The Kathmandu Holdings Ltd (ASX: KMD) share price will be on watch on Tuesday following the release of the outdoor retailer's record half year results.
At the time of writing the company's New Zealand-listed shares are up 3%.
Here's a summary of how Kathmandu performed in the first half compared to the prior corresponding period:
- Sales increased 13.3% to NZ$232 million.
- Same store sales flat in constant currency and down 2% at current exchange rates.
- Gross profit rose 9.4% to NZ$141.9 million.
- Normalised net profit after tax up 7.3% to NZ$13.2 million.
- Summit Club grows to 2 million members.
- Interim dividend of 4 New Zealand cents per share.
What happened?
Although Kathmandu delivered a record half year result, it was a disappointing six months given the impressive start the company had. This was the result of softer trading conditions in Australia and New Zealand over the key Christmas and Boxing Day period.
However, management did warn the market about this with the release of a trading update in January, so this result was largely in line with reduced expectations.
One positive during the half was that despite sales being below expectations, the company experienced an improvement in its retail gross margin. Kathmandu's retail gross margin increased 0.8% points from 63.4% to 64.2% due to less promotional discounting, leading to higher average selling prices.
Another positive was the performance of the recently acquired Oboz business. During the half the business continued its strong growth, with sales increasing 38.6% to NZ$29.2 million.
This strong form meant the Oboz business achieved its earn-out EBITDA target. As a result, Oboz is expected to be neutral to group earnings per share in FY 2019, but earnings per share accretive in FY 2020.
Outlook.
The company's CEO, Xavier Simonet, appeared cautious on its prospects in the second half.
He said: "We remain focused on achieving sales and profit growth in our core Australasian business to fund investment for future growth. Our full year result is still very dependent on the key promotions to come, in which we will be cycling a successful second half last year."
Should you invest?
Whilst I think that Kathmandu's shares are trading at an attractive level, I was a touch underwhelmed by this result and its outlook for the remainder of the year.
In light of this, I would suggest investors focus on other retail shares such as Accent Group Ltd (ASX: AX1) and Super Retail Group Ltd (ASX: SUL) instead.
