Trans Tasman clothing retailer Kathmandu (KMD) has provided yet another lesson to the moaners and groaners in the Australian retailing sector (such as Myer’s Bernie Brookes and Premier’s Solomon Lew) about superior sales and profit performance by producing one of the best results for the 2012-13 financial year.
The company yesterday revealed a 26.6% jump in net profit to NZ$44.2 million ($A39.23 million).
The mostly Australasian clothing retailer said top line sales had increased by 10.6% to NZ$284 million, while comparable or same store sales were up 5.6%, which was one of the best performances of all the listed retailers in the year.
As a result of the news, the company’s shares jumped 10.2%, or 26c to $A2.81 yesterday.
KMD YTD – Kathmandu’s retailing masterclass produces sales, profit, share price surge
The result is one of the best reported, matched only by Kmart’s 28% lift in EBIT. Kmart is a much bigger retailer, but it and Kathmandu seem to have done what the likes of Myer and David Jones have struggled to do and that’s convince consumers to shop in their stores at a time of particular sluggish trading in Australia and NZ.
Other chains such as The Reject Shop, Specialty Fashion Group and JB Hi-Fi also succeeded in outperforming market expectations in the latest financial year, even though some of their rivals (in fact most of their rivals) couldn’t match their gains and reported weak results.
It also helps that Kathmandu sells lifestyle as opposed to basic goods. Its outdoor clothing range appeals to consumers who can as easily buy from websites here and offshore if they want to. Obviously Kathmandu has convinced a ot of these buyers not to go offshore and in fact is taking steps to meet them there on websites such as Amazon.
Kathmandu CEO Peter Halkett said in yesterday’s statement “This was a good result given the difficult retail environment. It was pleasing to achieve positive same store sales growth over the year".
"Operating expenses reduced as a percentage of sales compared to FY2012, which also contributed to earnings growth,” he said.
Earnings before interest and tax (EBIT) jumped 11% to $NZ63.4 million, an increase of $NZ6.4 million compared with the prior corresponding period.
The company said its Australia and New Zealand operations "both performed strongly, delivering positive comparable sales growth on the previous corresponding period".
Kathmandu opened 17 new permanent stores, eight of these in the second half. Online sales growth of 55% contributed to over 4% of total sales, or more than $NZ11 million.
The company yesterday set a target of 10% of sales for the growing online business which will shortly be augmented by a Kathmandu site at Amazon.com.
The company said net debt at 31 July 2013 was down 22.5% on a year ago thanks to increased operating cash flow and reduced capital expenditure.
Kathmandu said a final dividend of NZ 9c will be paid, bringing the total dividend payout for FY2013 to 12c (FY2012: 10c). The dividend will be fully imputed for New Zealand shareholders and fully franked for Australian shareholders.
"Gross profit margin remained within Kathmandu’s target range of 62% to 64%. Margins were slightly reduced in Australia (down 60 bps) and marginally improved in New Zealand (up 10bps). Margins in the United Kingdom were lower than FY2012 by 200 bps (two percentage points) due to the impact of clearance activity associated with store closures," the company said yesterday.
CEO Halkett said the company cut its operating expenses 30 basis points as a percentage of sales. "We were successful in reducing operating costs as a percentage of sales," he said.
"This continues to be a key priority and we are confident Kathmandu will achieve further efficiency improvements in the future.
“We will continue to invest in our store network through opening new stores and relocating or refurbishing existing stores in Australia and New Zealand.
"Maximising the return on the investment made in inventory and store space remains a key focus while continuing to effectively manage operating costs.”
Mr. Halkett noted that, “Kathmandu will continue to invest in systems infrastructure to grow our online sales, given the opportunity presented by this channel”. He added “providing there is no deterioration in economic conditions, Kathmandu expects another solid performance in FY2014”.
