Kathmandu Holdings Ltd (ASX: KMD) has been a serial underperformer for investors with its latest setback coming on Tuesday when it released its interim results, resulting in a fall of more than 12% for the day.
For the half-year ended 31 January 2015, the outdoor travel and adventure retailer reported a 7% jump in overall sales to $179.4 million but operating expenses rose by 17.8% to $99.5 million with management admitting it got its product mix wrong.
Margins also declined as a result of heavy discounting to attract customers while earnings before interest and tax (EBIT) tumbled 97% to $0.6 million, with all figures being recorded in New Zealand dollars.
Unfortunately, there are plenty of reasons to suggest conditions will continue to slide for the retailer, and for its shareholders. First and foremost, the company said that it had also experienced a weak start to the second half with same store sales down 2% (on a constant currency basis) in the seven weeks to 15 March, while consumer confidence remains weak.
Right now, Kathmandu's shares are changing hands for $1.40, which reflects a 60% discount to 12 months ago. Although that might look appealing, it looks as though the market could be right in discounting this one. As such, investors should continue to avoid the retailer and focus on some of the market's more compelling opportunities.
