MARKET CLOSE: NZ shares fall on Kathmandu disappointment

Wednesday 4th August 2010

New Zealand shares fell for the first time in six sessions after outdoor equipment retailer Kathmandu Holdings reported a shrinking profit margin and traders fretted the earnings season will feature cost control rather than growth.

The NZX 50 rose 12.821, or 0.4%, to 3037.564. Within the index, 20 stocks fell, 11 rose and 19 were unchanged.

Kathmandu (NZX: KMD ) tumbled 12% to $1.80 after the retailer said gross margins fell short of last year’s forecast at 63%, which is below both the 64.4% result in the previous year and 64% prospectus figure. Annual sales climbed about 14% to $245.5 million.

“Kathmandu really disappointed the market,” said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. “Sales held up well but the margins did not.”“Investors have been burned a number of times with spin-offs from private equity,” he said.

Among other retailers, children’s clothing chain Pumpkin Patch (NZX: PPL ) fell 5.4% to $1.77, Warehouse (NZX: WHS ) decreased 1.7% to $3.54, clothing chain Hallenstein Glasson (NZX: HLG ) dropped 1.9% to $3.61 and Briscoes (NZX: BGR ) sank 3.2% to $1.20.

Telecom (NZX: TEL ) fell 0.5% to $2.01.

Lack of growth “has been a major concern” at Telecom, which has “struggled for a few years now,” Williamson said. The company faces increased competition and pricing pressure, meaning it will be “more and more difficult to maintain margin.” The proposed split of the company to fit in with Crown Fibre’s plans “might add something.”

Fletcher Building (NZX: FBU ) fell 0.4% to $7.57.

Allied Farmers (NZX: ALF ) declined 2.4% to 4.1 cents following the finance company’s announcement that it will seek to tap shareholders for some $19.3 million in a rights issue and share placement to institutions to pay back debt.

Fisher & Paykel Healthcare (NZX: FPH ) fell 6 cents to $2.97 and Vector Ltd. dropped 2 cents to $2.06.

South Port (NZX: SPN ), the Bluff-based port operator, fell 1.5% to $2.64 after signaling that earnings were $3.5 million to $3.7 million, compared with earlier guidance of $3.5 million profit. Williamson said the earnings season will likely show companies have been putting cost cutting measures in place during the downturn. There are “pockets of recovery but a lot will still be struggling.”

Opus International (NZX: OIC ) fell 2.8% to $1.75. The company about doubled profit in the year ended June 30 to $10.4 million on improvement at its British unit. Still, UK trading conditions remained "difficult," chairman Kerry McDonald said.

Businesswire.co.nz

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