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Kathmandu bets on Oz and wins

Looks like this company’s big bet on Aussie weekend warriors has paid off. Kathmandu (ASX: KMD), the retailer of sporting goods and outdoor apparel, opened 13 new stores in Australia in the last twelve months, and has just posted a big profit rise.

Net profits after tax grew upwards of 70%, going from NZ$6 million in the previous corresponding period to NZ$10.3 million in the first half of the 2013 financial year. Overall sales rose 13% and same-store sales increased in the mid-single digits.

Australian sales for the retailer rose a whopping 22%, while New Zealand sales rose 8%. Online sales grew even faster, at 50%.

The old story about consumer confidence?

When results come in lackluster, retailers’ management often reference weak or uncertain consumer confidence levels. But lately a string of positive results have put paid to this old line.

Namely, toymaker Funtastic (ASX: FUN), which has the rights to manufacture and distribute some Lego products in Australia, and Premier Investments (ASX: PMV), with its newer “fast fashion” focus have posted large profit increases, while more traditional, legacy retailers such as David Jones (ASX: DJS) and Myer (ASX: MYR) have seen relatively slight rises in profit or flat results.

Kathmandu, for its part, sees its full year results as “underpinned by the continuation of growth in the Australian market, attributable to improving brand penetration and the performance of new stores opened during the year.”

The Foolish bottom line

In all, it seems the scrappy upstarts and younger, more flexible retail models have been better able to respond to choppy conditions at home and abroad. This shouldn’t surprise old hands. Smaller companies, including Kathmandu with its near $500 million market cap, often offer more promising returns to patient investors than larger operations which run up against the law of large numbers as they try to grow.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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