Kathmandu cautious about ‘strong’ sales bounce

Adventure wear retailer Kathmandu says online sales have helped a ‘strong’ rebound, but it worries the rally may be short-lived.

A generic view of the Kathmandu signage and store in Adelaide, Wednesday, September 18, 2019. The company lifted first-half profit 13.7 per cent to $NZ13.95 million ($A13.55 million) despite disappointing sales over the Christmas period. (AAP Image/David Mariuz) NO ARCHIVING

Outdoor and adventure wear retailer Kathmandu has hailed a “strong” rebound in sales driven by online trade following the coronavirus lockdown, but has warned about continuing market uncertainty.

The New-Zealand based retailing group, which also owns brands like Rip Curl and Obuz, said social distancing and lockdown rules had hurt business, total group sales in the 10 months to the end of May down 15.1 per cent compared to the same period in 2019.

But with lockdowns around the country gradually easing, encouraging domestic tourism, sales had rebounded in all but its airport stories in the six weeks from May 18 to June 28.

Same-store sales for the recently-acquired Rip Curl swimwear brand jumped 21 per cent, with retail stores up 5.1 per cent and online sales up 151 per cent.

Same-store sales for the Kathmandu brand increased by 12.5 per cent, with retail stores up 2.2 per cent and online by 78 per cent.

For both brands, online represented around one-fifth of direct-to-consumer same-store sales.

Kathmandu shares rose 8.37 per cent to $1.165 in morning trade.

The group’s wholesale division remains in the coronavirus doldrums, with their “return to growth lagging as expected”. Rip Curl global wholesale sales are 26 per cent below the comparable seven-month period in 2019.

The group said the rebound in sales would push full year earnings before interest, tax, depreciation and amortisation to in excess of $NZ70 million, an almost 30 per cent decrease on last year’s EBITDA of $NZ99.6 million, with gross margins to be in the “lower end” of the 61 to 63 per cent target range.

Kathmandu Croup CEO Xavier Simonet said that despite the rebound in sales, the group remained “cautious” about medium-term demand because of the expected end to government income support measures.

“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.”

Other concerns also include the risk of further coronavirus outbreaks outside Melbourne, and “the impact of lower-foot-traffic CBD and tourist located retail stores from working and travel restrictions”.

In April Kathmandu raised $NZ207 million to shore up its balance sheet in response to the COVID-19 pandemic, resulting in an estimated $NZ300m of liquidity available to the group at the end of the financial year.