Adairs back on growth track following strong results

Adairs back on growth track following strong results

While other retailers continue to struggle amid a volatile market, homewares specialist Adairs (ASX: ADH) has gone against the grain to sit more than comfortably at the half year.

Adairs bounced back from a dip in FY17 to deliver its strongest ever earnings before interest and tax (EBIT) result of $20.9 million, up 73 per cent on the prior corresponding period (pcp).

Total sales rose by 19.7 per cent to $149 million, while the company's profit margin also sharply increased by 62.5 per cent to hit $13.9 million.

During the half, Adairs added four new stores to its portfolio in addition to upsizing three existing stores and refurbishing another two.

Managing director and CEO Mark Ronan says the company is back on the growth track following an exceptional period.

"Over the first half the team have focused on delivering a fashionable well-coordinated product range together with a superior retail experience," says Ronan.

"Whilst we were cycling negative like for like sales in the previous period, the strong growth in like for like sales at nearly 15 per cent way very pleasing.

Ronan says the company's focus on improving its bricks and mortar outlets has impacted its growth.

"Over the half we opened four stores, upsized three stores and refurbished another two stores," he says.

"We are seeing good results from our upsizing program and we see this alongside our store rollout delivering ongoing growth."

Although its New Zealand operations have affected the 1H18 gross margin, and will likely impact FY18, Adairs is optimistic about the future of the emerging market.

"The New Zealand stores continue to meet our initial sales expectations showing that we have an opportunity to build a strong business in New Zealand," says a statement by the company.

"Our gross margin result was impacted by inventory and supply chain issues resulting in a lower EBIT result than initially forecasted.

"We expect this will be improved over the second half with a small loss forecast for the full year."

Adairs recently upgraded its FY18 guidance, forecasting sales between $300-310 million and EBIT between $40-44 million.

ADH shares are currently trading down a slight 2.6 per cent at $2.22 at the time of writing (10:21am AEST).

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