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Kathmandu says Christmas sales miss expectations but margins improve

Thursday 3rd January 2019

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Kathmandu Holdings says first-half profit rose by as much as 8 percent after it managed to fatten gross margin, despite the Christmas shopping period falling short of expectations. 

The retailer's same-store sales fell 1 percent in the 22 weeks ended Dec. 30, undoing much of the strong start to the financial year. Same-store sales in Australia were down 0.2 percent and in New Zealand, same-store sales fell 2.4 percent. Despite the top-line decline, Kathmandu improved its profitability, widening its gross margin by 60 basis points to 64 percent. 

The company's recently acquired US footwear business, Obōz Footwear, delivered first-half sales of about $27.5 million at a gross margin of 40 percent. 

Kathmandu had been optimistic about the outlook after a strong first quarter. Same-store sales excluding Obōz had been tracking 6.3 percent higher than a year earlier in the 15 weeks to Nov 11 and Kathmandu said at the time it expected first-half profit to be strongly above the previous year's $12.3 million. 

After the weaker Christmas trading period, Kathmandu said first-half profit rose 4-to-8 percent, implying earnings of $12.8 million-to-$13.3 million. 

"Following strong same-store sales growth in Q1, we are disappointed in trading results in Australia and New Zealand over the Christmas and Boxing Day period," managing director Xavier Simonet said in a statement. "Despite sales being below expectation, it is pleasing to see the improvement in retail gross margin and continuing strong growth from the recently acquired Obōz business." 

The shares fell 3.3 percent, or 9 cents, to $2.65 in early trading today. Kathmandu was one of the stronger performers in 2018, gaining 12.8 percent last year, compared to a 4.6 percent increase on the S&P/NZX 50 index. 

(BusinessDesk)

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