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Why the Kathmandu share price is storming higher today

The Kathmandu Holdings Ltd (ASX: KMD) share price has been amongst the best performers on the Australian share market this morning.

After returning from their trading halt, the retailer’s shares have surged over 6% higher to $2.98.

Why is the Kathmandu share price surging higher?

Investors have been fighting to get hold of the retailer’s shares this morning after it successfully raised NZ$145 million through its institutional entitlement offer and bookbuild.

These funds have been raised so that Kathmandu can push ahead with its acquisition of iconic Australian global action sports brand, Rip Curl.

Earlier this week Kathmandu entered into an agreement to acquire 100% of the shares of Rip Curl for NZ$368 million (A$350 million).

Kathmandu CEO, Xavier Simonet, said: “This is a fantastic opportunity for Kathmandu to grow and diversify. The acquisition of Rip Curl transforms Kathmandu into a NZ$1.0 billion outdoor and action sports company, anchored by two iconic global Australasian brands.”

Mr Simonet believes the acquisition also provides the company with the opportunity to accelerate its global expansion.

“The combination of Kathmandu, Oboz and Rip Curl achieves diversification in product, channel, geography and seasonality, and creates a platform for the acceleration of our brands’ global expansion into new channels and markets. Importantly, there is also strong cultural alignment between our brands, underpinned by a shared focus on quality, innovation and sustainability,” he added.

Judging by the share price reaction today, the market certainly appears to agree with this view.

Should you invest?

I think this was a good move by management and like the way it diversifies the company’s offering away from predominantly winter apparel.

Overall, due to its positive outlook and attractive valuation, I would class it as a buy along with fellow retail shares Accent Group Ltd (ASX: AX1) and Super Retail Group Ltd (ASX: SUL).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended Accent Group. 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 Scott Phillips.

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