Nasty surprise for Kathmandu investors
Kathmandu has been caught up in a "spiral" of price discounting, as clothing retailers struggle with an unusually warm start to winter.
The NZX-listed retailer's shares slumped by nearly 15 per cent this morning after it issued a profit warning, wiping more than $100 million from the company's value.
While the share price recovered some ground to $3.17 this afternoon, down 11 per cent, there could be further falls to come.
Hamilton Hindin Greene director Grant Williamson said investors would be disappointed by the shock announcement.
"It wasn't that long ago that Kathmandu were very upbeat, and we started to see the share price rise very strongly," he said.
However, Williamson said the decline was a reflection of the difficult environment that many retailers were facing.
"Also, the problem is that one or two start to struggle, they start discounting, and that has a flow-on effect into other retail chains as well," he said.
"It seems to be a spiral effect."
Williamson said it would take time for analysts to crunch the numbers, but he would not expect the stock to rally much in the interim, and it could drop further.
Kathmandu is the latest of several retailers to report a big drop in winter sales.
The outdoor-clothing and equipment retailer said its sales through June, particularly since the start of its winter sales promotion, had been "significantly below expectations" in New Zealand and Australia.
Kathmandu has forecast its earnings for the 11 months to June to be 10 per cent to 15 per cent below the same period last year (0 per cent to 5 per cent on a constant-currency basis).
Chief executive Peter Halkett said the company could not give a specific full-year profit forecast yet because of the "materiality" of July, its third-biggest trading month.
However, he said that unless there was a big turnaround next month, the full-year profit would probably remain "at least" 10 per cent to 15 per cent down from last year's figure of $63.4 million.
Halkett said that like some other Australasian retailers, Kathmandu had had a sales downturn in the past five weeks in both countries.
"The sales shortfall has been particularly significant in the past fortnight, the first two weeks of Kathmandu's winter sale promotion," he said.
"In this period across all the major metropolitan cities in both countries, with the exception of Perth, we have been selling in a period of warmer, drier and generally sunnier weather than last year."
This had particularly been the case in New Zealand, and the winter weather pattern to date had not been conducive to sales of core items such as down jackets, fleece and thermals, he said.
The Warehouse also blamed warm weather when it downgraded its profit forecast last week.