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Kathmandu raises annual profit forecast; shares jump 16%

Thursday 30th June 2016

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Kathmandu Holdings raised its forecast for annual earnings as the outdoor equipment chain boosts margins from new products, better management of promotional activity and cost savings. Its shares jumped 16 percent.

The Christchurch-based retailer expects net profit of $32 million to $35 million in the year ending July 31, ahead of its previous forecast of $30.2 million and up from $20.4 million last year, it said in a statement. Same-store sales have increased 2.6 percent in the 47 weeks ended June 26 on a constant currency basis, the company said.

Its shares soared 21 cents to a four-week high of $1.54, making them the best performer on the S&P/NZX 50 benchmark index today.

Kathmandu's annual profit halved last year as a build-up of inventory forced it into aggressive discounting at lower margins to rid itself of excess stock. Under the management of new chief executive Xavier Simonet, who was appointed to the role in January 2015, the company is taking a more cautious approach to sales and keeping expenses under control.

“Despite the winter season starting late this year, product newness and careful management of promotional activity have resulted in a better than expected gross margin," Simonet said. "This combined with continued realisation of cost efficiencies has contributed to an improved FY2016 outcome.”

Still, the company said "a substantial proportion" of sales and earnings this financial year are still dependent on trading in July, the final month of the financial year. It will provide a further trading update in August and publish its earnings Sept. 21.

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