Adairs (ADH) H2 2024 earnings summary

Executive summary

• FY24 sales declined 4.3% to AUD 594.4 million, with underlying EBIT down 9.8% to AUD 57.6 million; gross margin improved 170bps to 60.3% amid lower customer traffic and disciplined cost management.

• Net debt reduced by AUD 10 million to AUD 64.1 million; dividends restored to AUD 0.12 per share, up 50% year-over-year.

• Sustainability initiatives led to a 6% emissions reduction and 46% waste diversion from landfill, with a net zero target by 2030.

• Each business segment advanced strategic objectives, including operational control of the NDC, store network optimization, and digital platform upgrades.

Financial highlights

• Group sales: AUD 594.4 million, down 4.3% year-over-year; store sales down 6.0%, online sales flat.

• Underlying group EBIT: AUD 57.6 million (EBIT margin 9.7%), down 9.8%; statutory EPS 17.9 cps, down 18.5%.

• Adairs sales: AUD 413.4 million, down 4.1%; gross margin up 130bps; EBIT AUD 31.7 million (margin 7.7%).

• Focus on Furniture sales: AUD 129.6 million, down 11.1%; gross margin up 70bps to 53.2%; EBIT AUD 19.5 million (margin 15.1%).

• Mocka sales: AUD 69.4 million, up 3.8%; gross margin up 790bps to 58.4%; EBIT AUD 6.5 million (margin 12.6%).

• Inventory declined 5% year-over-year to AUD 83.7 million; net debt reduced to AUD 64.1 million.

• Final fully franked dividend of AUD 0.07 per share, annual dividend AUD 0.12 per share (67% payout ratio).

Outlook and guidance

• FY25 expected to remain challenging, with initiatives for profitable sales growth, supply chain efficiencies, and digital enhancements.

• Targeting six new Adairs stores and three Focus stores in FY25, with ongoing network optimization and CAPEX of AUD 13–15 million.

• Like-for-like sales growth targeted in low single digits for Adairs, with EBIT margin improvement towards 10–12% over time.

• 75% of FY25 USD purchases hedged at US$0.67; gross margin for Adairs expected slightly down due to FX and freight headwinds.

• Mocka to complete NZ website replatform and trial new physical channels; Focus to refurbish 3–5 stores annually.