Rip Curl acquisition delivers sales surge for Kathmandu
Outdoors apparel retailer Kathmandu has seen a strong first-half contribution from its recently acquired Rip Curl surfing business amid a poor Christmas period hit by bushfires and unusually hot weather.
In a trading update on Friday, the ASX-listed company told investors its underlying half-year earnings before interest and tax (EBIT) for the 26 weeks up to January 31 would see a 40 per cent boost on the same half last year, largely fuelled by its $350 million acquisition of Rip Curl.
Kathmandu has seen a strong maiden contribution from its new Rip Curl surfing division.
This will see the company's underlying EBIT, which excludes the one-off acquisition charge, sit around $NZ27.7 million ($26.5 million), falling slightly short of analyst expectations of $NZ29 million.
Same-store sales for the company's Kathmandu stores grew 1.5 per cent, a marked improvement on the flat growth posted in the first half of the 2019 financial year. The growth was helped by a 30 per cent uptick in online sales for the period.
Rip Curl, which the company acquired in October, improved its total sales by 2.7 per cent for the first three months under its new ownership, and same-store direct-to-consumer sales grew 2.6 per cent.
The company's 118 Australian and New Zealand stores, which account for around one-quarter of Rip Curl's total revenue, saw same-store sales jump 8.3 per cent, driven by an increase of beach-going Aussies over the hot summer period.
Rip Curl, which Kathmandu bought for $350 million in October, sponsors the likes of Mick Fanning. Credit:WSL
Hiking boots brand Oboz also performed strongly for the half, with sales up 10 per cent for the half.
Kathmandu's chief executive officer Xavier Simonet said the company had seen a shift in spend away from the Christmas period towards the Black Friday weekend, which contributed to lower than usual foot traffic.
"The Christmas trading period has seen a further shift towards Black Friday and Boxing Day events. Low December market foot traffic between these two events, unusually hot weather, and bush fires in Australia, have combined to moderate first half sales," he said.
"We have responded to these challenging Australian conditions by focusing on operational execution, and we are pleased to have achieved same store sales growth for the first half."
Mr Simonet said the company was monitoring the coronavirus outbreak, noting Kathmandu sourced its products from a diverse range of suppliers and had a longer stock turn. Consumer confidence has so far not been affected by the virus, he said.
"[Kathmandu] has mitigation plans in place if there is a prolonged disruption to our Chinese suppliers," he said.
Kathmandu investors and analysts will gather today for an investor briefing in the seaside surf town of Torquay, Victoria, where they'll be sold on the long-term synergies and benefits of the acquisition.
Part of this pitch will involve a focus on Rip Curl's technical product sales, which accounts for 40 per cent of revenue and focuses on products such as wetsuits, boards, and high-tech watches.
Kathmandu will also look to soothe some concerns an acquisition of Rip Curl might see the company put an end to its popular surfing events division, with the company saying events such as the Rip Curl Pro Bells would continue.