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Kathmandu shares take a tumble: is it time to buy?

Kathmandu Holdings Ltd (ASX: KMD) shares went for a tumble this morning after the outdoor adventure gear retailer warned profits are expected to come in 10%-15% lower than the prior corresponding period in 2013.

Chief executive Peter Halkett blamed unseasonably warm weather for the declining sales, particularly since the start of the company’s winter sales promotion: ”The sales shortfall has been particularly significant in the past fortnight, the first two weeks of Kathmandu’s winter sales promotion,” he said.

As an outdoor equipment and apparel retailer Kathmandu always looked a prime candidate to follow other retailers such as Pacific Brands Limited (ASX: PBG) and the Reject Shop Ltd (ASX: TRS) in downgrading earnings on the back of weaker consumer sentiment and unusually warm weather. Kathmandu’s full-year earnings in FY 2013 were NZ$63.4 million and 2014’s full-year result will be released to the market on 22 September. The chief executive commenting: “Because of the materiality of July trading to the year overall and the variability caused by winter weather patterns, a more specific forecast of the full year’s earnings results is not possible at this time.”

With 2014’s full-year earnings currently downgraded in the region of 10%-15% shares are down more than 11% to $2.95 in morning trade. The business has been one of the ASX’s strongest past performers, and investors could expect a price rebound if the critical July period sees better-than-expected sales. Kathmandu remains a potential growth stock, but if you’re looking for a quality income and growth stock look no further than one we found below.

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Motley Fool contributor Tom Richardson owns shares in Kathmandu. You can find him on Twitter @tommyr345

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