NZ Kathmandu struggles both in business and trading

The New Zealand-based retailer Kathmandu is going through painful times after the outdoor apparel retailer reported worse-than-expected interim result. After they published the 42% slump in profit, the stock has gone down the trading hill.

Its shares, which have shed 38 per cent since November, erasing much of the gains the stock had made since the end of January. Kathmandu is also listed in Australia and a sharp downturn in consumer sentiment across the Tasman has left Australian investors nervous about any bad news from retailers.

The latest major sell-off follows the big plunge in Kathmandu's share price that took place just before Christmas, when a poor trading update helped erase around a quarter of the retailer's market value in a single afternoon, reported national press.

The company was giving little away about its expectations for the remaining months of its financial year yesterday, but chief executive Peter Halkett said recently the outdoor apparel market was becoming increasingly competitive.

"There is a relatively wide range of possibilities that means we can actually do quite well this year or if things get really difficult we can do quite poorly, " Halkett warned, explaining the company was not providing any guidance for its full-year result as variables such as weather conditions made forecasting Kathmandu's trading performance very difficult.

"Historically, bad weather helps Easter [sales] but there are so many variables and we certainly seem to cop a lot of criticism when we do have an expectation out and fall short of it. Besides the fact that the business is clearly a very good business it seems to cop more [criticism] than it deserves." Kathmandu conducts most of its business during its second half when the firm's crucial Easter and winter sales take place.

Kathmandu posted a 15.4 per cent rise in total interim sales to $146.6 million but said margins were affected by aggressive promotional and marketing activity that took place during January to maximise profits and reduce excess stock left over from slow Christmas trading.

Half-year net profit plunged 42 per cent on the same period a year earlier to $6 million, well below the $8.3 million forecast by Goldman Sachs analyst Buffy Gill, published ‘New Zeland Herald’.

The company said its New Zealand operation outperformed Australia in same-store sales growth during the first half, with Australian sales particularly weak in the states not benefiting from that country's resource boom. Operating costs rose almost 30 per cent to $75 million due to a number of factors including advertising spending.