The Kathmandu Holdings Ltd (ASX: KMD) share price is up 7% after releasing its FY21 half-year result.
What did Kathmandu announce?
Kathmandu, which is a retailer of outdoor gear and equipment, has reported a robust set of numbers in the first half of FY21. It also owns Rip Curl, which is a sports retailer. All amounts are in New Zealand dollars.
Sales grew by 12.9% to $410.7 million. Gross profit grew by 10.8% to $242.5 million, though the gross profit margin declined from 60.2% to 59% year on year.
Kathmandu has been working on its expenses. Underlying operating expenses increased 8.9% to $194.3 million – as a percentage of operating expenses, this fell from 49.1% to 47.3%. Statutory expenses were $147.2 million, which was just 35.8% of sales.
Underlying EBITDA (EBITDA explained) grew by 19% to $48.2 million, with the underlying EBITDA margin increasing by 60 basis points (0.60%) to 11.7%. Statutory EBITDA was $95.4 million. Underlying EBIT grew by 15.5% to $33.4 million.
Underlying net profit grew 32.8% to $23.1 million, whilst statutory net profit came in at $22.3 million.
That’s the numbers, what drove the result?
Kathmandu was pleased with the Rip Curl performance despite COVID-19 impacts in key global markets, which the company said validated the diversification strategy.
Management were cautious with costs because of the uncertain trading conditions, including significant restructuring and synergy savings, rental abatements and helped government wage assistance.
There has been an increase in the percentage of online sales, like most retail businesses are seeing. Group online sales increased to 12.7% of direct consumer sales, up from 8.8% a year ago. Total online sales increased 18.5% to $36 million. Rip Curl saw online sales growth of 107% in the USA, 47% in Australia and 78% in Europe. Oboz is launching an online store imminently.
During the period, the company had to deal with a number of impacts such as 60 Melbourne stores being closed for more than 11 weeks, 14 Auckland stores being closed for a fortnight, and various store locations in places like airports, CBDs and holidays destinations like Bali being impacted.
There was a mix of performance. the Kathmandu division saw sales drop 34.9% to $127.3 million and underlying EBIT sank 167.4% to a loss of $7.1 million. However, Rip Curl saw sales soar 86.1% to $251.1 million and underlying EBIT jumped 173.9% to $44 million.
Balance sheet and dividends
Kathmandu’s net debt was $10.1 million at the end of January 2021.
The board has decided to resume dividends, which will be fully franked for Australian shareholders. It’s going to be NZ 2 cents per share.
Outlook and my thoughts
Kathmandu said it’s entering the traditionally strong winter season well prepared. For the long term, all of its brands are well positioned to capitalise on increased participation in outdoor, hiking, beach and surfing activities. The COVID-19 vaccine rollout is expected to help international travel.
This was a solid result considering how much Kathmandu suffered. It could be a cheap opportunity considering how much it’s still down from the COVID-19 lows, though other ASX growth shares in the retail space are delivering stronger results.
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