Kathmandu boss steadies the ship

By Holly Ryan, Additional reporting Business Desk

Kathmandu told shareholders earnings would be between $33 million and $34 million as better-run promotions helped boost profitability.
Kathmandu told shareholders earnings would be between $33 million and $34 million as better-run promotions helped boost profitability.

A year into the arrival of new chief executive Xavier Simonet and Kathmandu has steadied the ship, lifting annual profit 64 per cent.

The company fended off a takeover proposal from its biggest shareholder Briscoe Group and improved its margins after more rigorous inventory management.

Forsyth Barr analyst Chelsea Leadbetter said it was early days but the result was a good one.

"Certainly Xavier has been a bit of a catalyst for changing things at this company and it's really just a demonstration of them executing on their plan," Leadbetter said.

"He talked about quite a few strategic changes and we've seen some pretty strong evidence of that so far but it is still early days," she said.

"It's definitely a very good start and although it's off a very weak base last year he's managed to steady the ship and delivered on what he said he will so far."

Net profit rose to $33.5 million, 16.6c per share, in the 12 months ended July 31, from $20.4m, or 10.1c, a year earlier. Gross margin widened to 62.6 per cent from 61.5 per cent, and sales rose 4 per cent to $425.6m.

"Sales growth was achieved at higher gross margins as a result of product newness and careful management of promotional activity," 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 $33m and $34m as better-run promotions helped boost profitability. The retailer had already upgraded guidance in June.

The company 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.

"They have commented on [international expansion] previously and the idea first was to get the Australasian business back into reasonable shape before they start to think further afield," Leadbetter said. "It is very early days into their thinking on the international strategy."

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

The board declared a final dividend of 8 cents per share taking the total payout to 11 cents.

- NZ Herald

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