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Can Katmandhu Holdings Ltd reach new heights for investors?

Shareholders in adventure wear and outdoor activity retailer Katmandhu Holdings Ltd (ASX: KMD) will be enjoying the view this morning as its ASX-listed scrip climbed to $1.79 in morning trade, after the company reported its results for the half-year period ending 31 January 2017. Below is a summary of the results, with comparisons to the prior half-year period.

  • Net profit of NZ$10 million, versus NZ$9.4 million in prior corresponding half (pch)
  • Sales for the period were NZ$196.3 million, versus NZ$195.9 million in pch
  • Interim dividend of NZ 4 cents per share (unfranked for Australian investors)
  • Earnings per share of NZ 5 cents, versus NZ4.7 cents in pch
  • Same store sales growth in Australia of 5%
  • Same store sales growth in New Zealand of 1.5%
  • UK same-store sales down 26.5%
  • Group gross profit margin of 61.6%

This was a flattish result for the retailer with its core Australia and New Zealand businesses performing moderately well, with some decent same-store sales growth offset by falling gross profit margins.

Elsewhere the company continues its hike out of its disastrous move into the UK, with several store closures as sales failed to take off in a country where outdoor activity options are more limited than Australasia.

Inventory on the balance sheet and operating expenses both fell over the period, with net debt finishing at NZ$48.9 million on a moderate debt-to-equity ratio of 13.9%.

The group rules off its books later than most retailers as it is has a key winter selling season with its interim results recorded up to the end of July 31 2017. As usual this period will be important in determining the short-term direction of the share price with cost controls, pricing, and consumer confidence the key profit drivers.

Other retailers including Premier Investments Limited (ASX: PMV) and Myer Holdings Ltd (ASX: MYR) have recently flagged weak retail conditions over the start of calendar year 2017 and Kathamandu also operates in a competitive retail environment.

The shares don’t look expensive selling for NZ$1.96 on the NZX or A$1.78 on the ASX which is around 11.5x trailing earnings with a decent dividend yield. The question for investors is whether Kathmandu can deliver sustainable growth despite a mixed track record.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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