Outdoor goods retailer Kathmandu looks to have successfully survived the establishment of Amazon across the Tasman by announcing a big lift in its earnings outlook for the 2017/18 year.

The Christchurch-based company, whose biggest market is Australia, said it expects to make a net profit of $48 million to $52 million in the year ending July 31, up from $38 million last year.

Earnings before interest and tax (ebit) are expected to be between $72m and $77m, up from $57 million last year, it said.

Sales were up 7.7 per cent so far this year covering the 47 weeks to June 24, it said.


The earnings upgrade was clearly out of left field for the market, with Kathmandu's shares rallying to $2.88 at one point before settling at $2.80, 30 cents or 12 per cent on the day and their highest point in three and a half years.

Under the management of chief executive Xavier Simonet, who started the role in June 2015, Kathmandu has been discounting less, selling more product at full price and achieving a higher average selling price.

So far this financial year, the company's gross profit margin is 240 basis points, or 2.4 per cent, above last year.

Josh Wilson, senior portfolio manager at NZ Funds, said the upgrade highlighted the unpredictability of Kathmandu's earnings.

"It's been a cracking second half when you put it in context with the first half, which was much more pedestrian," he said.

"The thing about Kathmandu is that it has in the past been a volatile and unpredictable sales model - a big chunk of sales are made during the three big sales periods throughout the year," he said.

"But every time they come out with a sales upgrade like this, it does add evidence to the idea that management have cracked that formula in terms of product design and stock levels, which has been an issue in the past," he said.

Analysts said Kathmandu appeared not to have been suffered from US online retail giant Amazon setting up shop in Australia last December.


"They like omni-channel solution," Oyvinn Rimer, senior research analyst Harbour Asset Management, which has a 9.2 per cent stake in Kathmandu, said.

"They have been working with Amazon in Europe - it's just another platform, and they have experienced significant growth on their own platform."

Simonet had refocused the business on lifting the quality of its products. "Under this leadership, the store layout is better and the look of the product is much more modern," Rimer said.

Unlike previous earnings results, the weather does not look to have played a part in the upgrade, he said.

"It is a meaningful outperformance of consensus forecasts."

While online shopping is clearly a challenge for the traditional retail sector, it is not all doom and gloom for Kathmandu and others in the retail space.

In February, clothing retailer Hallenstein Glasson first half net profit after tax was $15.1 million, an increase of 64.9 per cent over the corresponding period last year.

Kathmandu will release its full-year earnings on September 18.