The Kathmandu Holdings Ltd (ASX: KMD) share price could be on the move on Friday after the release of a trading update this morning.
In New Zealand the company’s NZX-listed shares are up 3.5% at the time of writing.
What did Kathmandu announce?
This morning Kathmandu provided an update on its expectations for the first half of FY 2020.
For the six months ended January 31, Kathmandu expects its underlying earnings before interest and tax (EBIT) to be up ~40% on the prior corresponding period.
This result includes the benefits of the Rip Curl acquisition which completed on October 31 and excludes the impact of the new IFRS 16 leasing standard.
How did its businesses perform?
The company advised that its Kathmandu business achieved same store sales growth of 1.5% for the 26 weeks ended 26 January 2020. Whereas its online sales grew by over 30% in the half, underpinned by enhancements made to the online platform in the first half of last year.
However, the Kathmandu first half gross margin was down 1.4%, reflecting the impact of year-on-year foreign currency movements.
The Oboz business continued its strong growth grow during the half. Sales were ~10% higher than the same period last year.
Pleasingly, the Rip Curl business has started positively. The total sales for the three months of Kathmandu’s ownership are expected to be 2.7% above the prior corresponding three-month period.
In addition to this, management advised that direct to consumer same store sales have grown by 2.6% for the 12 full weeks of ownership. And Rip Curl branded stores in Australia traded up +8.3% on a comparable basis in the important summer trading period.
Kathmandu’s chief executive officer, Xavier Simonet, was very pleased the positive impact that the Rip Curl acquisition has had.
He said: “We are delighted to have completed the successful acquisition of Rip Curl, allowing us to significantly diversify our products, geography, and channels to market.”
Mr Simonet was also pleased with the company’s performance in challenging retail conditions.
“The Christmas trading period has seen a further shift towards Black Friday and Boxing Day events. Low December market foot traffic between these two events, unusually hot weather, and bush fires in Australia, have combined to moderate first half sales. We have responded to these challenging Australian conditions by focussing on operational execution, and we are pleased to have achieved same store sales growth for the first half. Our diversification strategy has shown early benefits, with the Rip Curl surf focus helping to balance out the Kathmandu business,” he aded.
The chief executive officer also advised that the company’s supply chain is not expected to be materially impacted by the coronavirus. It has mitigation plans in place if there is a prolonged disruption to its Chinese suppliers.
The post Why the Kathmandu share price could charge higher on Friday appeared first on Motley Fool Australia.
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