Kathmandu result disappoints

A slow Christmas period and trading through January affected the result.

Kathmandu Holdings' first-half result is being described by analysts as disappointing but expected, after the outdoor retailer posted a net loss of $1.8 million.

The company had forecast a loss of between $1 million and $2 million, compared with $11.4 million profit the previous year.

"[The share price] started to rebound back heading into the result, maybe due to a belief that the company had been unduly sold when the issues might not be structural, but today was really confirmation of what they have been saying - that things are pretty tough," said JBWere equity analyst Rickey Ward.

Acting chief executive Mark Todd said a slow Christmas period and trading through January had impacted the result, with heavy stock discounting affecting sales margins - a factor Ward said was concerning.

"They themselves have made a public announcement [yesterday] that they did not hit the mark with the consumer," he said.

"So they had a lot of inventory that they had to discount heavily because they didn't get it right for the consumer yet they've done nothing differently to what they have done in the past so that sort of raises the potential that this is a structural challenge more than anything else."

Ward said this could involve price points or the product.

He said if the issues were structural then Kathmandu "did not deserve to trade on the multiples they have historically done".

Todd said the full-year performance would be highly dependent on sales and margins achieved in the key Easter and winter sales periods and the company had modified its promotional activity "incorporating what we learned from the first half".

Todd didn't provide a full-year forecast although he said he expected an improved performance in the second half when the company normally generated 60 per cent of sales. The company is expected to make an annual profit of $25.4 million, down from $42.2 million a year earlier, according to analyst estimates compiled by Reuters.

Ward said the real state of the company would become clear after the full-year result.

"You've still got the vital period for these guys which is Easter," he said. "So we have to put this first half-year result in context and that is that it's a small component of the overall reporting period for Kathmandu, so their busy period is yet to come but early indicators are that it's still very tough." Kathmandu, which has been ramping up spending as part of a strategy to build a global brand, opened eight new stores in the first half but has cut its full-year target to 11 from 15.

The company still aims to lift stores in Australia and New Zealand to 180 although it now anticipated a slow start to new store openings next financial year, and said store roll-outs would depend on individual returns on investment. Shares in the company closed down 21c, or 13 per cent, at $1.40 yesterday.