Daily ShareChat: Kathmandu

Kathmandu Holdings' results beat forecasts in a tough consumer spending environment, say analysts at Goldman Sachs & Partners.

The outdoor clothing retailer's earnings before interest and tax (EBIT) of $19.9 million for the six months ended January, up 28% on the previous first-half, compared with Goldman Sachs' $19 million forecast.

"We remain positive on Kathmandu's long-term earnings-per-share growth prospects," the analysts say.

"This reflects new store roll-outs, the expanded product range, a growing outdoor apparel sector, the strong brand and high-margin vertical business model."

About 95% of sales are Kathmandu-branded products.

"Our forecasts assume no deterioration in consumer spending but we expect trading conditions to remain difficult in the near term (owing to strong competition and a cautious/value-conscious consumer)."

While the first-half result was very strong, the full-year profit depends on successful Easter and Winter sale promotions, the analysts say.

"In the past, the second-half profit has generated over 65% of Kathmandu's full-year EBITDA. However, Kathmandu will be cycling a low base in the second-half of 2011." In the previous first-half, sales fell 5.5% and EBIT was down 1%.

They are forecasting a full-year EBIT of $56.9 million and a net profit of $33.7 million. For the year ending July 2012, they are forecasting a $39.9 million net profit.

Recommendation: Buy.

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