Kathmandu says annual profit rose as much as 67% on wider margins

Thursday 4th August 2016

Kathmandu Holdings says annual profit rose as much as 67 percent as better-run promotions widened the outdoor equipment chain's margins.

Net profit was between $33 million and $34 million in the 12 months ended July 31, up from $20.4 million a year earlier, the Christchurch-based company said in a statement. That's within Kathmandu's upgraded June guidance of between $32 million and $35 million, which highlighted the retailer's better margins.

"As indicated in our June update, product newness and careful management of promotional activity have resulted in a better than expected gross margin for FY2016," chief executive Xavier Simonet said. "Continued realisation of cost efficiencies and improved working capital management has contributed to an improved FY2016 profit outcome and generated strong operational cash flows."

Kathmandu's annual profit halved last year as a build-up of inventory forced it into aggressive discounting at lower margins to rid itself of excess stock. Under the management of Simonet, who was appointed to the role in January 2015, the company is taking a more cautious approach to sales and keeping expenses under control.

Simonet said the retailer's winter campaign registered earlier sales than usual which attracted a higher gross margin. Sales rose 4 percent to $425.5 million, while same-store sales increased 1.6 percent, slowing from a 2.6 percent pace in the 47 weeks ended June 26 when Kathmandu last provided guidance.

The retailer will announce its annual result on Sept. 21.

The share last traded at $1.73 and have gained 11 percent this year. The stock is rated an average 'buy' based on three analyst recommendations compiled by Reuters, with a median price target of $2.13.

BusinessDesk.co.nz

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