Kathmandu lifts profit despite sales drop in New Zealand

Net profit rose to $14 million in the six months ended January 31 from $12.3m a year earlier. Photo / Supplied

Kathmandu Holdings lifted first-half profit as expanding margins and a one-time tax adjustment bolstered extra sales from its recently acquired North American Oboz Footwear business.

Net profit rose to $14 million in the six months ended January 31 from $12.3m a year earlier. That included a $1.1m tax refund related to the treatment of GST on reward vouchers.

Sales were up 13 per cent at $232m, with Oboz - acquired last April - contributing $29.2m. Sales from New Zealand Kathmandu stores fell 1.9 per cent to $63.2m. Australian sales were up 1.2 per cent in local currency, although largely flat at $137.2m in NZ dollars.

Gross margin improved to 64.2 per cent from 63.4 per cent a year earlier with less promotional discounting.

"Following strong same-store sales growth at the start of our financial year, Kathmandu experienced softer trading conditions in Australia and New Zealand over the Christmas and Boxing Day period," chief executive Xavier Simonet said in a statement.

"Despite sales being below expectation, it was pleasing to see an improvement in retail gross margin."

The board declared an interim dividend of 4 cents per share, which isn't tax paid, payable on June 21 with a June 7 record date. That's unchanged from a year earlier.

The shares were unchanged at $2.42, and have dropped 12 per cent so far this year, under-performing an 8 per cent gain on the S&P/NZX 50 Index.

Kathmandu had signalled a subdued Christmas sales period, and earlier this month said it was investigating a month-long data security breach on one of its websites.

Online sales accounted for 9.5 per cent of its direct consumer sales during the past 12 months, up from the 9.4 per cent reported at its annual result in September.

Of the $7m of capital expenditure in the period, Kathmandu spent $2m on its systems and infrastructure upgrading its online platform. Some $4.6m was spent on new stores and refurbishing existing sites.

Inventory stood at $130.1m at balance date, of which $118.1m was Kathmandu stock and $12m was Oboz. That included $6m to support Kathmandu international, and early deliveries of autumn and winter stock. The retailer said clearance stock was in line with the prior period, when inventory stood at $84m. Oboz hadn't been acquired in the prior period.

Christchurch-based Kathmandu bought Oboz in April for US$60m ($86.8m) to diversify its product range and expand its geographic spread.

Net debt was $79.2m at January 31, up from $17m a year earlier.

The retailer reported an operating cash outflow of $16.2m in the half, compared to an inflow of $16.9m a year earlier. The outflow was due to the increased inventory and timing of supplier and tax payments.