Kathmandu shares plunge 17pc after earnings miss forecasts

Photo / Richard Robinson

Kathmandu fell by the most since shares began trading after the transtasman outdoor-equipment retailer said yesterday that full-year earnings missed forecasts.

Earnings before interest and tax in the year to July 31 were at least 5 per cent less than forecast in the Christchurch-based company's November prospectus, Kathmandu said in a preliminary earnings report.

The stock fell as much as 17 per cent, the biggest decline since their trading debut, eventually closing down 23c, or 11.2 per cent, at $1.82.

Same-store sales fell and gross profit margin on sales was less than the 64 per cent forecast in the six months ended July 31, the company said.

The environment for retailers was much more difficult and the company spent more on ads as a result.

John Burgess, an analyst at Austock Group in Melbourne, said the result was "not a complete shock given tough winter trading conditions for most apparel-based retailers".

He cut his recommendation to clients from "buy" to "hold". "We do not see relative outperformance for the stock until winter 2011."

Earnings before interest and tax totalled $47 million to $48 million in the year ended July 31, the company said, citing provisional figures.

The prospectus forecast was $50.6 million, it said. Earnings excluded costs associated with last year's initial public offering.

"We believe the level of promotional activity and our pricing strategies have been the right response," said chief executive Peter Halkett.

- BLOOMBERG