Kathmandu profit lifts shares 8%

Shares of clothing retailer Kathmandu improved 8% in price yesterday as investors reacted positively to the nearly 50% rise in operating profit.

The company, which listed late last year, reported earnings before interest and tax of $15.5 million for the six months ended January, excluding the listing costs.

Profit after tax was up $6.8 million to $4.4 million after a loss of $2.4 million in the previous corresponding period.

Total listing costs were $21.3 million, compared to the prospectus estimate of $15 million.

Chief executive Peter Halkett said he was pleased with Kathmandu's trading performance following last year's listing on both the New Zealand and Australian stock exchanges.

"It is very satisfying to deliver a good first result announcement, given we have recently been added to the ASX 300 index and are already included in the NZX-50."

The results were achieved in an improved retail environment and reflected both a successful ongoing store introduction programme and a strong sales result from the Kathmandu Christmas sales promotion, he said.

The sales performance was supported by continued tight margin and expense control.

Craigs Investment Partners broker Chris Timms said it was the first time the Christchurch-based company had publicly reported its results since it raised $A340 million through an initial public offering.

The company reiterated it was confident it would meet the full-year guidance provided in its prospectus of operating earnings of $50.6 million and net profit of $30.9 million, after allowing for full-year pro forma adjustments.

Sales were up 25.6% to $106.6 million, with the prospect of forecasts being exceeded.

It was noted that meeting the forecasts depended on the success of upcoming promotional events, weather conditions and ongoing general uncertainty and variability in the retail environment in each of its markets, he said.

Mr Halkett said that the relativity of the strong same-store sales increases in Kathmandu's two major markets (New Zealand up 14.1% and Australia up 9.9%) reflected the flow-through effect of the economic stimulus packages introduced by the Australian Government from December 2008.

Kathmandu did not expect Australian trading for the second half of the year to be similarly affected from the autumn 2009 Australian stimulus package.

Kathmandu opened eight new stores in the period, including two in New Zealand.

The prospectus forecasts of 12 new stores in the full financial year was not expected to be exceeded.

Two new stores in Ballarat and Hastings, and the relocated Christchurch city store, would be open before the end of March. Five new store sites were being negotiated for opening before the end of July, Mr Halkett said.