The Adairs share price is down 54% in 2022. What’s happened?

Man's legs poking out of a brown sofa while his body is sinking down into the back of it, dog looking onMan's legs poking out of a brown sofa while his body is sinking down into the back of it, dog looking on

The Adairs Ltd (ASX: ADH) share price has fallen on hard times this year.

Despite finishing 3.64% higher to $1.85 yesterday, the homewares and furniture retailer’ shares are down 54.32% in 2022.

Down, but not quite as low, the S&P/ASX 200 Consumer Discretionary (ASX: XDJ) sector is also in the red this year by 25.54%.

Let’s take a look at what’s impacted Adairs shares lately.

What’s driving Adairs shares lower these past few months?

The Adairs share price has continued to head south following weakened investor confidence on the ASX.

With inflation levels spiking to 5.1% in the quarter ending 31 March, the Reserve Bank of Australia (RBA) tightened its monetary policy.

This saw the central bank use its toolkit to cool down the hot inflation by raising interest rates.

The monthly household spending report for April indicated an uptick in buying furnishings and household equipment, up 14.9%. However, with May’s report set to be released on 12 July, this could show a drop-off in consumer spending.

This follows the RBA’s decision to aggressively ramp up the official cash rate by 0.5% this month to 0.85%.

Furthermore, the RBA governor, Philip Lowe, warned that more rate hikes in 2022 will impact the cost of living.

A number of economists expect the cash rate to lift to 2.35% by the end of the calendar year.

In Adairs’ first-half result, there was a drop-off across key metrics compared to the prior corresponding period.

Earnings before interest and tax (EBIT) and net profit after tax (NPAT) took a significant hit brought on by COVID-related operational disruptions.

However, with the COVID-19 era almost behind us, the headwinds outlined above could weigh down the company’s current financial performance.

Adairs share price snapshot

A disappointing 12 months has led the Adairs share price to register a loss of almost 60%.

It’s worth noting that its shares reached a 52-week low of $1.65 last week, before recovering some lost ground.

Based on valuation metrics, Adairs commands a market capitalisation of approximately $305.8 million.

The post The Adairs share price is down 54% in 2022. What’s happened? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ADAIRS FPO. The Motley Fool Australia has positions in and has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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