The Kathmandu Holdings Limited (ASX: KMD) share price has fallen 14% today after a trading update and first half profit guidance released this morning.
Kathmandu was founded in 1987 and now operates in Australia, New Zealand and the UK. It’s one of Australia and New Zealand’s largest outdoor gear retailers and now has over 165 stores across the two countries. The Kathmandu name shares the same name as Nepal’s capital, which is near to the Himalayas.
Kathmandu trading update
Kathmandu advised at the AGM in November that profit was expected to be “strongly” above last year based on the first 15 weeks of trade. However, sales in Australia and New Zealand during December have been below managements expectations and the prior year.
Same store sales for the 22 weeks ending 30 December 2018 were below last year by 1%, with same store sales down on the prior year by 0.2% in Australia and a 2.4% fall in New Zealand.
However there was a slight improvement of 0.6% of the retail gross margins to 64%, partially offsetting the lower than expected sales.
Total first half profits for FY19 are now expected to be 4% to 8% above the first half of FY18. With newly acquired Oboz Footwear expected to grow sales by 35% to approximately NZ$27.5 million for the first half of FY19.
Kathmandu Chief Executive Officer Xavier Simonet said, “Despite sales being below expectation it is pleasing to see the improvement in retail gross margin and continuing strong growth from the recently acquired Oboz Business.”
Is the Kathmandu share price good value?
Kathmandu is certainly 14% cheaper than it was yesterday and it is now trading at around 10x FY18’s earnings. The main consideration I have is whether this decline in sales will become a trend, or if it is a temporary slow down. I would want to see the answer to that question in the FY19 result before considering buying Kathmandu shares.
Kathmandu’s lack of growth in this announcement may be underwhelming, perhaps the three reliable shares in our free report below are worth taking a look at instead.
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