Retail-store company Kathmandu Holdings Limited (ASX: KMD) today announced the half year results for the period ended 31 January 2019. Total Sales increased by 13.3% to NZ$232.0 million and Gross Profit increased to NZ$141.9 million, up 9.4% on the previous corresponding period.
But the results could not impress the investors as the stock price plunged 8.974% in the day trade on 26 March 2019. The negative market sentiments underline the company’s negative same-store sales growth of 2.2% in New Zealand that has wiped out the marginal increase of 1.2% in the Australia same store division for 26 weeks ended 27 January 2019.
On the bottom line front, Kathmandu’s normalised NPAT increased by 7.3% to NZ$13.2 million despite the softer trading conditions in Australia and New Zealand over the Christmas and Boxing Day period. Normalised earnings before interest tax (EBIT) increased from NZ$18.0 million in 1HFY18 to NZ$19.8 million in 1HFY19, reflecting the growth of 10.0% primarily driven by the strong growth in the company’s Oboz update.
Chief Executive Xavier Simonet commented “Kathmandu is on a journey of transformation. The company is progressing with its diversified business approach through widening its channels, markets and brands with particular focus on its footwear brand Oboz.”
Oboz marks the fastest growing footwear brand in Kathmandu stores and the rapidly growing major hike footwear brand at REI, North America’s largest outdoor retailer. Its pro-forma EBIT increased by 77.1% to $4.7 million in 1HFY19 underpinned by the proforma sales growth of 38.6% to $29.2 million in the same period. Kathmandu stated that Oboz has achieved its earn-out EBITDA target of USD $7.1 million to December 2018. However, Oboz is expected to be neutral to Group earnings per share in FY2019, and EPS accretive in FY2020.
The Board has declared an interim dividend of NZ$ 4.0 cents per share payable on 21 June 2019 with the record date of 7 June 2019. The company stated that the dividend will not be franked for Australian shareholders, and will not be imputed for New Zealand shareholders, but the final dividend is expected to be fully franked and fully imputed.
Total Group inventory has increased from $111.9 million at the end of July 2018 to $130.1 million as at 31 January 2019. The Kathmandu inventory balance reportedly includes $6 million to support Kathmandu International and early deliveries of core styles for Autumn and Winter.
Mr Simonet stated that the Kathmandu remains focused on achieving sales and profit growth in its core Australasian business to fund investment for future growth. Along with Oboz’s continued growth, the company is progressing to build international Kathmandu brand equity through official outdoor wholesale channels.
Kathmandu is currently in its transformational phase turning from a leading Australasian retailer to a brand-led global multi-channel business. The management advised that the diversification of channel, brand, product, geography and seasonality has progressed in the first half, particularly through the success of Oboz.
KMD last traded at $2.130 on 26 March 2019. The stock price closed at a price to earnings multiple of 10.660x with a market capitalisation of $529.28 million.
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