Kathmandu shares climb on stronger sales figures

KATHMANDU'S share price received a welcome boost on Friday after the company announced stronger than expected sales for the financial year to date.

By InvestSMART · 17 Nov 2012

By InvestSMART ·
17 Nov 2012

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KATHMANDU'S share price received a welcome boost on Friday after the company announced stronger than expected sales for the financial year to date.

However, it warned against reading too much into what is traditionally its quietest trading period.

The shares jumped as much as 8 per cent at one stage, before closing 4.4 per cent, or 6? higher at $1.41 after Kathmandu told investors at its annual meeting that year-to-date sales were up 19.5 per cent.

Same-store sales - excluding stores opened during the year - grew by 14.3 per cent during the period, compared with 7.6 per cent in the same period last year.

The chief executive, Peter Halkett, said the period traditionally provided only 16 per cent of its business, but added: "This is obviously a very positive sign for us."

A better gauge of Kathmandu's performance for the year will be provided by the Christmas trading period, as well as the second half, which has historically accounted for 58 per cent of sales and almost all of its earnings growth.

The company reaffirmed its commitment to opening new stores, with 15 targeted across Australia and New Zealand for 2012-13.

"Not too many retailers will have this kind of roll-out plan available to them," Mr Halkett said. "We will open nine more stores by Christmas, the equivalent last year was five. And it is not about growing stores but also upgrading current ones."

He said the market did not really understand how great an opportunity Australia remained for Kathmandu. The per capita spending on its products stands at just $10.34, compared with $31.31 in New Zealand.

The Kathmandu chairman, James Strong, addressed investor concerns about the share price, which has languished since the company first listed three years ago.

"When the company was floated, it was before the retail economic downturn, and the pricing was based on the growth in the earnings. After the float, we ran into the 'Myer effect' where retail stocks remain well below their floated price," Mr Strong said.

Economic conditions were likely to continue to inhibit discretionary spending, Mr Halkett said.

The company said it was committed to expanding in Britain, but would not be going in for a big store expansion, with sales growth being driven by its online service.

"People are buying our products. Removing seasonal effects, our outdoor category is on trend," Mr Halkett said.

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Frequently Asked Questions about this Article…

Why did Kathmandu shares climb after the company’s recent update?

Kathmandu shares rose after the company reported stronger-than-expected year-to-date sales — up 19.5% — which prompted an intraday jump (as much as 8%) and a close up 4.4% at $1.41. Management also cautioned investors not to read too much into this period because it is traditionally one of the quietest trading periods.

What were Kathmandu’s year-to-date sales and same-store sales figures?

Kathmandu told investors year-to-date sales were up 19.5%. Same-store sales (excluding stores opened during the year) grew 14.3% in the period, versus 7.6% in the same period last year.

How seasonal is Kathmandu’s business and which periods matter most for earnings?

Management said the current quiet period typically provides only about 16% of annual business, while the second half historically accounts for 58% of sales and almost all of Kathmandu’s earnings growth. The Christmas trading period and the second half are therefore the best gauges of full-year performance.

What are Kathmandu’s store expansion plans in Australia and New Zealand?

Kathmandu reaffirmed its commitment to opening 15 new stores across Australia and New Zealand for 2012–13. The company planned to open nine more stores by Christmas (versus five in the equivalent prior period) and also focus on upgrading existing stores.

How does Kathmandu view growth opportunities in Australia compared with New Zealand?

Management said Australia represents a significant opportunity: per capita spending on Kathmandu products in Australia is reported at $10.34 compared with $31.31 in New Zealand, suggesting room for increased market penetration in Australia.

What is Kathmandu’s strategy for expansion in Britain?

Kathmandu said it remains committed to expanding in Britain but will not pursue a big bricks-and-mortar store rollout there. Instead, the company expects sales growth in Britain to be driven by its online service.

What risks or challenges did Kathmandu’s management highlight for investors?

Management warned that broader economic conditions are likely to continue inhibiting discretionary spending, which affects retail. The chairman also noted the share price has lagged since the company listed, pointing to a post-float retail downturn that left many retail stocks below their floated price.

What should everyday investors watch next when following Kathmandu shares?

Investors should watch Kathmandu’s Christmas trading results and second-half performance (the periods that historically drive most sales and earnings), progress on the planned store roll-out and upgrades, and online sales growth in Britain — all factors management flagged as key to future performance.