Kathmandu Holdings shares were modestly higher on Friday after the billon dollar outdoors retailer reported strong growth, despite further travel restrictions and significant disruption from the recent Covid outbreaks.
Same-store sales grew strongly since the reopening of the group’s Australasian store network in the second quarter. While Rip Curl YTD same-stores sales were -1.6% below last year, including ongoing COVID impacts in the first quarter, same-store sales growth was +3.0%, with +20.0% same-store sales growth compared to the pre-COVID FY20 period, thanks to a continued resurgence in participant numbers within the surf category generally.
Kathmandu's YTD same-stores sales were +2.8% above last year, despite significant COVID store closures in the first quarter, while adjusted same-store sales growth was +15.1%, with the company building momentum as a result of a renewed focus on marketing and products.
Wholesale sales for are expected to be 3.4% above last year, offsetting declines in Oboz, where first-quarter factory shutdowns of Oboz product suppliers in Vietnam materially impacted the company’s ability to meet demand. Although Kathmandu expects a gradual recovery from the transitory supply constraints in the second half, while demand for the Oboz brand and products has never been stronger, and forward orders into FY23 still support the medium-term revenue growth targets.
Kathmandu’s total sales for the first half are expected to be approximately $405 million, albeit with lower a gross margin below due to COVID-elevated international freight costs, and increased clearance mix for the Kathmandu brand. However, second-half gross margins are expected to be in line with the prior year based on current promotional plans, and expectations of international freight costs and currency impacts.
Underlying EBITDA is expected to be in the range of $90$11 million, in line with previous guidance of a $35 million COVID impact on first-quarter EBITDA, a result of a combination of lost revenue and lower government support.
The group said it continues to invest in the long-term value of its brands, with an additional $14 million expenditure in the first half to support brand marketing and expansion into international markets.
Commenting on the result, Group CEO Michael Daly said: “It was pleasing to see a strong rebound in Kathmandu sales over the second quarter of FY22 following the first quarter’s lockdowns. Kathmandu is well placed with appropriate inventory levels and new product introductions for the second half. Rip Curl has again performed well in the southern hemisphere summer season, with strong wholesale sales growth, and retail sales consolidating last year’s strong growth and profitability.”