Kathmandu saw strong sales and profit growth in its recently acquired footwear business, Oboz, in the first half of FY19.
The US-based footwear brand, which the outdoor retailer acquired in April 2018, generated NZ$29.2 million (A$28.4 million) in sales in the six months to January 31, 2019, a 38.6 per cent increase on the previous corresponding period. This led to a 77.1 per cent increase in earnings before interest and tax to NZ$4.7 million (A$4.6 million).
In a statement about its first-half earnings, Kathmandu said Oboz was the fastest growing footwear brand in its stores and the fastest growing major hike footwear brand at REI, the biggest outdoor retail chain in the US.
The Christchurch-based retailer reported NZ$3.7 million (A$3.6 million) in group EBIT from its North American business for the first half of FY19, after accounting for consolidation adjustments and Kathmandu’s initial wholesale costs.
“[We] are beginning to build international Kathmandu brand equity through authentic outdoor wholesale channels,” Kathmandu’s chief executive Xavier Simonet, said in a statement.
“International growth remains a very important priority.”
Across the group, the retailer reported a 13 per cent increase in sales in the period to NZ$232 million (A$225.5 million), and a 9.4 per cent increase in gross profit to NZ$141.9 million (A$137.9 million).
Excluding NZ$1.1 million abnormal income relating to the GST treatment of reword vouchers, normalised EBIT increased 10 per cent on the previous corresponding period to NZ$19.8 million (A$19.2 million), and net profit after tax increased 7.3 per cent to NZ$13.2 million (A$12.8 million).
While Kathmandu saw strong same-store sales at the start of FY19, it experienced softer trading conditions in Australia and New Zealand over the Christmas and Boxing Day period.
However, a focus on less promotional discounting, resulted in an increase in gross profit margin from 63.4 per cent in the first half of FY18, to 64.2 per cent in the first half of FY19.
“Despite sales being below expectation, it was pleasing to see an improvement in retail gross margin,” Simonet said.
The outdoor retailer saw operating expenses increase 4.3 per cent at constant exchange rates in the half, with incremental expenses arising from Oboz and Kathmandu’s North American business totalling NZ$7.3 million (A$7.1 million).
Kathmandu had NZ$130.1 million ($126.5 million) in inventory at January 31, 2019, which includes NZ$6 million (A$5.8 million) to support its international business and early deliveries of core styles for the Autumn and Winter seasons. Clearance stock is in line with last year.
Simonet noted that the full-year result is dependent on the key promotions to come, referencing the retailer’s successful second half last year.
“Kathmandu is on a journey of transformation,” he said, adding that the company aims to shift from being a leading Australasian retailer to a brand-led, global, multi-channel business.
Profit growth in the core Australasian business will be used to fund investment for future growth.
“While we are focused on driving growth for our core Kathmandu business in Australia and New Zealand, we are also step by step diversifying our channels, brand and markets, particularly through Oboz which has delivered strong growth,” Simonet said.
