Kathmandu bucks sales trends

TIMARU HERALD

WALKING OUT: More domestic holidays have helped the outdoor stores' popularity.

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Outdoor gear retailer Kathmandu's first results as a listed company show earnings before tax increased by almost 50 per cent in the half year to January 31, despite difficult trading conditions for many retailers.

Earnings before interest and tax rose to $15.5 million, up 49.6 per cent from $10.4m in the same period last year. Profit after tax was $4.4m, up from a $2.4m loss.

Total sales increased from $83.6m to $106.6m, while same-store sales were up 13.7 per cent. Margins also held up well in a retail environment riddled with heavy discounting, dipping just 1.1 per cent to 61.3 per cent.

The $10.4m profit does not take into account costs associated with floating the retailer on the NZX and ASX late last year, for which costs were $20.3m.

If this had been included Kathmandu would have posted a $11.3m loss for the half year.

Kathmandu shares closed 8.6 per cent, or 19 cents higher yesterday at an all-time high of $2.38, with a market capitalisation of $438m.

Kathmandu Holdings chief executive Peter Halkett said yesterday the previous year's first-half loss was mainly due to servicing debt, which had since been reduced from $183.9m to $73.9m using money raised in the initial public offering of shares.

He was pleased with the company's better-than-expected trading performance following last year's listing.

"It is very satisfying to deliver a good first result announcement given we have recently been added to the ASX 300 index and are already included in the NZX 50," he said.

Mr Halkett cited consumers' move towards more home holidays and camping in the aftermath of the financial crisis and a strong Christmas sales performance as drivers behind increased sales.

However, he warned the retailer's bigger half of the year was still to come and while the expectation was for a full-year profit after tax of $30.9m, it was far from assured.

"We are ahead but it's still a relatively small proportion [of total sales]."

The company also turned around a negative operating cashflow of $8.3m in the first half in 2009 to report a $479,000 positive cashflow. Kathmandu opened eight new stores during the half-year, two in New Zealand and six in Australia, bringing the total in both countries and Britain to 90 stores.

A further five stores are expected to be opened before the year's end.

Sales increased by more than 20 per cent in both New Zealand and Australia, with the biggest increase in the six stores in Britain, with a 37.3 per cent half-yearly increase in sales.

However, Mr Halkett remained coy about Kathmandu's future in Britain, where, despite increased sales, the six stores reported a loss of $400,000 for the half year.

"It's fair to say there are a few question marks over Britain because it's a pretty tough market at the moment.

"We think there is the possibility of success."

In the medium term, Australia was the best prospect for growth with the New Zealand retail environment remaining fragile and fickle, he said.

Mr Halkett said there would be no half-yearly dividend but a dividend of 6.7 cents per share was expected in the full year if profit targets were met.

- © Fairfax NZ News