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- Adairs (ADH) has withdrawn its FY20 earnings guidance
- As a result, the company will also not proceed with its H1 FY20 interim dividend of 7 cents per share, announced last month
- The home goods retailer cancelled the interim dividend to support its financial position during the retail uncertainty around COVID-19
- While sales for some retailers have declined, all Adairs physical and online stores are open and have been performing well due to recent promotions
- Adairs’ plan is to maximise near term sales, reduce costs, manage working capital and defer any non-essential projects
- This will help maintain its financial position during the impact of the coronavirus
- Adairs’ shares are down 27.6 per cent at market close and trading for 67 cents each
Home goods retailer Adairs (ADH) has withdrawn its FY20 earnings guidance and will not proceed with the 1H FY20 interim dividend of 7 cents per share.
The dividend was announced on February 21 but will now be cancelled for precautionary reasons in response to COVID-19. A total of $11.8 million in cash was to be paid in April 2020, however the Board wants to maintain strong liquidity and protect long term shareholder value.
Until recently, both Adairs and its subsidiary, Mocka, were delivering positive results.
This year, up to March 15, Adairs’ like for like (LFL) sales were up 7.1 per cent, with stores up 0.7 per cent and online up 31.8 per cent. Mocka’s LFL sales were up 18.1 per cent over the same period. This is significant; like for like (LFL) sales indicate a growth in sales across new or divested businesses.
The company has reported that while sales for some retailers have declined, all Adairs stores are open and so are its online platforms to support customers who are practicing social distancing.
“The COVID-19 pandemic and its impact on our community and our business is evolving rapidly,” CEO and Managing Director Mark Ronan said.
“As a team we are reviewing the situation daily and taking advice from the relevant government authorities to ensure we are caring for the health and safety of our team and customers,” Mark added.
Adairs’ offshore suppliers are now largely operational, with weekly inventory shipments arriving in both Australia and New Zealand. Stock levels are currently healthy and is performing well as a result of recent promotional events.
The retailer’s management team is making sure the brand maximises near term sales, reduce costs, manages working capital and defers any non-essential capital projects. Adairs is also working with its landlords to agree on fair occupancy arrangements during this time of uncertainty.
Despite uncertainty in the retail sector, Adairs is confident in its financial position.
It has $16 million cash on hand, net debt of $48 million, undrawn term debt of $26 million and working capital facilities of $6.5 million. The term debt facilities do not mature until March 2023 however, and the working capital facilities are annually renewable.
Positively, Adairs doesn’t have any payments due for its Mocka acquisition until September 2021, and this payment is based on how the subsidiary performs.
Adairs’ shares are down 27.6 per cent at market close and trading for 67 cents each.
