Shut shops cost Adairs
THE chief executive of home furnishings retailer Adairs has warned that forced closures of its stores from Melbourne to Auckland since July have cost it as much as $32m in lost sales and lost almost half its trading days across its store network.
The value of those lost sales to its earnings was between $12m and $15m.
In a trading update before the company’s annual meeting on Wednesday, Mark Ronan revealed this had switched Adairs’ sales growth to negative for the 16 weeks to October 17, although against the performance in 2020 the company had rung up strong sales growth, with online sales rocketing 172.8 per cent.
The mandatory lockdowns of non-essential retail across NSW, Victoria, the ACT and Auckland had done damage to the sales trajectory at Adairs and caused it to lose sales.
Management estimated the value of sales foregone in Adairs as a result of store closures over the 16 weeks to be $28m-$32m, net of the estimated sales benefit captured in the online channel. The EBIT impact of these lost sales was estimated to be $12m-$15m.
“The trading environment is operationally challenging due to the ongoing impact Covid-19 is having across the Australian economy,” Mr Ronan said at the AGM.
“As a group we remain focused on dealing with the Covid-19 challenges including government mandated store closures, vaccination requirements, impact of 14-day isolation periods combined with international and domestic supply chain challenges.”
Mr Ronan said electing to bring stock in early, carrying additional inventory in core lines, and being prepared to pay higher than usual freight costs had ensured Adairs was in a strong inventory position.
There had been a strong rebound since lockdowns were ended in NSW.
“The reopening of our NSW stores last week has delivered strong sales results, giving us early insight into the strength of the demand from the consumers as we come out of lockdown. We expect to see continued strength in retail stores as customers elect to shop in store given the domestic freight challenges.”
Mr Ronan said there was “no doubt” freight challenges were significantly affecting retail customers and their online experience across all sectors.
For the year to date total group sales were 8.5 per cent lower than 2021 but 8.2 per cent higher on a like-for-like basis.
Adairs said when compared to pre-covid levels, sales were up 14.6 per cent against 2020.
For the 16 weeks to October 17, like-for-like sales were up 67.1 per cent against 2020, up by 8.2 per cent against 2021.
Its online platform posted sales growth for the period of 15 per cent against 2021, and up 172.8 per cent against 2020.
At the AGM the retailer did cop a strong negative vote for its remuneration report and the awarding of options.
There was a 15.69 per cent vote against the remuneration report, avoiding a first strike, and a 14.09 per cent vote against the awarding of longterm incentive options to Mr Ronan and executive director Michael Cherubino.