Manchester and homewares retailer Adairs Ltd [ASX:ADH] has watched its share price hit an all-time high today thanks to strong full-year results.
Despite COVID-19 hammering the broader retail sector, the ADH share price has recovered strongly.
With some companies forced to scrap their dividend due to poor financial performance, ADH said they would increase their final dividend from last year.
Certainly a pleasing result given store closures in April and May.
At time of writing ADH shares are up 15.63% or 43 cents to trade at $3.17 per share.
Online sales boost Adairs profit
The big jump in the ADH share price today has nothing to do with luck.
The results speak for themselves.
Group sales (Adairs and Mocka) were up 12.9% to $388.9 million for FY2020.
Group online sales were up 110.5% to $124.2 million, which now represents 34.8% of total sales.
Bringing the retailer’s net profit to $35.3 million, representing a growth of 19% compared to last financial year.
ADH was tracking ahead of its own expectations until March, when the market crashed.
Before then online sales had grown 30% in H1 FY20, while store sales growth was a meagre 2.3%.
Before the full effects of the coronavirus were to be realised, ADH was already looking to penetrate the online market.
Back in December 2019, the company purchased NZ-based Mocka.
Mocka is a pure-play online retailer of home and living products operating in both Australia and New Zealand.
COVID seems to have accelerated ADH’s online strategy.
Source: Adairs Ltd
According to ADH, online sales now represent around 35% of total group sales.
Can Adairs continue their success?
ADH shareholders are no doubt please with the latest results, which beat consensus forecasts by over $3 million.
Consequently, ADH announced a final dividend of 11 cents per share, an improvement on FY2019’s final dividend of eight cents.
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Although, FY2020’s interim dividend was cancelled to preserve cash during the COVID-19 period.
Indeed, cost management also seems to be in focus going forward.
ADH announced they would be pressing ahead with plans to open a new distribution centre in Melbourne.
The new warehouse facility is expected to be open in 2021 and is forecast to deliver cost savings of around $3.5 million a year from 2022.
With online sales up 103.2% in the first five weeks of FY2021 and store sales up 18.6%, things are looking positive.
Although, the board said it will not give performance guidance at this time due to economic uncertainty.
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