Kathmandu hits a wall as holiday season growth stalls, but US ops soar
Kathmandu had been progressing so well but earlier last year but an update on Thursday showed that the Australia and New Zealand-based outdoor gear specialist struggled over the Christmas period.
The company, which also targets the UK market and has an acquired US arm, saw its shares diving on news that its seasonal trading was less than stellar and that its Boxing Day sale got off to a weak start.
“Following strong same-store sales growth in Q1, we are disappointed in trading results in Australia and New Zealand over the Christmas and Boxing Day period,” a none-too-upbeat CEO Xavier Simonet said.
Looking at the wider performance, in the period from the end of July to the end of December (which is late winter through spring and early summer in the southern hemisphere), like-for-like sales fell 1%. In Australia, which had previously been the stronger performer, they fell 0.2%, while New Zealand continued to lag the Australian performance with a 2.4% drop.
Clearly, both of those markets saw sales falling off a cliff in the post-November 11 period as the company had delivered an earlier bulletin to that date saying that sales in Australia had risen 7.1% while those in NZ were up 5.2%.
Does this mean that the CEO’s earlier assertion that H1 profits would be “strongly above last year” will now have to be revised downwards? Well, it looks that way as Simonet had previously said that his profit expectations were very dependent on continuing strong sales, and on Thursday he admitted that sales weren’t what he’d hoped for.
But the profits picture isn’t that clear. Kathmandu now expects half-year profit to increase anywhere from 4% to 8% year-on-year “not withstanding the adverse impact of the NZD/AUD exchange rate on reported profit [and] assuming current trends continue.” So anything could happen.
The company gave no update on how the UK business had fared so we’ll have to wait for the next set of results on March 26 to hear more. But it did say that its acquired US hiking boot business Ozboz saw positive sales growth for 2019.
“Despite sales being below expectations it is pleasing to see the improvement in retail gross margin and continuing strong growth from the recently acquired Oboz business,” Simonet said.
He expects Oboz sales to soar by as much as 35% to A$23.5 million/NZ$27.5 million with a gross margin of 40%.
And as Simonet mentioned, the overall retail gross margin for the company was one piece of encouraging news in the update with a 60 basis point improvement to 64%.
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