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Climbing profits for upbeat Kathmandu

AAP logoAAP 20/09/2016 Petrina Berry

The head of adventure gear retailer Kathmandu says strong profit growth vindicates the decision to reject a multi-million dollar takeover offer made last year when the company's results were adrift in the wilderness.

New Zealand retailer Briscoe lobbed a multi-million dollar takeover bid for Kathmandu just one day after Xavier Simonet stepped into the chief executive role in June 2015.

The takeover offer coincided with a slide in Kathmandu's share price as the retailer struggled with aggressive discounting, sluggish sales growth and profit downgrades.

A year after rejecting the takeover offer, Mr Simonet has unveiled a full-year net profit that has "exceeded expectations."

Kathmandu's net profit rose 64 per cent to $NZ33.5 million ($A32.4 million) in the year to July 31, and total sales rose four per cent to $NZ425.6 million.

Asked if the result vindicated the group's decision to reject Briscoe's takeover offer, Mr Simonet agreed.

"The business model is not broken and that was the assumption of the takeover bid," he said.

It was also cycling off a weak 2014/15 where profit fell 51 per cent to $NZ20.4 million due to aggressive discounts and excessive stock.

Mr Simonet said Kathmandu was holding less inventory and has moved away from aggressive discounts and towards new and distinctive products with higher prices.

Total inventory was reduced by 15.8 per cent, or $NZ17.9 million, for the year.

Kathmandu's total sales revenue was up four per cent to $NZ425.6 million for the year to July 31, compared to $NZ409.4 million in the prior year.

Same store sales rose 2.6 per cent at its Australian stores but same store sales in New Zealand declined 0.1 per cent.

Total sales grew 7.4 per cent in Australia and 1.9 per cent in New Zealand, helped by the opening of five new stores.

But the group's UK sales declined 10.5 per cent due to the closure of three stores.

The company, which had only four UK stores, decided a year ago to close its UK stores and abandon expansion plans into Europe.

Instead, the group wants to grow its overseas brand presence through online retail and digital marketing.

Mr Simonet said the group's digital and social media marketing was already having an impact and the plan was to ramp this up.

"We have seen a huge increase in the number of younger customers getting excited about the brand and visiting our website," he said.

"We've got a great heritage and we need to talk more about it and engage more with customers around our brand, product benefits and features."

The group's online sales grew about 15 per cent, amounting to about seven per cent of total sales.

Auckland-based Briscoe, which runs household and sports goods retail stores in NZ, is Kathmandu's largest shareholder after buying a 19.9 per cent stake in the group last year.

Shares in Kathmandu gained two cents to $1.96.

KATHMANDU SALES EXCEED FORECASTS

* Net profit up 64pct to $NZ33.5m

* Revenue up 4pct to $NZ425.6m

* Fully-franked final dividend of NZ8.0 cents, up from NZ5.0 cents

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