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Daily ShareChat: Kathmandu

By Jenny Ruth

Wednesday 1st June 2011

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 Jenny Ruth

Kathmandu's planned new distribution centre in Christchurch will provide additional capacity to cater for the retailer's growing store network and product range, say analysts at Goldman Sachs & Partners.

"This avoids the need for third party warehousing to hold inventory in peak trading periods," they say.

Kathmandu will have increased its store numbers in New Zealand from 31 in the year ended July 2009 to an estimated 40 this year and the group has a long-term target of about 49 New Zealand stores. It has also significantly expanded its product range in recent years.

The company's current 3,600 square metre distribution centre has been operating since 2000 when the company had only nine stores in New Zealand.

The new distribution centre will be 5,000 square metres and new technology, such as electronic scanning for 'picking' and 'put away'processes replacing manual systems, will improve its efficiency, the analysts say.

"This may help to improve Kathmandu's relatively low stock turnover times in the six months ended January)," they say.

The Goldman Sachs analysts have a 12-month share price target of $3.10.

"We believe a key catalyst in the near term is the outcome of the winter sale promotion." This runs from mid June to the end of July.



Recommendation: Buy.

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