NZ-based outdoor clothing and adventure wear retailer Kathmandu has further justified its opposition to last year’s takeover bid from a rival Kiwi retailer by revealing a sharply improved earnings forecast for 2015-16, with expectations of a 71.5% jump in profits for the year.
The news saw the company’s shares take-off on the ASX yesterday as they rebounded more than 20% to $1.52 and fully put to bed fears the outdoor clothing group had been hurt by the warm start to winter in Australasia. The shares ended up 17% at $1.465.
Kathmandu yesterday forecast net profit for 2015-16 in the range of $NZ32 ($A30.5 million) to $NZ35 million, compared with its previous guidance of $NZ30.2 million and consensus forecasts of around $NZ29.3 million.
The new guidance is 57% to 71.5% above last year’s bottom line profit of $NZ20.4 million. Directors, though, cautioned that, “A substantial proportion of the year’s sales and earnings result are still dependent on trading in July, the final month of the financial year".
Kathmandu said earnings before interest and tax were expected to rise as much as 60%, to between $NZ49 million and $53 million, exceeding consensus forecasts around $NZ46.6 million and the $NZ33.2 million earned in 2015.
However, the new guidance remains well below Kathmandu’s earnings in 2014, when EBIT reached $NZ64.3 million.
But Kathmandu’s underlying earnings halved last year after the retailer was forced to aggressively clear excess winter stock and that profit plunge prompted New Zealand rival retailer Briscoe Group to launch a $324 million takeover bid, which was ultimately rejected by Kathmandu shareholders, leaving Briscoe sitting on a 19.9% shareholding.
Kathmandu said in yesterday’s statement to the stock exchange that the better-than-expected performance this year has been underpinned by solid same-store sales growth, higher gross margins, less discounting and cost savings, including a reduction in marketing expenses and job cuts in head office.
"Despite the winter season starting late this year, product newness and careful management of promotional activity have resulted in a better than expected gross margin," chief executive Xavier Simonet said.
"This combined with continued realisation of cost efficiencies has contributed to an improved 2016 outcome," said Mr Simonet.
Same-store sales for the 47 weeks ended June 26 are up 2.6% on a constant currency basis compared with same-store sales of 3.8% in the first half.
While the rate of sales growth has slowed in the second half due to warm weather in Australia and New Zealand, Kathmandu said it had responded by cutting discounting to protect gross profit margins, which are expected to be within its target range of 61% and 63%.
Kathmandu will provide a further trading update in early August and the full result for the year will be released on September 26.
