Kathmandu targets 10% of total sales online, plans 'capital-light' international expansion

See also: Kathmandu's interim profit up 622% as product and costs controlled

UPDATED: Kathmandu Holdings [NZX: KMD], the outdoor equipment chain that fended off a hostile takeover by Briscoe Group last year, aims to lift the proportion of total revenue it garners online to 10 percent from 6.6 percent currently and is considering a "capital-light" international expansion that would include wholesaling, franchise partnerships and internet sales.

The Christchurch-based retailer today posted first-half profit of $9.4 million, meeting guidance, and affirmed full-year forecast profit of $30.2 million.

Sales rose 9.3 percent to $196 million, led by Australian revenue growth of 12 percent to $124 million, a 4.6 percent gain to $68 million in New Zealand sales and a 19 percent increase to $3.6 million in UK sales. Online sales rose 23 percent to account for about 6.6 percent of total sales, or some $13 million.

Permanent stores in the UK reduced to three from four and the company expects to have exited all of its outlets in that country in 2016, while building its UK and European online channels. Kathmandu is pursuing what it calls a blended model for growth outside its core ANZ markets and has hired an adviser with international wholesaling experience. It may follow a similar route to global competitors North Face, Patagonia and Columbia, which have an online presence, franchise stores and partnerships with department stores.

"I think we're doing well versus other brands in Australia" for online sales, chief executive Xavier Simonet said on a conference call. "But looking at global brands we could do better. I believe if we could achieve 10 percent of total sales that would be really brilliant."

Kathmandu shares rose 1.2 percent to $1.68, below the theoretical offer price from Briscoe Group of $1.80 a share made in mid-2015, which was rejected as too low. Rod Duke's Briscoe remains a major shareholder with just under 20 percent and Simonet said he would be meeting with Duke later today as part of a roadshow to shareholders. He declined to comment on whether Kathmandu was expecting a new offer from Duke.

The retailer has increased membership of its Summit Club to 1.5 million from 1.4 million and Simonet said Kathmandu is in a gradual process of refreshing the offering to members of the loyalty scheme. It has increased the contribution Summit Club members make to total sales and improved the retention rate, he said. 

The retailer's gross margin widened to 62.8 percent in the first half from 59.3 percent a year earlier, although margins "will come under increasing pressure" in the second half as US dollar hedges mature, he said.

Kathmandu will pay a first-half dividend of 3 cents a share, unchanged from last year, imputed for New Zealand investors and unfranked for Australian shareholders.

The value of inventory rose to $103.3 million from $97.3 million, which Kathmandu said reflected a strengthening US dollar. Operating expenses rose 1.8 percent to $101 million, but decreased to about 52 percent of sales from 56 percent. Operating cash flow was $24.2 million from a $5.8 million deficit a year earlier. Gearing narrowed to 17.9 percent from 22.6 percent.

(BusinessDesk)