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Daily ShareChat: Kathmandu

By Jenny Ruth

Sunday 26th December 2010

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 Jenny Ruth

Kathmandu Holdings' shares are oversold at current levels, despite the difficult economic environment and the company falling short of its prospectus forecasts, says Sarndra Urlich, an analyst at First NZ Capital.

"The market still appears to be in an unforgiving mode. We believe this sentiment is misguided as Kathmandu's story is still on track," Urlich says.

"This includes good growth prospects from store rollouts, store refurbishments and new product offers," she says.

Kathmandu is delivering positive same-store (stores open 12 months or more) sales growth. "Yes, this is small but it comes in the face of a difficult retail climate, not to mention Kathmandu is cycling very challenging comps (previous comparable periods)."

The unsupportive macro conditions have flushed out or at least compromised some of the company's less robust competitors and Kathmandu's rollout strategy is on track, Urlich says.

For example, Mountain Designs has closed five stores in Australia and Snowgum recently announced it is closing its six New Zealand stores.

"It is no coincidence that the pace of store rollout across the sector, or lack thereof, coincides with challenging macro conditions, not to mention unseasonal weather patterns during the key 2010 winter period."

Urlich values Kathmandu shares at $1.90 and has a $2.05 12-month price target.


Rating: Outperform.

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