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Kathmandu on track to match profit

NZ Newswire logoNZ Newswire 18/11/2016 Tina Morrison

Kathmandu Holdings expects first-half profit to be in line with last year's as it struggles to grow sales and maintain margins.

"Through careful management of gross margins and operating expenditure, we remain on track to match last year's first-half profit result despite pressure on sales growth," chief executive Xavier Simonet said in a trading update posted to the stock exchange.

He added that the result was "highly dependent" on the more significant Christmas and January trading periods.

Kathmandu shares fell 2.1 per cent to a three-month low of $1.84.

The company didn't provide specific figures but in the previous first-half period ended Jan. 31, it posted profit of $9.4 million, sales of $196m, and a gross margin of 62.8 per cent.

In the first quarter of its current financial year, covering the 15 weeks ended Nov. 13, the gross margin was lower primarily due to changes in currency rates, operating expenses were lower, and the working capital position had been maintained or improved with lower net debt and stock per store, the Christchurch-based retailer said in its update prepared for delivery at its annual meeting of shareholders on Friday.

Its first-quarter sales fell 0.6 per cent, the company said. On a constant currency basis sales rose 2.8 per cent.

Kathmandu's annual profit rebounded in 2016 following a slump in 2015 after a build-up of inventory forced it into aggressive discounting at lower margins to rid itself of excess stock.

Under the management of new chief executive Xavier Simonet, who was appointed to the role in January 2015, the company has been taking a more cautious approach to sales and keeping expenses under control.

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