Despite the grim figures, group chief executive Xavier Simonet was bullish on the company’s recovery for the new financial year, saying sales in regions out of lockdown had been strong.
“We strongly believe there are some structural changes happening with people becoming more focused on the need to protect their health and wellbeing for themselves and their family,” he said.
There’s probably a systemic structural shift with COVID in terms of people wanting to enjoy the outdoors or beach or the mountains, and focus on health and fitness.
Kathmandu CEO Xavier Simonet
“There’s probably a systemic structural shift with COVID in terms of people wanting to enjoy the outdoors or beach or the mountains, and focus on health and fitness.”
The result beat analyst expectations, who had predicted the business would report revenue of $735 million for the year and profit of about $27.8 million. However, the weaker profit figures led Kathmandu to cancel its dividend, sending shares down as much as 8 per cent after the market opened.
Online sales at the company were a strong performer, accelerating 63 per cent for the year to $106.4 million and comprising 15.7 per cent of the business’ total direct to consumer sales.
Retailers across the board are expecting online to be a major source of growth in the coming years, and Kathmandu is no different. Mr Simonet said the brand was well-positioned to compete despite the increasingly crowded online environment.
“If competition increases online, there’s certainly going to be consolidation within our sector. Some companies are suffering more than others, and we’re really well-positioned in terms of a strong balance sheet,” he said.
Mike Higgins, portfolio manager at Kathmandu shareholder Milford Asset Management, said the result was a positive one and had clearly underlined the logic behind the Rip Curl acquisition.
“Kathmandu was a very heavily seasonal business, it was reliant on sales around winter,” he said. “Now it’s a bit more year-round, so we quite like that aspect of the Rip Curl acquisition.”
“Their categories being outdoor-orientated is also quite well-suited to the return of the domestic holiday this coming summer.”
Kathmandu’s net debt sits at just $9.4 million thanks to the company’s $207 million capital raising completed earlier this year. The retailer received a total of $21.2 million in government grants, which includes the New Zealand wage subsidy and JobKeeper.
The company also confirmed it applied for $4.2 million in PPP loans, a US program designed to help struggling small businesses during the pandemic. It flagged with investors its application was subject to a “possible audit” by the US government and it may be deemed ineligible for the grant.
If that was the case, Kathmandu would have to pay back the money received, along with 1 per cent interest. However, the company noted it was confident it was eligible and noted it intended to apply for the loan to be forgiven.
Kathmandu chief executive Reuben Casey defended applying for the loan, saying the company was comfortable it was eligible for the program and the likelihood of an audit was “low”.
Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.