Kathmandu shares rise to 3 1/2 year high after profit upgrade

The Christchurch-based company's shares were recently up 14.8 percent to $2.87. Photo: Lynn Grieveson

Kathmandu Holdings shares jumped nearly 15 percent after the outdoor equipment retailer said it expects to increase profit this year on higher sales and better margins, with the market picking it could deliver at the top end of today's guidance.

The Christchurch-based company's shares were recently up 14.8 percent to $2.87, the highest since December 2014, after it said it expects net profit of $48 million to $52 million in the year ending July 31 from $38 million last year. Earnings before interest and tax (ebit) are expected to be between $72 million and $77 million, from $57 million last year. Sales are up 7.7 percent so far this year covering the 47 weeks to June 24, it said.

"The key thing we'd read through here is it could be the case that they're still being a bit conservative," said Andrew Bascand, managing director at Harbour Asset Management. "They're only partway into the sales period, and generally what happens is the trend is set at the beginning of the sales period. Either they get their stock right, and the climatic conditions are good, or they're not, and it seems to us they've got their stock right, climatic conditions are favourable, and we're only partway into the sales period and they're upgrading already."

"If it continues to be these cooler weather conditions and they continue to have their stocking right, they've got quite a big range here of, for example, ebit $72 million to $77 million - with a few weeks left, you could see how they could be maybe not the midpoint of the range, but maybe the higher end of the range. That's my sense, and that's what the market is chatting about right now."

Under the management of chief executive Xavier Simonet, who started the role in June 2015, Kathmandu has been discounting less, selling more product at full-price and achieving a higher average selling price. So far this financial year, the company's gross profit margin is 240 basis points, or 2.4 percent, above last year, it said today. Kathmandu will release its full-year earnings on Sept. 18.