Investors didn’t like the first quarter sales update from outdoor and adventure wear retailer, Kathmandu despite some big numbers.
The shares lost more than 4% to end the day at $1.265, despite topline sales rising 72% in the first quarter (to the end of October) as the contribution from the Rip Curl acquisition really kicked in.
Investors looked through that contribution and discovered that sales had not done all that well compared to a year ago, a point Kathmandu confirmed.
In a trading update ahead of the company’s annual general meeting yesterday, Kathmandu revealed that direct-to-consumer sales across the group on a Pro-forma basis, which includes three months of Rip Curl’s sales prior to its acquisition, dropped 24.1%.
Kathmandu was the primary reason for this decline, with trade falling 37.7% at the branded stores (with the shutdowns in Victoria and Auckland playing a major role). But Rip Curl performed far better, with sales down just 1.7%.
Adjusted for lockdown closures, same-store sales were down 7.6%. This was despite a 37% increase in group online sales over the period.
Also under pressure during the first quarter were the company’s wholesale sales. They were down 14.4% compared to the prior corresponding period.
Group earnings before interest, tax, depreciation, and amortisation for the first quarter were in line with last year. This includes government subsidies and the realisation of cost synergies.
Kathmandu’s CEO, Xavier Simonet, gave the result a guarded tick.
“We are realising the benefit of a diversified Group, with strong performance in summer weighted product categories for Rip Curl in all key geographies, following successful winter trading for Kathmandu,” he said in a statement to the ASX.
“Rip Curl’s strong sales performance in its key markets of Australia, Europe and North America is very pleasing.
“It highlights the strength of Rip Curl’s global brand and innovative products as more people take to surfing. At broadly pre-COVID-19 levels, wholesale sell-in for Rip Curl for the second half-year is also encouraging,” he added.
Mr. Simonet notes that the Kathmandu business has struggled with customer traffic during the COVID crisis.
“As for Kathmandu, camping and footwear categories have over-performed, but have not compensated for the impact of COVID-19 with low footfall in CBD and tourist locations as well as lower travel-related purchases.
“Oboz’s performance has been robust with strong sales to key accounts, and the forward order book tracking above pre-COVID-19 levels.”
Kathmandu again warned that its half-year result will be dependent on the key Christmas trading period but this year, it said the impact of COVID-19 on consumer sentiment remains a risk.
Not even the hint of a return to dividends in early 2021 could change minds of investors.
“The Group continues to maintain a strong balance sheet and liquidity position, allowing it to respond to current trading conditions and pursue attractive growth opportunities that may arise.
“The Group intends to resume dividend payments subject to market conditions and trading performance following first-half results,” Mr Simonet added.