zealand’s Wage Subsidy programs which covered $11.3m of Adairs’ staffing expenses.
With such strong results for FY20 despite the pandemic, the growth of their online sales division and operating efficiencies will see Adairs continue accelerating their digital transformation while still maintaining their brick-and-mortar network of stores on short-term leases.
This will see further marketing expenditure pushed towards Mocka, their online-only brand which was acquired in December 2019 and has been integral to total online customer growth. At the same time, Adairs will look to open 3-5 new stores in FY21 and upsize 3-5 existing stores, with all to be optimised by their new National Distribution Centre which is expected to be operational by July 2021 and deliver annual Company savings of $3.5m.
ADH shares responded very well to news of the retailer’s sales growth to open at $3.04, a rise of 11% on their previous $2.74 close.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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