Kathmandu lifts annual profit on increased sales and cuts debt levels

Online sales accounted for 7.5% of all sales, while same-store sales gained 6.9% in Australia and 3.6% in New Zealand.

Kathmandu Holdings lifted annual profit 14% in 2017 as sales grew in New Zealand and Australia while it cut its debt levels to record lows.

Net profit rose to $38 million, or 18.7c a share, in the 12 months ended July 31, from $33.5 million, 16.6c, in 2016, the Christchurch-based outdoor equipment chain said in a statement. Earnings before interest and tax gained 12% to $57 million while sales rose 4.6% to $445.3 million. Online sales accounted for 7.5% of all sales, while same-store sales gained 6.9% in Australia and 3.6% in New Zealand.

Last month, the company said profit was between $37.4 million and $38 million and ebit was in a range of $56-57 million, following on from a first-half result that beat guidance and continuing the recovery from an earnings slump in 2015 when an inventory build-up forced it into aggressive discounting at low margins to clear stock.

"We were pleased to achieve strong same-store sales growth driven by innovative new products and inspiring digital content," chief executive Xavier Simonet said. "In addition to top-line growth, continued cost control and working capital efficiency delivered solid profit growth."

Mr Simonet said he was excited about the European wholesale trials the company is starting in the 2018 financial year and remains committed to developing new international channels for the Kathmandu brand. In the year, international sales dropped 54% to $2.5 million as the company wore the cost of the three UK stores it closed in the previous financial year and is set to close its last UK store this year. Kathmandu incurred $500,000 in international wholesale start-up and promotion costs in the 2017 year.

Inventory decreased 6.5% in the year to $89.2 million, or 7.6% on a same-store basis, which the company said showed the benefits of investing in forecasting and planning technology. Net debt fell to $6.9 million from $36.8 million in 2016, with gearing at 2.1% from 10.6% a year earlier.

The board declared a final dividend of 9 cents per share, bringing the full year payout to 13c, an 18% lift on 2016 and a record payout to shareholders.

The shares rose 2.8% to $2.20. Kathmandu shares have climbed 9.7% this year, behind a 14% gain for the S&P/NZX 50 Index.

(BusinessDesk)