Daily ShareChat: Kathmandu

By Jenny Ruth

Tuesday 8th February 2011

Kathmandu Holdings' Christmas/New Year trading update was better than expected, says James Levien, an analyst at Aegis Equities Research which is owned by Morningstar.

The company expects first-half sales will be between 16% to 18% higher than the previous first-half.

"We understand the growth initiatives highlighted at the AGM, including product category growth, higher inventory levels and new and refurbished stores, were positive influences," Levien says.

"With the US and European currencies weaker, many Australians and New Zealanders are taking the opportunity to travel. Europe also suffered a particularly cold winter, suiting Kathmandu's winter oriented product range," he says.

Comments from other outdoor clothing and equipment suppliers suggest other travellers are choosing cheaper domestic holidays and Kathmandu also caters to that travel category.

Levien says he is cautious because last year the company reported an above-prospectus first-half result but a poor second-half result due to a warm winter and poor retail conditions.

"With earnings a hit and miss affair since listing, the stock tends to trade at a discount to its peers," he says. While the market was pleased with the update, given contrasting commentary from other retailers, "further meaningful share price gains will come once Kathmandu establishes consistency in its results."

Recommendation: Hold.

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