Kathmandu's share price rises after profit news
Investors in outdoor gear retailer Kathmandu liked what they heard yesterday when the company announced its net profit for the first half of the 2013 financial year could be as much as 75 per cent higher than for the same period last year.
Kathmandu's share price traded higher after the trading update was released to the market, reaching $2.35 in morning trade before settling back to end the day 4.5 per cent, or 10 cents, higher at $2.31, its highest level in 12 months.
The retailer estimated net profit for the six months ending January 31 would be between $9.5 million and $10.5m, compared with $6m in the same period last year.
That was on the back of strong sales growth in the first quarter, particularly in Australia, a "satisfactory" December and January and a tight grip on costs.
Kathmandu chief financial officer Mark Todd said the improvement in net profit was helped by the fact that this time last year the company had had one-off costs as it bedded in new systems, particularly in warehouse management, which did not recur this year.
Online sales were still a small portion of overall sales.
"Online sales, whilst they grow strongly, continue to be only a relatively small portion of the growth, compared to the store rollout in Australia."
Given this sales performance, and gross margins which were expected to be similar to the previous year, Kathmandu forecast earnings before interest, tax, depreciation and amortisation of $20.5m to $21.5m, compared with $17m last year.
Kathmandu chief executive officer Peter Halkett said that the company's trading performance during the Christmas and January period had been in line with management expectations.
"Our sales in Australia have continued to grow at a faster rate than New Zealand, which reflects the continuing strengthening of the Kathmandu brand and market penetration in Australia."
However, Kathmandu's overall profit for the full year was mainly dependent on trading in the second half of the year.
"We continue to expect approximately 60 per cent of sales and 70 per cent or more of earnings to be made in the second half of the financial year, and as our store rollout continues, the amount of our sales and earnings that is dependent upon our second-half performance, will increase."
Halkett said the company remained cautious about its full-year result and would not give any guidance on that because of the volatile retail environment.
Grant Williamson, director at brokerage Hamilton Hindin Greene, said the trading update reaffirmed the improvement Kathmandu reported in November.
"But the announcement does come with a warning that it is still volatile trading conditions. Obviously, the retail environment can be quite fickle so the directors are being pretty cautious looking forward at this stage."
Kathmandu's half-year result will be made public on March 26.
Half year ended January 31. Total group sales will be about $165.8 million, 13t per cent up on $146.7m last year. Same store sales growth of 6.1 per cent on a constant currency basis (unaffected by currency fluctuations).
Earnings before interest, tax, depreciation and amortisation estimated at $20.5m to $21.5m (last year $17m). Net profit after tax estimated at $9.5m to $10.5m ($6m).