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Kathmandu reports $41 million profit

Outdoor adventure retailer Kathmandu (ASX: KMD) has released its results for the full year ending July 2013.

The New Zealand-based company, which reports in NZ dollars, reported a 10.6% increase in sales revenue to NZ $384 million. Pleasingly the retailer also achieved a 5.6% in same-store sales growth at constant exchange rates.

While the gross profit margin declined by 0.2% to 63% this was offset by a corresponding 0.3% decrease in operating expense margin. Overall, the revenue growth — coupled with a tight control on costs — led to a 17.8% increase in underlying profit after tax to NZ $41.1 million. (Underlying profit excludes a $3.1 million tax benefit.)

Store numbers and more to come

Kathmandu opened 17 new stores during the year, taking the store network to 136 stores including 44 in New Zealand, 87 in Australia and 5 in the UK. Of the new stores opened, 14 were in Australia, 2 were in NZ, while 1 was opened and 2 were closed in the UK.

With a target for 170 stores across Australia and NZ there appears to be a couple more years of store roll-out ahead for Kathmandu. Management is targeting 15 new stores for financial year (FY) 2014, with seven sites already confirmed.

Dividends

The board declared a fully-franked final dividend of NZ 9 cents, taking the full-year dividend to NZ 12 cents, up 2 cents on the previous year.

Outlook for further growth

The company’s presentation stated that it “expects another solid performance in FY14”. With a sound balance sheet – the company reduced net debt by nearly NZ $12 million to NZ $40.2 million over the year – and an operating cash flow which increased by over NZ $13 million to NZ $45.7 million, Kathmandu has the ability to continue its investment in expanding its store network further.

Much like the investment merits for The Reject Shop (ASX: TRS) and Premier Investments (ASX: PMV), which both also have good pipelines for store expansion, store roll-outs can be key attribute for investors considering investing in a retailer.

Foolish takeaway

While current economic conditions are still uncertain, as Kathmandu highlights, the outdoor category remains resilient.  Although competition does continue to increase in the sector, Kathmandu’s results suggest FY2014 is shaping up to be another solid year for the retailer.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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