Kathmandu widens first quarter margins as sales drop

Kathmandu widens first quarter margins as sales drop; expects higher 1H profit

By Sophie Boot

Nov. 21 (BusinessDesk) - Kathmandu Holdings, the outdoor equipment retailer set to hold its annual meeting on Friday, says its first-quarter earnings were up despite sales dipping as it widened margins by selling less sale stock.

In the 16 weeks to Nov. 19, group sales rose 0.6 percent at constant exchange rates but dropped 1.6 percent on a same-store basis, the Christchurch-based company said without providing more detail. In Australia, its largest market, same-store sales grew 2.9 percent in the quarter while they dropped 10 percent in New Zealand. Gross margin expanded 240 basis points, or 2.4 percentage points, with the level of clearance stock about 40 percent lower than a year earlier, it said.

Its share fell after the statement and last traded down 4.6 percent at $2.48, but are up 33 percent this year.

"During the first quarter we sold more current season product than last year, but less clearance stock," chief executive Xavier Simonet said. "This meant improved gross margin, and with total sales broadly in line with last year, we ended our first quarter with an improved earnings result.

"We have maintained our strong working capital position, and we expect first-half profit to be above last year. As always our first half-year result is highly dependent on the more significant Christmas trading period."

In the last financial year, Kathmandu Holdings posted first-half profit of $10 million, up 6.4 percent and just beating earnings guidance. More recently, the company announced it had lifted annual profit 14 percent to $38 million as sales grew in New Zealand and Australia, while it cut its debt levels to record lows. It has continued the recovery from an earnings slump in 2015 when an inventory build-up forced it into aggressive discounting at low margins to clear stock.

The company will hold its annual meeting in Melbourne on Friday morning.

(BusinessDesk)

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