In This Article:
Release Date: February 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Adairs Ltd (ASX:ADH) reported a strong first half of FY25 with total sales up 6.6% compared to the same period last year.
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The company achieved a record sales half, driven by a positive customer response to key categories such as bed linen and improved inventory availability.
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Gross profit improved by 20 basis points, and underlying EBIT increased by 10% to $33 million.
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The National Distribution Center (NDC) improvements led to a 20% increase in items delivered to stores, enhancing in-store product availability.
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Adairs Ltd (ASX:ADH) declared an interim dividend of 6.05 cents per share, reflecting confidence in future performance.
Negative Points
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Focus on Furniture faced a challenging trading period with sales down 4.1% and gross profit margins declining by 250 basis points.
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The New Zealand market for Moa experienced a 10.2% decline in sales, highlighting regional challenges.
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Currency headwinds are expected to impact gross margins in FY26, with the company planning to address these challenges.
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Focus on Furniture's performance is hindered by an overexposure to the Victorian market, which is currently underperforming.
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The company anticipates temporary store closures for refurbishments, which may impact short-term sales.
Q & A Highlights
Q: Given the strong trading update for the Adairs brand, up 15%, are there any reasons to expect this growth to slow down in the second half? A: (Unidentified_3) I wouldn't plan on holding 15%. Your observation around comps getting a bit harder as we move forward is correct. However, the improvements made in H1, particularly around having more stock in stores, are supporting sales in core areas. (Unidentified_2) We are confident with the product numbers we've put down.
Q: Regarding Adairs' product gross margins at 62.4%, was the discounting during Black Friday and Boxing Day more elevated than usual? Is 62.4% where you'd expect to finish for the second half? A: (Unidentified_3) The Boxing Day and Black Friday period was in line with our plans. The margin uplift was due to turning off marketing during a warehouse transition. Margins have come in as expected for the Adairs brand, and we didn't increase promotional activity. We expect margins in H2 to be similar to H2 last year.
Q: For the group, the first half gross margin was 59.9%. How should we think about this going into the second half and FY26, considering FX headwinds? A: (Unidentified_3) Holding gross margins is our objective as we enter FY26. We have currency headwinds, but we're making plans to address them. For H2, there's not much currency risk as we've hedged most of it at 67.