Group gross margins were significantly lower, falling 520 basis points to 59.6 per cent. The Focus and Mocka brands are lower margin businesses, but margins were squeezed by Adairs transition to a new distribution centre which cost $6 million in additional costs.
Adairs chief executive Mark Ronan said on Monday about 16 per cent of store trading days were lost due to government mandated lockdowns.
“Significant operational disruptions related to COVID-19, particularly within our supply chain, impacted the group’s cost base and meant that this growth did not translate into an increase in profits,” he said.
“The majority of these costs are not expected to carry into future years and while a number of macroeconomic headwinds have emerged in recent months, we are confident that this tougher environment will favour companies such as Adairs, Mocka and Focus all of whom provide a strong value proposition to the large and growing middle-market consumer.”
Adairs is a rare company this profit season providing full year 2023 guidance, saying that it expect sales to be in the range of $625 million to $665 million, and underlying EBIT be between of $75 million and $85 million.
In January, the company flagged its December half-year profits would sink to almost half of the previous year because of the combined impact of extended lockdowns in Sydney and Melbourne, and higher staff and warehousing costs in the pandemic.
Adairs, which bought the Focus on Furniture chain for $80 million late last year, in an expansion from its own stores which sell linen, towels, cushions and homewares. This deal pushed up group inventory higher to $86.1 million for the year.
It bought online retailer Mocka for about $85 million in cash and shares in December 2019.
The board declared a final fully franked dividend of 10¢ per share in line with a year ago, taking the total dividend payout for the year to 18¢ per share. The payment date is September 22. Adairs said the dividend reinvestment plan will continue to operate for the 2022 final dividend.
More to come
