Does an improvement in Christmas trading justify Kathmandu’s (KMD) rejection of the $1.80 a share offer last year from fellow Kiwi retailing group Briscoe Group?
The trading update yesterday saw Kathmandu shares bounce more than 11.5% higher to end at $A1.54 in Australia and $NZ1.70 across the Tasman – within sight of the Briscoe’s offer price.
In yesterday’s statement to the ASX, Kathmandu said it now expects earnings before interest, tax, depreciation and amortisation (EBITDA) of between $NZ21 million and $NZ22 million for the six months ending January – sharply higher than market forecasts around $NZ8.9 million and a weak EBITDA of $NZ6.8 million a year ago.
Earnings Before Interest and Tax (EBIT) are expected to be between $NZ14.5 million and $NZ15.5 million, compared with consensus forecasts around $NZ1.68 million and reported EBIT of $NZ0.6 million a year ago.
And Kathmandu said it expects interim net profit to be between $NZ8.5 million and $NZ9.5 million, compared with that first-half loss of $NZ1.8 million in 2015.
KMD 1Y – Better news out of Kathmandu
Chief executive Xavier Simonet said the retailer is on track to deliver a full-year net profit of $NZ30.2 million, above market forecasts around $NZ28 million. That would be well above the $NZ20.4 million earned in 2014-15 (which was more than half the previous year’s $NZ42.2 million).
But he said the final result would depend on trading in the six months ending July, when the company is expected to generate 55% of sales and between 65% and 70% of earnings.
Sales rose 9.1% to $NZ195.7 million and same-store sales rose a solid 3.8% on a constant currency basis – slightly weaker than the 4.8% same-store sales growth reported in November.
Encouragingly, the company said its gross margins rose by 360 basis points in the latest half year as the company sold more products at full price after clearing excess stock.
“Top line sales growth was in line with expectations but crucially it was profitable growth achieved through an improved gross margin outcome and realising planned cost efficiencies," said Mr Simonet.
Briscoe acquired a 20% in Kathmandu before launching an unsuccessful offer at $NZ1.80 a share. But that failed when other shareholders refused to support the hostile offer.
Kathmandu’s half-year results will be released on March 22.
