Beleaguered leisure and sport retailer Kathmandu has reported a 50% decline in profit to $20.4million, as expected, and is to exit its four UK stores.
Analysts are split on Kathmandu's (KMD) ability to restructure and recover.
KMD spurned a hostile takeover offer by Briscoes earlier this month, labelling it opportunistic, but the 100% takeover offer gained little traction with shareholders anyway, with less than 3% offering up their scrip.
For its year to July, KMD saw sales rise 4.2% from $392.9million to $409.4million, but earnings before interest and tax (Ebit) plunged 48% from $64.3million to $33.2million, with profit slashed by 51.7%, from $42.2million to $20.4million.
While paying a 5c per share dividend, KMD shares declined almost 3%, to $1.37 yesterday.
KMD said the reduced earnings were because of several factors, including excess inventory requiring ''aggressive clearance activity'' at compressed margins, some pricing and promotional activity caused customer confusion and the rate of operating cost increases in anticipation of sales growth, which did not eventuate, chief executive Xavier Simonet said.
''The results for full year 2015 were disappointing and well below our expectations,'' he said.
Following a challenging first three quarters, KMD's annual winter promotion delivered improved same store sales and gross margin results, which was ''a significantly better outcome than our Christmas and Easter promotions''.
Craigs Investment partners broker Chris Timms said KMD's guidance for 2016 was expected to be particularly interesting given the buy-out attempt.
''Briscoe's offer lapsed two weeks ago after attracting just 2.27% of shareholder acceptances,'' he said.
Mr Timms said KMD was sticking with earlier forecasts of a 43% rise in earnings for 2016, with sales up 11% to $454.6million, but questioned if the guidance could be met.
It had been a ''challenging year'' in which KMD's message failed to resonate with customers, increased investment failed to generate a strong lift in sales, inventory was too high forcing clearances at lower margins, and the Australian retail environment remained tough, he said.
He said Mr Simonet's renewed strategy was positive and KMD was a strong brand.
''However, conditions remain tough in the key Australian and New Zealand markets and we believe there are risks of KMD missing its guidance. We therefore retain our `neutral' share recommendation,'' he said.
Mr Simonet said the full year result ''has highlighted the need to review our cost structure and we have taken decisive action on this already''.
It also emphasised the need to optimise pricing strategies and the promotional model in order to improve same store sales growth and profitability in existing stores.
KMD was committed to its long term target of 180 stores across Australasia, including three new stores in the coming year, but is exiting its UK store network in the year ahead; three in London and one in Bristol.
Forsyth Barr broker Suzanne Kinnaird said sentiment towards KMD had been negative, following recent weak trading.
''Stepping back from near-term trading and cyclical issues in Australia, we believe KMD can recover,'' she said. KMD had a strong brand, vertically integrated model, valuable loyalty database and market-leading position; ''all strong building blocks in a retail model''.
