Kathmandu Holdings Ltd reports full-year results: Should you buy?

Kathmandu Holdings Ltd (ASX:KMD) saw some strong performance in Australia, but UK operations remain a worry.

| More on:

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

What: Outdoor adventure apparel and equipment retailer Kathmandu Holdings Ltd (ASX: KMD) today announced a flat sales and profit result for FY14.

Sales of NZ$392.9 million were up 2.3% on the prior year, while total earnings before income tax (EBIT) were NZ$64.3 million, up 1.4% on the prior year.

So what: The flat result is partly the result of weaker consumer confidence that hit retailers across the board in the first half of calendar year 2014. Furthermore, Kathmandu closes off its books on 31 July and its results are especially sensitive to winter sales in the June and July period, unfortunately sales fell flat this year partly as a result of unusually warm weather.

However, during the year same-store sales growth was up 4.2% on an FX-adjusted basis and the retailer opened 15 new permanent stores. Australian operations were also a highlight, with same-store sales growth of 6.9%. The group now has 149 stores, with eight more openings planned for the first half of FY15.

Promisingly, online sales grew by over 35% at comparable exchange rates and contributed 5.1% of total sales. The group continues to invest in its brand and online capabilities to drive online sales internationally. Online is a potentially lucrative operation with no store costs and low staff costs meaning juicy margins can contribute to big profit growth.

What of the outlook: The group stated that "providing there is no deterioration in economic conditions we expect improved earnings from the Australasian business in FY15, however the overall outcome will be impacted by the UK investment."

Despite a disappointing performance from its UK operations so far including having to close some loss-making stores, Kathmandu is planning to invest further into the UK and Europe generally. In my opinion the UK consumer is not a natural target group for Kathmandu's products and the group would be better off looking to North America.

However, the group's niche product market means it remains one of the better retailers available on the ASX and at $2.77 it trades on around 14x FX-adjusted earnings per share for FY14.

Motley Fool contributor Tom Richardson owns shares in Kathmandu. You can provide feedback on Twitter @tommyr345

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »