Kathmandu warns of slow Christmas

Kathmandu at Westfield St Lukes in Auckland. New Zealand Herald Photograph By Chris Gorman

Kathamandu Holdings, the outdoor equipment retailer, has reported a slowdown in sales growth after a subdued start to Christmas shopping in its Australian market. The shares fell to a 16 month low.

The Christchurch-based company's year-to-date sales rose 14 per cent as at Dec. 21, slowing from a pace of 19 per cent as at Nov. 16, due to lower same-store sales in Australia over the past five weeks, it said in a statement.

Kathmandu expects Australia to remain tough for some time and is reassessing its sales and pricing strategy for the second half of the 2015 year and beyond. The shares dropped 6.8 per cent to $2.59, the lowest since August 2013.

"Due to both the subdued start to Australian trading in Kathmandu's Christmas sale promotion, and the reduced gross margins achieved across the full year to date in Australia, the company will experience a substantial reduction in the gross profit earnings in the pre-Christmas Day trading period compared to the equivalent period in FY2014," it said.

"Kathmandu anticipates any recovery in trading from now till 31 January 2015 will not be sufficient to make up the shortfall in gross profit experienced to date in 1H 2015."

In September, the retailer posted a 4.5 per cent decline in annual profit to $42.2 million, as earnings were hurt by a warmer start to winter, which dented trading of seasonal goods through a period when it holds one of its biggest annual sales, while a strong New Zealand dollar against the Australian currency, where it generates the majority of its revenue, crimped earnings.

Australia is the outlier for Kathmandu, with same store sales in New Zealand the UK tracking ahead of the same period a year earlier, and at similar gross margins, it said.