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Why the Kathmandu share price hit a multi-year high today

The Kathmandu Holdings Ltd (ASX: KMD) share price has continued its run and pushed higher again on Monday.

In fact, the adventure retailer’s shares rose 2.5% to hit a multi-year high of $3.00.

This gain means that Kathmandu’s shares have now risen 38% over the last six months.

Why are Kathmandu’s shares at a multi-year high?

Investors have been fighting to get hold of the retailer’s shares this month after it announced a major acquisition.

Earlier this month Kathmandu entered into an agreement to acquire iconic Australian global action sports brand Rip Curl for A$350 million (NZ$368 million).

This acquisition went down particularly well with investors and it isn’t hard to see why.

Kathmandu CEO, Xavier Simonet, explained: “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 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.”

Also going down well with investors was management’s earnings impact estimate. It expects the transaction to deliver FY 2020 pro forma earnings per share accretion in excess of 10% pre-synergies.

The acquisition was subject to shareholder approval, but that went down without a hitch on Friday. The results of the special shareholder meeting reveal that 99.96% of shareholders voted in favour of the acquisition.

Is it too late to invest?

Whilst I am a fan of the company and believe this acquisition is a very smart move by management, I think its shares are about fair value now.

In light of this, I would hold off an investment for now and wait for a better entry point. In the meantime, I continue to believe fellow retail shares Accent Group Ltd (ASX: AX1) and Super Retail Group Ltd (ASX: SUL) offer a lot of value for money at current levels.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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