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Kathmandu Holdings Ltd shares climb higher on trading update

In morning trade the Kathmandu Holdings Ltd (ASX: KMD) share price has got off to a bright start and edged 2% higher to $2.26.

This means the outdoor and winter sports retailer’s shares have risen 25% since this time last year.

What happened?

This morning Kathmandu released a trading update which revealed its expectations for the first-half.

According to the release, management expects to report group net profit after tax of no less than NZ$12 million for the first-half of FY 2018. This will be 20% higher than the NZ$10 million it achieved in the prior corresponding period.

Considering total sales are up just 4% to NZ$204 million during the half, it appears as though management has been able to achieve a sizeable increase in its margins.

Kathmandu’s CEO Xavier Simonet stated: “Striking the right balance in the key Christmas trading period between generating sales growth and improving our gross margin has fuelled healthy earnings growth. We have also continued to strengthen our balance sheet position during the first half.”

In Australia, its largest market, same store sales grew by a solid 1.9% on constant currency terms. Disappointingly, it wasn’t quite as positive over in New Zealand where same store sales declined 6.4% during the period.

Kathmandu will release the full result for the half-year on Tuesday 20 March 2018.

Should you invest?

I’ve been very impressed at the way Kathmandu has turned around its performance over the last 12 months.

As of yesterday’s close, its shares were changing hands at 12.5x trailing earnings. I think this could be cheap for a company growing its bottom line by at least 20% in the first-half.

In light of this, I think Kathmandu could be worth a look today. However, investors may want to hold out until its results release when management is likely to provide its full-year guidance.

In the meantime, retail shares such as Noni B Limited (ASX: NBL), Premier Investments Limited (ASX: PMV), and Lovisa Holdings Ltd (ASX: LOV) could be worth a closer look.

Alternatively, these high-flying growth shares could be in the buy zone today if you ask me.

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