The Kathmandu Holdings Ltd (ASX: KMD) share price will be on watch this morning following the release of a first quarter update.
In early trade in New Zealand, the retailer's NZX listed shares are up 4.5%.
How did Kathmandu perform in the first quarter?
For the three months ended 31 October, Kathmandu delivered a 72% increase in group total sales.
This was driven entirely by the transformational acquisition of the Rip Curl business which completed in the second quarter of FY 2020.
On a pro forma basis, group direct to consumer same store sales, including online sales, for the 16 weeks ended 15 November were down 24.1%. Adjusted for lockdown closures, same store sales were down 7.6%. This was despite a 37% increase in group online sales over the period.
Also under pressure during the first quarter were the company's wholesale sales. They were down 14.4% compared to the prior corresponding period.
Pleasingly, group earnings before interest, tax, depreciation and amortisation (EBITDA) for the first quarter were in line with last year. This includes government subsidies and the realisation of cost synergies.
Management commentary.
Kathmandu's CEO, Xavier Simonet, appeared pleased with the company's performance given the tough trading conditions.
Mr Simonet said: "We are realising the benefit of a diversified Group, with strong performance in summer weighted product categories for Rip Curl in all key geographies, following successful winter trading for Kathmandu."
"Rip Curl's strong sales performance in its key markets of Australia, Europe and North America is very pleasing. It highlights the strength of Rip Curl's global brand and innovative products as more people take to surfing. At broadly pre-COVID-19 levels, wholesale sell-in for Rip Curl for the second half year is also encouraging," he added.
Mr Simonet notes that the Kathmandu business has struggled with low foot traffic during the COVID crisis.
He explained: "As for Kathmandu, camping and footwear categories have over-performed, but have not compensated for the impact of COVID-19 with low footfall in CBD and tourist locations as well as lower travel-related purchases. Oboz's performance has been robust with strong sales to key accounts, and the forward order book tracking above pre-COVID-19 levels."
Outlook.
As always, the company has warned that its half year result will be dependent on the key Christmas trading period. However, this year, it also warned that the impact of COVID-19 on consumer sentiment remains a risk.
Nevertheless, management appears confident on the future and revealed that it is keeping its eyes open for growth opportunities.
"The Group continues to maintain a strong balance sheet and liquidity position, allowing it to respond to current trading conditions and pursue attractive growth opportunities that may arise. The Group intends to resume dividend payments subject to market conditions and trading performance following first half results," Mr Simonet concluded.
