Outdoor clothing and equipment retailer Kathmandu is expecting to take a hard hit in its first-half profit, citing retail disruptions caused by the pandemic. Photo / Supplied
Outdoor clothing and equipment retailer Kathmandu is expecting to take a hard hit in its first-half profit, citing retail disruptions caused by the pandemic. Photo / Supplied
Outdoor clothing and equipment retailer Kathmandu is expecting a big hit to its first-half profit, citing retail disruptions caused by the pandemic and overseas factory shutdowns.
The NZX/ASX listed retailer issued a trading update to investors today saying first half underlying ebitda is expected to be between $9 million to $11 million because of a previously signalled $35m Covid-19 related impact and additional brand marketing investment of $14m.
That compares with reported ebitda for the same period last year of $48.2m, up 19 per cent on the previous first half.
Kathmandu shares recently traded on the NZX at $1.39, down 0.71 per cent.
The retailer, which owns Rip Curl and Oboz brands, said its first half results to be released next month included 11,696 lost trading days because of Covid restrictions, an increase of 65 per cent on 1H FY21.
But in the second quarter of 2022, underlying profitability was higher than the previous year, the company said in its update.
The group's wholesale sales for the first half was expected to be 3.4 per cent above last year, with Rip Curl wholesale sales increasing by 18.2 per cent, offsetting declines in Oboz.
The company said the first-quarter factory shutdowns of Oboz product suppliers in Vietnam had impacted its ability to meet demand, with about 50 per cent of orders unable to be fulfilled.
Kathmandu expects a gradual recovery from the transitory supply constraints in the second half.
Demand for the Oboz brand and products was strong, and forward orders into financial year 2023 still support the medium-term revenue growth targets.
Group total sales for 1H FY22 (unaudited) are expected to be about $405m, with a gross margin below 1H FY21. Covid-19 increased the international shipping costs and increased clearance mix for the Kathmandu brand.
"Second-half gross margins are currently expected to be in line with last year based on current promotional plans, and expectations of international freight costs and currency impacts."
The Group continues to invest in the long-term value of its brands, with an additional $14m expenditure in 1H FY22 to support brand marketing and expansion into international markets. Net debt is expected to be about $48m with liquidity of about $252m.
The Group's chief executive Michael Daly. Photo / Supplied
The Group's chief executive Michael Daly said Kathmandu sales had rebounded over the second quarter of FY22 after the first quarter's lockdowns and the online sales continued to grow.
But the Omicron variant had impacted customers' flow to the shop and also resulted in temporary store closures.
"Kathmandu is well placed with appropriate inventory levels and new product introductions for the second half. Rip Curl has again performed well in the southern hemisphere summer season, with strong wholesale sales growth, and retail sales consolidating last year's strong growth and profitability."
"Covid continues to cause ongoing disruption to our consumers, employees, and suppliers globally, most recently from the Omicron variant.
"The disruption has resulted in reduced retail footfall, temporary store closures and staffing constraints in many locations. Sales conversion has increased as customers have shopped with purpose, and our online channels continue to grow."
"Even though ongoing supply challenges remain, forward wholesale demand for our products remains at record levels. In addition, the Group remains well capitalised, investing in the long-term international expansion of our global house of brands," Daly said.
The Group intends to release the full result for the half year on March 23.
