Kathmandu (ASX:KMD) share price on watch after FY 2020 results

The Kathmandu Holdings Ltd (ASX:KMD) share price on watch after releasing its FY 2020 results this morning…

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Kathmandu Holdings Ltd (ASX: KMD) share price will be on watch this morning following the release of the retailer's first full year results since its transformative acquisition of the Rip Curl business.

How did Kathmandu perform in FY 2020?

For the 12 months ending 31 July 2020, Kathmandu reported a 48.7% increase in sales to NZ$801.5 million. This was driven by a nine-month contribution from the Rip Curl business and strong online sales growth. The latter was up 63% over the 12 months to NZ$106.4 million.

Kathmandu's sales would have been notably stronger had it not been for the coronavirus pandemic. Management estimates the COVID-19 impact to its sales to be ~NZ$135 million. This comprises NZ$80 million retail and NZ$55 million wholesale.

On an underlying basis, Kathmandu's earnings before interest, tax, depreciation and amortisation (EBITDA) came in 15.3% lower to NZ$83.4 million. This excludes the impact of IFRS 16 and one-off transaction and abnormal costs.

Statutory net profit after tax was down sharply to NZ$8.9 million. However, this includes NZ$18 million of one-off transaction costs, NZ$4.6 million of restructuring costs, and a NZ$2.6 million impact from the implementation of the IFRS 16 leasing standard.

In light of this profit decline, the company will not be paying a final dividend.

"A transformational year."

The company's CEO, Xavier Simonet, notes that FY 2020 was a transformational year for Kathmandu.

He said: "It has been a transformational year for us with the acquisition of Rip Curl and we are pleased with its integration into the Group over the last nine months. Unfortunately the Group faced significant unexpected challenges with COVID-19 restrictions and lockdowns."

"We took decisive action early to reduce costs, adjust the operating structure of the business, and raised $207 million of equity. These initiatives have resulted in a strong balance sheet and healthy inventory level, which position us well for the future," he added.

Despite the challenges, Mr Simonet was pleased with the way the company was able to adjust to the new normal thanks to its omni-channel strategy.  

He explained: "Our omni-channel strategy and infrastructure capacity allowed us to rapidly scale up to meet the surge in online demand from March. In addition, following the easing of lockdown restrictions, we saw retail sales for Rip Curl and Kathmandu perform strongly in our core markets of Australasia, Europe and California, as consumers trended towards outdoor and recreation activities. Both Rip Curl and Kathmandu also enjoyed an exceptional post-lockdown winter sales performance in Australia and New Zealand."

Outlook.

The company has had a mixed start to FY 2021 due to the COVID-19 pandemic.

Management advised that its performance has been impacted during the first seven weeks of FY 2021 due to Melbourne, Auckland, Hawaii, Bali, and airport store closures. This has led to a mixed same store sales performance over the period.

Though, it feels confident that demand will return to normal in these markets when stores reopen.

Mr Simonet commented: "Despite the challenges posed by COVID-19, the business remains strong financially and operationally. The balance sheet was significantly strengthened by the recent equity raise, our brands are well-positioned to capitalise on increased participation in outdoor, beach and surfing activities following the end of the lockdowns, and our investment into omni-channel capabilities allows us to quickly respond to shifts in consumer habits and strong growth in online demand."

"Beyond the short-term impacts from lockdowns, our long-term strategy remains unchanged. Product innovation, brand differentiation, a key focus on sustainability, and a step change in digital transformation, will enable us to continue answering the needs of our customers and also inspiring them," he concluded.

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

More on Share Market News

A graphic image of the world globe surrounded by tech images is superimposed on the setting of an office where three businesspeople are speaking together while standing.
Share Market News

Here's how the ASX 200 market sectors stacked up last week

ASX technology shares led the market with a 2.8% gain this week.

Read more »

A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

Woman in a hammock relaxing, symbolising passive income.
Dividend Investing

Hoping to retire? I'd buy these ASX 200 dividend shares for passive income

I think these ASX 200 dividend stocks will continue to reward passive income investors for years to come.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

These ASX 300 shares could rise 35% to 65%

Analysts are tipping these shares to rise strongly from current levels. How high could they go?

Read more »

a man in a high visibility vest and hard hat holds a thumbs up at a mine site with heavy equipment in the background.
Broker Notes

What are brokers saying about BHP shares following the miner's quarterly results?

Analysts have crunched the numbers.

Read more »

A young girls clings in fright to a big red slide.
Share Market News

Here are the top 10 ASX 200 shares today

Investors were hitting the sell button hard today...

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Share Fallers

ASX 200 insider buys up another $2,000,000 in company stock following Wednesday's 15% crash

This director took Buffett's advice to heart this week.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »