Shareholders in outdoor adventure apparel retailer Kathmandu Holdings Ltd (ASX: KMD) may be forgiven for abandoning the financial forecasts in favour of the weather forecasts recently. The company's management today provided their second update in less than six weeks on recent temperatures, weather patterns, and forecast profits.
Fortunately, generally colder temperatures in July have reportedly led to better sales and earnings with the group now forecasting net profit for the year ending July 31, 2014, to be marginally down on the prior year, coming in between NZ$39.5 million to NZ$42.5 million.
Total sales and same-store sales are now expected to be marginally up on the prior year with the slight profit fall attributable to higher costs on overheads like new stores and better IT systems. Kathmandu has opened many new stores across Australia recently, including in more regional areas where sales volumes are lower, but lower overheads like rent and staff generally act in compensation.
The retailer has also been growing its Summit Club membership scheme with nearly one million members now signed up. This encourages repeat sales and brand loyalty. Indeed, brand strength looks the key to future growth overseas and in the Australia and New Zealand domestic markets.
Management has been investing in an attempt to increase online sales abroad, with an intention to ship goods sold overseas. With no overheads like staff or store costs (potentially even shipping costs can be put on the buyer) this is a bottom-line bulging activity if successful.
Financial (not weather) forecasters are predicting Kathmandu will earn around 19.5 cents per share in FY 2015, placing it on 15 times earnings when selling for $3.10. It looks one of the better opportunities currently available in the retail sector.
