Because of the "difficult market conditions", it was not possible to give specific financial guidance, Kathmandu said yesterday.
Its shares plunged more than 13% to $1.64 after announcing its half-year to January after-tax profit fell $4.5 million, from $10.5 million for the corresponding period a year ago, to $6 million.
A 3c dividend will be paid.
While group sales were up 15.4% to $146 million, earnings before interest and tax were down 36% to $12.7 million and its gross profit margin declined from 64.7% to 62.7%, Kathmandu's chief executive Peter Halkett said.
"Margins were reduced in all the countries that Kathmandu trades in, primarily due to the proportionally greater volume of sales made at lower margin due to higher discounting and greater clearance activity," he said.
Forsyth Barr broker Suzanne Kinnaird said the next half's trading would be "challenging" for Kathmandu and downgraded Forsyth Barr's forecast to "slightly below" last year's result, of $39.1 million.
"The company is giving no guidance for the second half, in which the bulk of its annual profit is generated, as it is very dependent on the weather from now to July and on the success of winter promotions," Ms Kinnaird said.
Craigs Investment Partners broker Peter McIntyre said the low margins and higher costs were compounded by slow Christmas trade, plus rising inventory costs.
"They are pushing out more stores but there has to be a saturation point. Investors don't want growth for growth's sake, but want to see dividends." Kathmandu, whose permanent store numbers rose from 100 to 114 during the half, still expects to open 11-15 new stores during the full financial year.
Mr McIntyre noted that rising costs included some one-offs, with a $2 million system upgrade, a brand "refresh" and increased capital expenditure on store relocations and refurbishments which rose from $4.1 million a year ago to $10.3 million.
Mr Halkett anticipated a "very competitive retail environment" would continue to prompt competitive pricing to maintain sales growth and market share, meaning lower gross margins were "likely to continue in the second half-year, in comparison to full-year 2011".
Net debt rose 10.5% from $77.5 million to $85.6 million, for a planned inventory boost costing $21.3 million and capital expenditure, but the debt to equity ratio rose just 0.3% to 25.1%.
