Retailer weathers tough times
The company, which listed on the sharemarket four years ago, reported on Tuesday a 26.6 per cent rise in its annual profit to $NZ44.2 million ($39 million) for the 12 months to July 31.
In the midst of tough trading conditions for most retailers, Kathmandu managed to dodge the worst of the downturn that undid other fashion chains, with revenues for the year up a healthy 10.6 per cent to $NZ384 million.
For the full-year, its same-store sales growth, drawn from its 136 stores in Australia, New Zealand and Britain, rose 5.6 per cent. During the year, Kathmandu opened 17 new stores, eight of these in the second half.
Its Australian operation recorded 6.7 per cent same-store sales growth, New Zealand had 4.4 per cent sales growth but its five British stores had a 6.5 per cent sales drop.
Online growth was the standout performer, jumping 55 per cent in 2012-13 to contribute more than 4 per cent of group sales.
Kathmandu chief executive Peter Halkett, who recently returned to work after a two-month illness, said the retailer's digital platform represented huge potential and should eventually generate 10 per cent of group sales.
"There is no reason why we shouldn't be targeting 10 per cent over the next three years," he said.
However, the growth of the retailer's online platform had been held back by the lack of a true omni-channel offering where customers could easily slide between the physical store and an online site to order or pick up their goods.
"It's not an omni channel yet, we haven't got some of the enhancements we think are important to be a modern online retailer, so in many ways we have still got a lot of things to do, but that also reflects there is a lot of growth to come for it."
Some of these enhancements include leveraging the brand power of online stores such as Amazon to sell its range.
New Zealanders on a per capita measurement continued to spend heavily at its stores through both economic upturns as well as softer conditions, Mr Halkett said.
On the outlook for 2013-14, Mr Halkett said, provided there was no deterioration in the economy, the company expected another solid performance characterised by minimising costs and focusing on its growth strategies.
He would not give guidance on actual profit expectations.
"What we have seen last year, and what we have seen for the past four years ... there is no reason why we shouldn't deliver a pretty solid outcome."
Kathmandu will open seven stores in the first half of 2013-14, six in Australia. But during the year the retailer closed a store in England to bring its British store numbers down to five.
Despite its business there never recording a profit, Mr Halkett said Kathmandu remained committed to its British base and it would eventually turn good.
"We believe it's an important part of our longer term strategy that we actually set that business up for success and we have gone through the pain of restructuring it. It's on a firm financial footing, but not profitable yet."
He said some stores had been profitable in their own right but at a country level it had been a "very big drag on profits".
Kathmandu declared a fully-franked final dividend of NZ9¢ per share, up from NZ7¢ per share declared last year.
Frequently Asked Questions about this Article…
For the 12 months to July 31, Kathmandu reported a 26.6% rise in annual profit to NZ$44.2 million (about $39 million) and group revenues up 10.6% to NZ$384 million. Same‑store sales across its 136 stores grew 5.6% for the year.
Kathmandu’s online sales jumped 55% in 2012–13 and now account for a little more than 4% of group sales. The company is targeting online sales of around 10% of group sales over the next three years.
Kathmandu says it does not yet have a true omni‑channel offering — customers can’t seamlessly move between store and online services in all cases. Management sees improvements (such as better store‑online integration and leveraging third‑party platforms like Amazon) as important to unlock further online growth.
Same‑store sales rose 6.7% in Australia and 4.4% in New Zealand, while the five British stores recorded a 6.5% sales decline. The group operated 136 stores and opened 17 new stores during the year (eight in the second half).
Kathmandu expects another solid performance in 2013–14 provided there is no deterioration in the economy, with a focus on minimising costs and pursuing growth strategies. Management declined to give specific profit guidance.
At a country level the British business has not yet recorded a profit and has been a material drag on group profits, although some individual UK stores have been profitable. Kathmandu says it is committed to the UK, has restructured the business and aims to set it up for long‑term success.
Yes. Kathmandu opened 17 stores in the reported year and plans to open seven stores in the first half of 2013–14 (six of those in Australia). The company also closed one UK store, bringing its British store count to five.
Key factors to monitor include overall economic conditions (management qualified its outlook on this), progress on online and omni‑channel improvements, the turnaround of the UK business, and execution of store expansion plans — all of which could materially affect future sales and profits.
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