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Why the Kathmandu Holdings Ltd share price soared today

Shares of Kathmandu Holdings Ltd (ASX: KMD) surged more than 11% higher today to trade at $1.635, after the outdoor adventure retailer reported a “solid start” to the 2016 financial year.

The shares have since retreated, but are still almost 7% higher than yesterday’s closing price.

Indeed, Kathmandu’s trading performance has been the topic of much disappointment in recent years. It suffered a weak start to the Easter and winter period (although conditions did improve), which is critical to the company’s full-year performance, while its Christmas trading period was also quite lacklustre in 2014, contributing to a 51.7% slide in full-year net profit after tax (NPAT).

Investors will be hopeful this year isn’t the same with the company reporting an 8.6% lift in group sales in the 15 weeks leading up to 15 November 2015, to $91.3 million (actual exchange rates).

Group comparable sales (that is excluding new stores which did not impact last year’s results) also rose 4.8%, while comparable sales for Australian stores rose 6.5% — a much stronger figure than that reported by various other retailers. Its gross margin also rose 5% year-on-year during the quarter thanks to fewer clearance sales.

Of course, there is no guarantee that the group will experience strong trading conditions in December, but today’s results were certainly encouraging enough for Kathmandu to maintain its full-year NPAT expectation of $30.2 million.

Elsewhere, Myer Holdings Ltd (ASX: MYR) has also risen a little over 4% today after delivering an upbeat trading update, which follows a stunning performance from fellow department store giant David Jones (now owned by South Africa’s Woolworths) yesterday.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

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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