AAP Finance

Kathmandu cautious despite sales recovery

By AAP Newswire

Shares in Kathmandu have jumped after the outdoor wear retailer outlined a strong recovery in sales since reopening stores in May after coronavirus restrictions were eased in Australia and New Zealand.

It expects full-year earnings before interest tax depreciation and amortisations to drop but stay above $70 million, reflecting the impact of the COVID shutdowns.

The company had reported EBITDA of $99.6 million in FY19.

It also sounded a cautious note, warning there remains significant downside risk over future economic conditions.

"Whilst we are pleased with the strong recovery in direct to consumer sales over the past six weeks, we remain cautious about medium-term levels of consumer demand," group chief executive Xavier Simonet said.

Same store sales for the six full weeks to June 28 at Kathmandu are up 12.5 per cent, including retail stores up 2.2 per cent, and online up 78 per cent. For Rip Curl, same-store sales are up 21 per cent, reflecting retail stores up 5.1 per cent and online up 151 per cent.

Shares in the company climbed more than 12 per cent on the better-than-expected numbers. By 1245 AEST, Kathmandu shares were up 11.2 per cent to $1.20 each in the broadly higher Australian market.

The ASX and NZX-listed retailer had shut most of its 327-store international network in late-March as governments imposed strict social-distancing rules and business closures in an effort to contain the spread of coronavirus.

It reopened most of its Australian stores in early May.

"We believe that some short-term factors, including government support packages and pent-up demand are underpinning current sales," Mr Simonet said.

Kathmandu said total group sales for the 10 months ended 31 May 2020 were 15.1 per cent below the comparable period last year but since reopening stores, the group's retail and online sales had exceeded management expectations.

However, the company's wholesale sales for the period to the end of May had been substantially affected by COVID-19.

Rip Curl wholesale sales, in particular, were 26 per cent below those in the same period last year.

The company said it is too early to assess the medium-term impact on wholesale demand, given the ongoing restrictions impacting wholesale customers' retail operations, and the timing of seasonal range releases.

Gross margins at its Kathmandu-only business is expected to be at the lower end of the 61 per cent to 63 per cent target range.