Covid Causes Kathmandu Profits to Take a Hike

Shares in outdoor retailer Kathmandu ended down 4% yesterday after it became the first company to issue a revenue and profit downgrade because of the renewed threat from Covid-19 and its Delta variant.

The shares ended the day down 4% at $1.42. The warning did have an early impact on other companies in the retailing space but by the close they had shrugged that off.

It also upset the ASX as a whole, along with news of tighter lockdowns in Brisbane, parts of regional Queensland and WA. At one stage the market was down 0.9% but retraced those losses to close down just 6 points, or just under 0.1%.

The extended lockdowns will probably see Kathmandu hit even more.

It told the ASX on Tuesday that the new lockdowns across New South Wales and Western Australia will cost it $NZ13 million ($12 million) in lost earnings.

Kathmandu, which also owns surfwear brand Rip Curl said the lockdowns would mean it would not reach its predicted full-year sales and profit forecasts.

The company’s sales are heavily weighted towards the winter period when it sells most of its outdoor gear such as puffer jackets, boots and camping goods.

Currently, 40 Kathmandu stores are shut in NSW for a minimum of two weeks and a further 26 stores are closed in WA for the next four days as both states kick off lockdowns in an attempt to combat rise in infections of the Covid-19 Delta variant.

The company said that combined with the two-week lockdown in Victoria earlier this year, which impacted 62 of the company’s stores, Kathmandu now believed its full-year sales to be around $NZ930 million and its earnings to be approximately $NZ120 million.

This includes $NZ20 million claimed by the company through government job subsidies such as JobKeeper.

This is below market expectations of $NZ944 million in revenue and $NZ183 million in earnings, with the retailer saying the recent lockdowns and their associated movement restrictions had already had a $NZ13 million impact on the company’s bottom line.

“Uncertainty remains due to the evolving COVID-19 situation in Australia, and this expectation is subject to change,” Kathmandu told shareholders.

The downgrade comes despite a strong start to winter for the brand, with sales tracking broadly in line with pre-COVID levels before lockdowns took their toll.

The company’s Northern Hemisphere operations, where higher percentages of populations are vaccinated and hard lockdowns are rarer, are also performing well, with Rip Curl sales tracking well above pre-COVID levels. It helped cushion the company in the 2020 lockdowns.

It said that wholesale orders for the 2022 financial year have grown double digits compared to pre-COVID and Kathmandu’s footwear brand Oboz is also seeing record sales.


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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