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Outdoor equipment retailer Kathmandu has reported an after-tax profit of $ 8.9 million for the year through July 31, down from $ 57.6 million last year.
The results also reflected one-time costs related to the purchase of Rip Curl in February.
The company said that sales were greatly affected by store closures during the Covid-19 closures in Australia and New Zealand.
Sales were down $ 135 million across Kathmandu’s retail and wholesale business.
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At the same time, online sales had strengthened for the company that included Kathmandu, Rip Curl, and Oboz Footwear.
Online sales of $ 106.4 million were up 63 percent from last year and now account for 15.7 percent of total sales.
Stacy Squires / Stuff
Covid-19 has had a massive impact on Kathmandu’s earnings.
Kathmandu CEO Xavier Simonet said it had been an important year for the company with the purchase of Rip Curl.
Unfortunately, the group faced significant unexpected challenges with the Covid-19 restrictions and shutdowns. We took decisive steps early on to reduce costs, adjust the operating structure of the business, and raise $ 207 million of capital, ”Simonet said.
Decisions made by the company resulted in a strong balance sheet and a healthy inventory level, he said.
Kathmandu’s strategy of integrating its brick-and-mortar stores with its online store had allowed the company to scale quickly to meet the increased demand online, he said.
After loosening of lockdown restrictions, Rip Curl and Kathmandu sales were strong in New Zealand, Australia, Europe and California, the United States, as consumers began to engage in outdoor and recreational activities, Simonet said.
“Both Rip Curl and Kathmandu also enjoyed exceptional performance in post-closing winter sales in Australia and New Zealand,” he said.
The outlook for the business was positive, Simonet said.
“Despite the challenges posed by Covid-19, the business remained financially and operationally sound, he said.
“The balance sheet was significantly strengthened by the recent capital increase, our brands are well positioned to capitalize on increased participation in outdoor, beach and surf activities after the end of closures, and our investment in omnichannel capabilities enables us to quickly respond to changes in consumer habits and strong growth in online demand. “
Hamilton Hindin Greene’s investment adviser Grant Davis said the big challenge for Kathmandu would be to make sure it is not overwhelmed by overstocking.
“Probably the most important thing is to get that inventory out of your books. That is the danger, it was a problem they had a few years ago, being overloaded, “he said.
Stacy Squires / Stuff
Hamilton Hindin Greene investment advisor Grant Davies says Kathmandu will need to engage with Summit Club members as part of its recovery.
“Obviously you don’t want to have last season’s products on the shelves and be forced to aggressively discount them – it can be a vicious cycle that you don’t want to get into.
While the growth in online sales was good, Kathmandu needed to interact with its Summit Club members, he said.
“They have a fairly large database of members, so engaging them online will be a key point in their recovery.”
The retail sector was not out of the woods with the global pandemic and Kathmandu was particularly exposed due to its geographic distribution of stores, Davis said.
“Their purchase of Rip Curl gives them more exposure to that given the prevalence of sales in Europe. Oboz, he’s very American in his approach.
“It’s nice to have geographic diversification, but right now Kathmandu is more focused on New Zealand and Australia and that may have to do more heavy lifting for the company in the next 12 months,” Davis said.
