Ann: ADH - Trading Update, page-96

Published by Morgans this morning.

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	Column 1
0	Adairs
1	Head scratcher
2	Despite producing best-in-sector LFL sales growth (+7%) throughout most of FY19, the quantum and speed with which this trajectory has changed has come as a surprise and is difficult to understand. The step-down during a major trading period (June) in addition to persistently elevated DC costs has seen ADH downgrade FY19 EBIT guidance by 6-9% vs prior consensus estimates. We have taken what should be a conservative stance on FY20 which now sees us forecast earnings to fall (7.6%) on FY19 – 1% LFLs and opex deleverage. The FY19 result trading update will be key in terms of the LFL sales growth – we also expect the company to provide FY20 guidance at this result. Until we see some reversal of the recent LFL sales growth trajectory, ADH’s share price is unlikely to re-rate. However, the savage share price reaction sees ADH offer a 10% yield at current prices; Add maintained and A$1.73 PT.

Morgan's are completely puzzled. Best in sector LFL sales growth suddenly falling to zero in June, one of Adair's key sales periods. Price Target now $1.73 vs $2.25

So I guess it all comes down to what you believe Adairs will report when it releases results in August and gives it FY'20 outlook.

Cheers.................................Daicosisgod