Kathmandu to venture into the US, profit surges

Mr Simonet said Kathmandu's entry into the US would be "capital light" and, while the company has appointed a vice-president of sales and marketing, there were no current plans to open standalone Kathmandu stores.

Kathmandu has a dedicated online store in the US but traffic to date has been low because of lack of brand awareness.

"We need to show success through wholesale and online first and we'll see how it goes," Mr Simonet said.

"Oboz is giving us access to the authentic outdoor retailers in the US. That doesn't mean we'll get immediate success but ... we'll start talking to customers and presenting the range."

Sales up 12pc

It plans to extend the Oboz brand, which has been growing at about 40 per cent a year over the last four years, into new categories such as sandals to take advantage of its design and sourcing capabilities.

"It's a great company and a great brand and we need to strengthen and deepen the partnership with them," said Mr Simonet.

"It's going to accelerate our international growth and hopefully give us the capability and expertise and relationships in the US to start a healthy business there."

Oboz made an initial contribution of $NZ2.6 million in the four-month period, before $NZ2 million in transaction costs, on sales of $NZ15.9 million.

Kathmandu's total sales rose 11.7 per cent to $NZ497.4 million, exceeding consensus forecasts of about $NZ493 million, with same-store sales in Australia rising 7.5 per cent and online sales surging 35 per cent, offsetting a 2.4 per cent decline in same-store sales in New Zealand.

Earnings before interest and tax rose 31 per cent to $NZ74.6 million – in line with guidance of $NZ72 million to $NZ77 million – as gross margins swelled from 62.0 per cent to 63.4 per cent, exceeding the company's long-term target range of 61 per cent to 63 per cent.

Average selling prices rose and more products were sold at full price after Kathmandu cut back on discounting, while operating expenses fell to 45.4 per cent of sales from 46.1 per cent.

Rewarding shareholders, staff

Kathmandu rewarded shareholders by increasing its final dividend NZ2¢ to NZ11¢ a share, payable November 30, and rewarded staff by paying all permanent employees a $NZ1000 bonus.

"We've had tremendous success," said Mr Simonet, who has seen profits rise 2.5 times since 2015, "and we believe all our team members have contributed to that success."

After rising 30 per cent this year to $2.86, Kathmandu's shares rose as much as 7 per cent on Tuesday to four-year highs before closing at $2.88.

Mr Simonet gave no guidance for 2019 but Morgan Stanley said it expected the strong momentum in 2018 to continue in the December-half and international growth remained a source of potential upside.

"Leveraging the Kathmandu product portfolio and Oboz distribution could deliver a meaningful earnings base in wholesale," said Morgan Stanley analyst James Bales.