Adairs (ADH) H2 2024 earnings summary

Executive summary

• FY24 was challenging due to macroeconomic pressures impacting household spending and customer traffic, but proactive planning, disciplined execution, and cost management helped mitigate impacts, resulting in a 4.3% sales decline to $594.4m and underlying EBIT down 9.8% to $57.6m; gross margin improved by 170bps to 60.3%.

• Net debt reduced by $10m to $64.1m; dividends restored to 12.0 cps, up 50% year-over-year.

• Sustainability initiatives led to a 6.3% reduction in emissions and 46% waste diversion from landfill.

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

Financial highlights

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

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

• Gross margin rose to 60.3% (+170bps); cost of doing business (CODB) flat to slightly up.

• Net debt at $64.1m (0.9x EBITDA); inventories reduced by 4.6% to $83.7m.

• Final fully franked dividend of 7.0 cps, annual dividend 12.0 cps (67% payout ratio).

Outlook and guidance

• FY25 expected to remain challenging, but initiatives in place to drive profitable sales growth, supply chain efficiencies, and digital enhancements.

• Targeting six new Adairs stores and three Focus on Furniture stores in FY25, with ongoing optimization of store network and 5–8 Adairs store closures expected.

• FY25 capital expenditure expected between $13m and $15m.

• 75% of FY25 USD purchases hedged at US$0.67.

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