Once or twice a year for the last three years, dual-listed retailer Kathmandu (KMD) produces figures that surprise the market and underline how its merchandising and retailing skills produce consistently better results than those from bigger, less specialised chains.
Yes, the outdoor and adventure market that the company dominates in Australasia, is a niche compared to the broader ranges of Coles, Myer, David Jones, Harvey Norman or JB Hi Fi.
But in turn Kathmandu has less margin for error than bigger retailers. It’s exposed by that specialisation to a loss of faith among customers if it gets its retail offer wrong, misprices products or dilutes its strong image.
It doesn’t have the wider product range of larger retailers to protect itself against mistakes or a loss of enthusiasm among its customers, so it has to get its offer to customers spot on in terms of products and prices.
And that’s how it was yesterday with the company’s January 31 interim figures for the 2013-14 financial year showing higher margins and earnings, after discounting for the rise in the value of the Kiwi dollar.
Group topline sales jumped 10.5% for the half, driven by the near 15% jump in sales in its Australian stores, which now dominate the company.
Same store or comparable store sales jumped an enviable 6.6% in the half year. Same store sales jumped 3.2% in NZ, up from the 1.3% a year ago.
Australia made up 61.4% of Kathmandu sales, while New Zealand 37.2% and sales in the UK just 1.4%.
Net profit was $NZ11.4 million ($10.7 million) in the six months.
That was a rise of 10.7% on the previous corresponding half and would have been higher except for the rise in the value of the NZ dollar against the Aussie currency.
KMD 1Y – Kathmandu shows retail rivals a clean pair of heels, again
Sales growth of just 1% to $NZ167 million for the six months was clipped as well by the stronger Kiwi dollar (which all but wiped out the strong sales growth in Australian dollars).
Earnings before interest and tax jumped 11% to $NZ17.5 million, a sign the company managed to expand margins.
That was shown in the 1.20 percentage point rise in the company’s gross profit margin to 63.9% from 62.7%.
And the company’s EBIT (earnings before interest and tax) margin, the generally accepted measure of profitability, rose a whole percentage point to 10c in the dollar, from 9.5c a year earlier.
"The New Zealand economic environment and consumer sentiment is currently generally positive, but there is more uncertainty in Australia’s prospects, and I anticipate it will continue to be the more challenging retail market during 2014," Kathmandu chief executive Peter Halkett said in yesterday’s statement.
Two large weather dependent promotions in the second half are critical for Kathmandu’s full-year results, the company said.
"We are targeting an improved profit outcome in FY14, after adjusting for the effect of exchange rates.
"Looking further ahead our strong financial performance enables us to continue to invest in growing our store network, enhancing our online," Mr Halkett said.
During the first half Kathmandu opened five new stores, four in Australia and one in New Zealand, and is still planning to open 15 for the whole financial year.
The company will pay an unchanged interim dividend of NZ3¢ and will be fully franked for Australian investors.
No wonder the company’s shares jumped by more than 11% and ended at $3.45.
