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Kathmandu's annual profit soars

NZN 20/09/2016 Paul McBeth

Kathmandu Holdings, which fended off a takeover proposal from its biggest shareholder Briscoe Group, lifted annual profit 64 per cent after more rigorous inventory management helped fatten margins.

Net profit rose to $33.5 million, in the year to the end of July from $20.4m, a year earlier, the Christchurch-based outdoor equipment chain said.

Gross margin widened to 62.6 per cent from 61.5 per cent, and sales rose 4 per cent to $425.6m.

"Sales growth was achieved at higher gross margins as a result of product newness and careful management of promotional activity," chief executive Xavier Simonet said.

He said cost efficiency and improved working capital management had also contributed to the result.

Kathmandu primed shareholders for an upbeat result last month saying earnings would be between $33m and $34m as better-run promotions helped boost profitability. The retailer had already upgraded guidance in June.

The board declared a final dividend of 8 cents per share taking the total payout to 11 cents, up from 8 cents in 2015.

The shares rose 2 per cent to $2.02, having gained 27 per cent so far this year.

Mr Simonet said the company is working to reduce the currency impact on gross margins but didn't give guidance for the 2017 year, saying it was too early to comment due to changes in the timing of promotions.

However, he said the retailer is investigating other foreign markets, using its Australian business as a foundation.

Australia generated most of Kathmandu's sales across 114 stores, up 5.2 per cent to $278m with earnings before interest, tax, depreciation and amortisation jumping 51 per cent to $32.9m.

The New Zealand business lifted revenue 1.9 per cent to $141.7m, while sales fells in the UK where it now has only one store after closing three outlets. Online sales rose about 15 per cent and now account for about 6.9 per cent of total sales, it said.

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