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Adairs (ASX:ADH) share price in focus on weak FY24 trading update

The Adairs Ltd (ASX: ADH) share price is under the spotlight after the company announced its FY24 trading update.

Adairs is the business behind the brands of Adairs, Mocka and Focus on Furniture.

Adairs trading update

The company said the impact of higher interest rates and cost of living pressures has seen a “significant decline” in traffic across each of its businesses of around 10% over the same period last year.

While sales in each business were below the same period last year, the company’s focus on “customer experience and conversion” has ensured the sales decline is less than the decline of traffic.

Group sales in the first 21 weeks of FY24 were down 9%, with Focus on Furniture sales down 8.7%, Mocka sales down 2.4% and Adairs sales down 9.9%.

What could help the Adairs share price from here?

The Adairs business saw the fifth highest sales week thanks to the November linen lover sale event. The national distribution centre transition is “progressing well” and it’s seeing “significant improvements” in customer service and remains on track to deliver the anticipated cost savings.

Focus on Furniture sales in the first 21 weeks are “ahead of plan”, and the business is prioritising margin over sales volume. It has “managed its inventory and sales promotions carefully to maintain margin and its costs of doing business.”

Mocka is seeing improving profitability, with the expected profit margin improvements being realised in the year to date on lower stock levels and with costs continuing to be carefully managed.

Thoughts on the Adairs share price

Adairs said that the Adairs brand business growth will “come from building out the product offering to see Adairs establish itself as the destination for home, supported by a data-led approach to enhancing the customer experience both in store and online.”

Focus on Furniture’s growth will come from its “national store rollout program supported by an enhanced in-store experience.”

For Mocka, profit growth will come from “increased market share via greater brand awareness and broader channels to market – including a physical presence.”

With the Adairs share price down 60% in two years, I think there’s a solid rebound potential over a two-year or three-year period when the outlook for retail conditions improve. But, sales could continue to show declines over the next 12 months.

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