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Kathmandu shares rise 9.3% on strong FY result, solid US performance

Wednesday 18th September 2019

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Kathmandu Holdings shares rose 9.3 percent after the company reported annual profit at the top end of its guidance, including a standout performance in the US.

The outdoor equipment chain said net profit was $57.6 million in the year ended July 31, versus $50.7 million in the prior year. Total sales rose 9.7 percent to $545.6 million.

In August the company said it expected net profit of $56.5-$58 million.

“The key driver was a positive contribution from the Australian business and rapid sales and profit growth from Oboz in North America and increased penetration of the online channel,” chief executive Xavier Simonet said on a media conference call.

Oboz, acquired in April 2018, saw full-year pro-forma sales growth of 30 percent with earnings before interest and tax up 38.6 percent on a pro-forma basis. North American sales were $64 million while ebit was $9.6 million, it said. 

“The foray into North America looks to be going very, very well and that’s a real positive for the company,” said Hamilton Hindin Greene investment advisor Grant Davies.

Davies said investors were also likely cheered by news the online segment was also looking positive, with those sales now comprising 10.1 percent of direct-to-consumer sales, up from 9.4 percent a year earlier. 

“Particularly for Kathmandu, which has relied so heavily on their stores in the past, to see that picking up a bit of traction is another positive for them,” Davies said.

The stock last traded at $3.05, the highest level since October last year.

Same-store sales growth lifted 0.6 percent although Australia fared better than New Zealand.

Australian same-store growth was up 2.7 percent while in New Zealand it fell 3.9 percent.

Australia makes up 66 percent of the business while New Zealand makes up 25 percent.

Kathmandu said the New Zealand market is “more mature” and therefore more price sensitive. Also, a late start to winter had an impact on sales, it said. 

Overall, gross margin slipped to 60.9 percent from 63.4 percent. In Australia, it was 65.4 percent versus 65.9 percent in the prior year. In New Zealand, it was 59.6 percent versus 60.5 percent.  The North American gross margin was 40.8 percent down from 41.8 percent.

Davies said that considering the Oboz business unit operates at lower margins, “margins were holding up ok.”

Kathmandu will pay a final dividend of 12 cents a share versus 11 cents a share in the prior year. The record date is Sep. 30 while the payment date is Oct. 11.  Davies said the dividend was higher than some analysts had expected, which is also likely helping to push the share price higher.

The company provided no guidance but, in the seven weeks to Sep. 15, group same-store sales grew 6.1 percent at constant exchange rates, but at lower gross margin. Australia same-store sales grew 4 percent and New Zealand same-store sales rose 11.7 percent.


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