Cautious Kathmandu Counts Cost Of Virus Shutdown

By Glenn Dyer | More Articles by Glenn Dyer

NZ-based Outdoors retailer Kathmandu looks like reporting a 30% fall in profits for the year to July and is not confident at all about prospects in the 2020-21 financial year starting August 1.

The company said yesterday it now expects its adjusted earnings before interest, tax, depreciation, and amortisation to be above $70 million for the full-year, down sharply from $99.6 million in the 2019 financial year.

Seeing the company reported first-half EBITDA of $78.7 million, it looks as though Kathmandu traded at a loss in the six months to July 31.

Kathmandu’s gross profit margin is likely to be weaker at around 61 to 63%, slightly lower than last year’s 63.6%.

Revenue will be down sharply as well with the company report that sales at the company’s physical stores in the 10 months to the end of May fell 15.1% as it was forced to shut stores and stand down staff due to the government’s strict social distancing measures, especially in NZ.

However, trade from May 18 to June 28 rebounded 12.5% at Kathmandu and 21% at RipCurl. These recoveries were largely fuelled by online sales, which increased 78% and 151% at Kathmandu and Rip Curl respectively.

Wholesale sales were the worst affected, the company said, with RipCurl’s wholesale trade down 26% as its retail customers saw sales fall.

This has left the company wary about the outlook. Kathmandu, which is dual-listed on both the ASX and NZX, said in Thursday’s trading update that it saw “significant downside risk over future economic conditions” as government stimulus wears off and further outbreak threats loom.

CEO Xavier Simonet said in the update that while he was pleased with the recovery in sales, he remained cautious about the future.

“We believe that some short-term factors, including government support packages and pent up demand are underpinning current sales,” he said.

“The heightened level of uncertainty that currently exists is likely to persist over the medium-term, and we are focused on being well prepared to respond to the associated risks and opportunities as they emerge.”

In April, Kathmandu completed a successful $NZ207 million equity raising in response to the COVID-19 pandemic. The company said that based its current assessment of the operating environment and outlook, available liquidity in excess of $300 million is expected at the end of this financial year.

Kathmandu shares rose 9% to 1.175 on the ASX yesterday.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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