Kathmandu turns sights on America

Peter Halkett. Photo / Richard Robinson

Outdoor apparel retailer Kathmandu is eyeing cities on the west coast of the United States and Canada as potentially lucrative markets.

Chief executive Peter Halkett says the Christchurch-based firm has a "long-term vision" to expand out of the regions it now operates in - New Zealand, Australia and Britain.

He said North American cities such as Seattle, Portland and Vancouver were similar to Australasia in terms of the popularity of outdoor activities.

"We'd like to think that once we have maximised the potential we have in New Zealand and Australia and got a successful model happening in the UK then we can take that to other places," Halkett said.

"But that's probably going to be driven off the back of online and not a full store network rollout."

Kathmandu is working hard to return its struggling British operation - where same-store sales fell by 7.1 per cent in the year to July - to profit, partly through driving growth in online sales.

Halkett said the company wanted to create a successful business model in Britain which could then be applied to new markets.

In a research note released last week, Linwar Securities analyst Mark Wade said the fact that Kathmandu was eyeing global expansion opportunities was one of the "key positives" that emerged when the firm announced its full-year result last week.

"Clearly there is an upside to our forecasts should Kathmandu successfully expand outside of New Zealand and Australia," Wade said.

Despite natural disasters on both sides of the Tasman, weak consumer confidence and sluggish economic growth, the outdoor retailer last week reported record sales of $306.1 million for the year to July.

Net profit of $39.1 million was a 55.2 per cent lift on the year before when costs tied to the company's initial public offering in November 2009 were excluded.

Same-store sales rose by 15.7 per cent across its operations.

Halkett said the strong Australian and New Zealand dollars were benefiting the business through reducing import costs and encouraging increasing numbers of Kiwis and Aussies to travel overseas.

The company had been having a "torturous time" with its British operations and was focused on building a successful business model in Britain - partly through online sales.

Kathmandu plans to open 15 new stores in New Zealand and Australia during its current financial year.

That includes a 1291sq m, multi-level space in Auckland's Newmarket that has been empty since teen fashion retailer Supre moved out of the site at the start of this year.

Goldman Sachs & Partners Australia has a "buy" recommendation on Kathmandu shares, with an expected 12-month total return of 51.9 per cent.

Shares closed steady at $2.14.

Footprints
Kathmandu stores at July 31
* New Zealand 39
* Australia 66
* Britain 6.