Full year results yesterday from adventurewear retailer, Kathmandu and department store giant, David Jones, gave us the two sides of the current Australian retailing story.
Kathmandu, confirmed earlier guidance of a sharp rise in profit, while David Jones confirmed its previous guidance for a fall in earnings in the 2011 financial year and a weak start to 2012.
Take the good news from Kathmandu a 55% increase in net profit to $NZ39.1 million, in line with previous guidance, as sales rose 24.5% to $NZ306.1 million.
The shares fell 1c in Australia to $A1.74.
The company set final dividend at NZ 7c a share (unchanged), and a full year payout to shareholders of NZ 10c a share. It was NZ 7c in 2010 with no interim payout in that year.
In Australia, the company’s biggest market, the outcome was better than for the company as a whole: Sales up 26.3% to $A143.3 million, same store sales growth of 14.4% and EBITDA (trading result): up 43.8% to $A33.8 million.
“We have achieved double-digit same-store sales growth in both Australia and New Zealand, and improved margins despite the well publicised difficult economic environment and the resulting impact on consumer demand in all our markets,” CEO, Peter Halkett said in yesterday’s statement.
“Our 14 new stores opened during the year have all performed very well and we see continued growth opportunities for Kathmandu as we expand our retail footprint and introduce new products and an updated brand identity to the market over the next year.
He said the Christchurch earthquake resulted in the closure for an indefinite period of Kathmandu’s central city store, which was located close to major Christchurch office and hotel tower blocks currently being demolished.
In 2011-12 four new stores are already confirmed to open, two each in New Zealand and Australia, and four existing stores in major cities are in the process of being relocated to new and larger premises. The group now has a total of 109 shops.
Mr Halkett confirmed that most of this year’s targeted 15 new stores to be opened will again be in Australia.
And the group is wondering about moving into the US market, while maintaining its presence in the loss-making UK market, but no more expansion for the time being.
As a sign of how well the company did during the year, gross profit margin was up 2.30% "on FY10, reflecting sales growth primarily coming from apparel categories with associated higher margins." Gross margin rose to 65.5% from 63.2%.
"An increasing share (now over 61%) of total sales is made in Australia where Kathmandu earns higher gross margins. Gross margins increased in both Australia and New Zealand in FY11."
Kathmandu might have smaller sales than the likes of David Jones, Myer and others, but its improvement (its 2009-10 financial year was much tougher) in at times difficult trading conditions in Australia and NZ tells us that the management and staff did very well in the 2011 year, compared to competitors, no matter their size.
And the company is confident about 2012:
“The current retail environment, and cost pressures both domestically and internationally create a volatile and unpredictable environment. However, given our market position and brand strength we remain well placed for further growth in FY12," the CEO said in yesterday’s statement.
David Jones’ full year result provides a nice comparison.
The group reported net profit in line with its earlier (downgrade) guidance and stood by its gloomy forecast for the current six-month period.
David Jones said net profit fell 1.5% to $168.1 million in the 12 months to July 30.
The company had forecast a profit of $167.7 million to $169.7 million.
First-quarter sales were likely to be down around 10%, David Jones said yesterday, which was below management expectations.
And the company said it was expecting a fall in first-half 2012 net profit of between 15% and 20% compared with the first six months of 2011, which saw earnings rise 4.2%.
The company declared a fully franked final dividend of 15 cents a share (17c a share previously), taking the full-year dividend to 28 cents, down from 30 cents in the 2010 year. The interim dividend for the 2011 year was raised by a cent to 13c a share after the solid first half result.
As previously announced, David Jones’ sales revenue for the year fell 4.4% to $1,961.7 million, while earnings before Interest and Tax (EBIT) eased 1.1% to $246.5 million, from $249.2 million in 2010.
The Company’s Financial Services business reported growth of 7.5% in EBIT to $47.7 million in 2011 from $44.4 million in 2010.
The department store business saw full year EBIT dip 2.9% to $198.8 million.
But in the second half it fell 14.3% to $67.9 million from $79.2 million as the slowdown and then slump in sales and discounting ate profit margins.
Second half EBIT for financial services rose 7.5% to $24.9 million (from $23.2 million), making for a total EBIT for the group in the half of $92.8 million, down 9.4% on the $104 million earned in the second half of the 2010 financial year.
The company’s profit margin fell 0.60% to 39.1% from 39.7%, but the cost of doing business fell 0.8% to 29% from 29.8%, indicating that the company at least kept costs under reasonable control.
Chief executive Paul Zahra said sales in the first-quarter of the current year had been below expectations, but said the company still expects to meet its first-half p
