Kathmandu shares soar on big profit upgrade

Outdoor clothing chain Kathmandu has issued a substantial profit upgrade based on strong sales on both sides of the Tasman.

The company says it expects net profit after tax to be in the range of $48-52m (up from $38m last year), for the year ended July 31, 2018. 

Earnings before interest and tax are forecast to be between $72-77m, up from $57m last year.

Katmandu shares initially gained 8% to $2.70 on the news before climbing further to be up 14.87%, or 37c, at $2.87 just after 2pm..

Chief executive Xavier Simonet says second-half sales have been strong across both Australia and New Zealand.

Year-to-date sales are 7.7% higher than at the same time last year and Kathmandu's gross profit margin is 2.4% above last year due to improved full price sell-through and a higher average selling price, he says.

“The autumn season and the start of our key winter promotion have delivered higher sales and profit than planned," Mr Simonet says.

“The successful launch of innovative new products, enhanced in-store customer experience, inspiring content and engagement on social media and digital channels, have contributed to the performance.”

Harbour Asset Management analyst Shane Solly says the group's profit growth is driven by a 13.8% increase in second-half store sales in Australia.  

“There is no doubt that the sharp movements in weather have helped.

"The business is getting more sophisticated about how it engages with its customer base. Certainly, there is a real trend toward outdoors as people look to spend more time outside.”

The fresh guidance comes after the $2m acquisition costs for US company Oboz Footwear.

The company says it expects the acquisition to add to group earnings from 2019.

In March it announced it would buy Oboz for a $US60 million upfront payment and $US15 million earn-out. It then launched a successful $40 million equity raise, underwritten by Goldman Sachs, to part-fund the acquisition.

Mr Solly says Oboz is well-regarded among users of outdoor leisure products and gives Kathmandu a potential entry point into a bigger US market.

Kathmandu will release its full result for the year on September 18.

In March, Kathmandu reported its strongest interim results for four years – lifting net profit 23% to $12.3 million in the six months to January 31.