Outdoor clothing retailer Kathmandu (KMD) has already guided the market to expect a reasonable first half performance in a trading update in February and yesterday’s announcement of a 6% rise in net profit was achieved by cutting costs and a smaller interest bill.
But there were a couple of points in the result that point to superior performance in the tough retail market in Australia that has brought larger rivals undone in the past six to 12 months.
Kathmandu said that it experienced a small (1.8%) slip in earnings before interest, tax, depreciation and to $NZ21.5 million for the 26 weeks ending January 29 as gross margins fell thanks to higher input costs (mostly currency related) and higher clearance activity of unsold product.
After taking into account a $NZ584,000 decline in interest costs from better working capital management, net profit rose 6.4% to $NZ10 million.
Group sales rose just 0.2% to $NZ196.3 million, or 3 per cent in constant currency terms, after Kathmandu closed three underperforming stores in Britain.
Same-store sales rose 3.4% (which was a good result and up sharply from 0.4% in the same period of 2015-16) with most of that increase coming from the 5% rise in comparable store sales in Australia, which was a far better performance than many other retailers in the half – especially over the Christmas New Year break where the likes of Target, Big W and Myer all stumbled. NZ same store sales edged up a mere 1.2%.
“The results for the first half of 2017 were overall in line with our expectations,” chief executive Xavier Simonet said in a statement released with the results.
"It is pleasing to exceed last year’s first-half net profit while absorbing about $NZ4 million of adverse foreign currency impacts in gross margin," he said.
"We achieved strong same-store sales growth in Australia which is our largest market, as we maintained rigorous cost control and continued to drive working capital efficiency."
Kathmandu lifted its interim dividend by 1 NZ cent to 4 cents a share, unfranked.
Mr Simonet said despite the "solid" start to 2017, full-year earnings would hinge on key sales periods in the second half.
"We have worked hard to minimise the impact of currency on our gross margin through sourcing negotiations, product newness, price action, improved stock management and cost control. Maintaining gross margin and operating efficiency will continue to be a key focus,” he said.
The shares rose 0.2% to $A1.78 on the ASX.
