Kathmandu expects first-half profit to dive as Covid-19 restrictions hurt retailing

Friday, 11 February 2022

Covid-19 disruption is hurting trading at retailer Kathmandu.

Kathmandu Holdings expects first-half profit to slump as much as 81 per cent as the Covid-19 pandemic disrupts retail trading.

The company expects underlying profit of between $9 million and $11m in the six months to the end of January, down from $48.2m a year earlier, it said in a statement to the NZX. Lost revenue and lower government support dented first-quarter profit by $35m, it said.

The profit measure excludes interest, tax, depreciation, amortisation, one-off costs and accounting changes.

The company, which owns the Kathmandu, Rip Curl, and Oboz brands, lost 11,696 trading days in the first half due to Covid-19 restrictions, 65 per cent more than the year-earlier period. First-half sales are expected to slip to $405m from $410.7m, and the gross profit margin is expected to contract due to higher international freight costs and increased clearance sales.

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“Covid continues to cause ongoing disruption to our consumers, employees and suppliers globally, most recently from the Omicron variant,” said chief executive Michael Daly. “The disruption has resulted in reduced retail footfall, temporary store closures and staffing constraints in many locations.”

Still, Daly said sales and underlying profitability improved in the second quarter since the re-opening of its store network across Australia and New Zealand, despite further travel restrictions and significant disruption from the recent Omicron outbreak.

Factory shutdowns of Oboz product suppliers in Vietnam meant about half of its orders were unable to be fulfilled, however that is expected to gradually improve in the second half and demand remained strong, he said.

Gross margins in the second half were expected to be in line with last year based on the company’s promotional plans, and its expectations of international freight costs and currency impacts, he said.

Online sales continued to grow, accounting for 17 per cent of direct-to-consumer sales, up from 11.2 per cent in the same period last year.

The company expects net debt at the end of January to rise to about $48m, from $10m at the same time last year.

Shares in Kathmandu fell 1.4 per cent to $1.38 in mid-morning trading on the NZX. The stock has gained 8.1 per cent over the past year.

The company expects to release its full results for the half year on March 23.