Kathmandu annual profit climbs 64%; better product management fattens margins

Kathmandu Holdings, which fended off a takeover proposal from its biggest shareholder Briscoe Group, lifted annual profit 64 percent and will pay a bigger dividend after more rigorous inventory management helped fatten margins.

Net profit rose to $33.5 million, 16.6 cents per share, in the 12 months ended July 31, from $20.4 million, or 10.1 cents, a year earlier, the Christchurch-based outdoor equipment chain said in a statement. Gross margin widened to 62.6 percent from 61.5 percent, and sales rose 4 percent to $425.6 million.

"Sales growth was achieved at higher gross margins as a result of product newness and careful management of promotional activity," chief executive Xavier Simonet said. "Cost efficiency and improved working capital management have also contributed to a successful FY2016."

Kathmandu primed shareholders for an upbeat result last month saying earnings would be between $33 million and $34 million as better-run promotions helped boost profitability. The retailer had already upgraded guidance in June.

The board declared a final dividend of 8 cents per share, payable on Nov. 25 with a Nov. 14 record date, taking the total payout to 11 cents. That's up from 8 cents in 2015, though still less than the 12 cents paid in 2014 and 2013.

The shares rose 2 percent to $2.02, having gained 27 percent so far this year.

Simonet said the company is working to reduce the currency impact on gross margins for the 2017 year, through "sourcing negotiations, product newness and continual refinement of our customer-centric promotional calendar."

Kathmandu didn't give guidance for the 2017 year, saying it was too early to comment due to changes in the timing of promotions, although Simonet said the retailer is investigating other foreign markets, using its Australian business as a foundation.

Australia generated most of Kathmandu's sales across 114 stores, up 5.2 percent to $278 million with earnings before interest, tax, depreciation and amortisation jumping 51 percent to $32.9 million. The New Zealand business spanning 47 stores lifted revenue 1.9 percent to $141.7 million, while earnings climbed 21 percent to $35 million. The UK business posted a 3.1 percent fall in sales to $5.5 million while narrowing its loss to $541,000 with the closure of three stores, leaving just one at the end of the year.

Online sales rose about 15 percent and now account for about 6.9 percent of total sales, it said.

Kathmandu scaled back inventory to $95.4 million from $113.3 million a year earlier, which it said was due to the introduction of its forecasting and planning system in 2014, which allowed more accurate buying.

(BusinessDesk)

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