I am doubtful the market is actually doing much interpretation...

I am doubtful the market is actually doing much interpretation here at all- rather shoot first think later,as has been the case for most of the last 2 months. In this case, looks like short term money decided to profit take?
We know that cashflow isn't an issue right now (+5m during Covid albeit with rental arrears * they stated they are paying rent where they've come to agreements with landlords). They have not received Jobkeeper money yet, which will no doubt be fairly substantial (employee costs were running at 7m/month)- so the cash position is probably overall better than it was last month.
They have renegotiated only long term leases- the 30% of leases with <12m expiry will be up for renegotiation next.
They have clearly indicated they will be sensible- ie manage inventory sensibly, prepare for the worst and do well irrespectively in good run scenarios. They have stated they are preseving margins and profitability (which is evident in the cash position).
The proforma EBIT pre-Covid for FY21 was 60m- even in the extremely unlikely scenario of a 40% reduction in EBIT (acknowledging that a lot of traditional fixed costs are actually variable costs right now)- this is only trading at 7.5x FY 21 EBIT.
Multiple reports have suggested consumer spending was down about 40% during the Covid period, and the tyro update shows that is rapidly normalising (from -43% to -27% in the space of just 2 weeks).
Assuming there is no structural change in demand for Adairs core products (unlikely to be), and the indication from today's release that they have grown market share in this time (30% new customers), it seems improbable that a 40% reduction in EBIT is going to occur- and in fact they suspected near normal trading by December this year. In the worst case scenario that the economy really tanks- lease payments will come down, starting with the 30% of leases due in the next year.
Importantly- they have been accounting conservatively- their owner earnings (FCF) has been very close to reported profit, so earnings are a reliable guide to free cashflow generation.
With a conservative EBIT of 42m for FY21 and FCF of 27m (including Mocka), we are looking at an FCF yield of 10% at current prices with a risk free rate of 0.25%.

Insane pricing, even now, with the known information, under a fairly dire scenario. Under the more optimistic scenario, wherein we get a 10-20% in underlying economic activity, and Adairs gains market share to get close to the proforma EBIT for FY21 (IMO at least a 50% chance of this occurring), it is trading at just 4x EBIT or at a 15% FCF yield in comparison to the risk-free rate....Note none of this is pricing in even a remote V-shaped recovery, which certainly could occur in Australia and New Zealand, the two key markets for Adairs....

I think the market is just looking back at pre-Covid prices and ignoring reality- Adairs was very cheap prior to Covid, and has become substantially cheaper now, even after a 200+% rise from the bottom. I am not sure what it is going to take for reality to set in- maybe the dividends, when they are re-announced, actually hitting the pockets of people!