Kathmandu shares have hit an
all-time-high after administrators were called into a major
Australian competitor, which is blaming the NZX-listed
outdoor clothing and equipment retailer's aggressive
discounting - as well as high rents and labour costs - for
the problems facing its business.
Adventure wear seller Snowgum, which operates 17
company-owned and eight franchised stores across the Tasman,
went into voluntary administration following a rent dispute
with the landlord of one of its stores, according to
Australian media reports.
The business is now up for sale.
Voluntary administration involves freezing a company's assets
while the administrators and creditors determine its fate.
Kathmandu shares rose more than 10 per cent to hit $4.01 -
their highest level since the firm's 2009 listing - yesterday
following the Snowgum news, before falling back to close at
$3.93 last night.
Snowgum managing director Ross Elliot told the Sydney Morning
Herald that Kathmandu, which operates close to 90 stores in
Australia, had "perfected the art of pricing a product at an
exorbitant retail price then offering it at 60 per cent off
to attract buyers".
"The adventure wear category has traditionally maintained
integrity in retail pricing, but Kathmandu has changed all
that," Elliot said. "The Kathmandu high-low pricing model
where products are constantly on 50, 60 and 70 per cent
discount, all year round, has forced the whole category to
Kathmandu relies on a number of major sales events each year
for a large portion of its sales.
Peter Halkett, Kathmandu's chief executive, was unavailable
Elliot said rent and wage increases had also badly affected
Snowgum and the business had never really recovered from the
global financial crisis.
Snowgum, which was founded as the Scout Shop in Melbourne in
1926, has operated several stores in New Zealand but decided
during the GFC to pull out of this country and focus on
Salt Funds Management managing director Paul Harrison said
the surge in Kathmandu's share price was directly related to
the Snowgum announcement.
"The market obviously thinks [the problems facing Snowgum]
show that the Kathmandu business model is working in the
sense that it can compete in a marketplace where others are
struggling," he said.
Harrison said Kathmandu's margins and business model were
Kathmandu shares have gained 124 per cent in the last 12
- By Christopher Adams
of the New Zealand Herald