Kathmandu’s Australian operations are giving with one hand and taking with the other: sales are growing strongly, but a fall in the dollar is reining in the outdoor goods retailer’s profit gains.
New Zealand-based Kathmandu lifted its first half net profit 10 per cent to $NZ11.4 million ($A10.83 million) and believes it is on track for a positive full year result.
Investors cheered the company’s performance, pushing its Australian listed shares up 35 cents, or 11.3 per cent, to $3.45.
But the first half result, which covers the six months to January 31, would have been $NZ2.2 million higher if not for the Australian dollar’s fall against its Kiwi counterpart.
Total sales from the Australian operations, which accounts for more than 60 per cent of Kathmandu’s business, rose almost 15 per cent over the six months. Australian sales were up 6.6 per cent on a same-store basis.
That’s well above the 5.6 per cent total sales growth recorded by its New Zealand operations, or 3.2 on a same-store basis.
But overall sales were up only one per cent at close to $A167 million, with much of the benefit from the rise in Australia swallowed up by currency conversion.
“We had a good half in Australia and the Australian market. It’s only when you convert it to New Zealand dollars that it doesn’t look that flash,” chief financial officer Mark Todd said on Monday.
“There is a 15 per cent weakening in the exchange rate. Australia is two thirds of our business, so it has approximately a 10 per cent effect on earnings as a result.”
The company expects the weak Australian dollar to further impact on the full year result, but says sales growth in Australia will, nonetheless, be the key driver of profit over the second half.
Chief executive Peter Halkett said he did not expect uncertain economic conditions in Australia to significantly undermine sales growth.
“The New Zealand economic environment and consumer sentiment is currently generally positive, but there is more uncertainty in Australia’s prospects, and I anticipate it will continue to be the more challenging retail market during 2014,” he said.
“Nevertheless, our increasing brand awareness and profile in Australia makes me confident that we will see ongoing sales growth this year.”
The company declared an interim dividend of three NZ cents, fully-franked for Australian shareholders.
