Kathmandu's annual profit rises on wider margins

Kathmandu Holdings says annual profit rose as much as 67% as better-run promotions widened the outdoor equipment chain's margins.

Net profit was between $33 million and $34 million in the 12 months ended July, up from $20.4 million a year earlier.

That is within Kathmandu's upgraded June guidance of between $32 million and $35 million, which highlighted the retailer's better margins.

"As indicated in our June update, product newness and careful management of promotional activity have resulted in a better than expected gross margin for FY2016," chief executive Xavier Simonet says.

"Continued realisation of cost efficiencies and improved working capital management has contributed to an improved profit and generated strong operational cash flows."

Kathmandu's annual profit halved last year as a build-up of inventory forced it into aggressive discounting at lower margins to rid itself of excess stock.

Under the management of Mr Simonet, who was appointed to the role in January last year, the company is taking a more cautious approach to sales and keeping expenses under control.

Mr Simonet says the retailer's winter campaign registered earlier sales than usual which attracted a higher gross margin. Sales rose 4% to $425.5 million, while same-store sales increased 1.6%, slowing from a 2.6% pace in the 47 weeks ended June 26 when Kathmandu last provided guidance.

The retailer will announce its annual result on September 21.

The share last traded at $1.73 and have gained 11% this year. The stock is rated an average 'buy' based on three analyst recommendations compiled by Reuters, with a median price target of $2.13.

(BusinessDesk)

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