New Zealand Professional Investment Services Firm

Forsyth Barr

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Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Kathmandu Holdings 1H21 Preview&nbsp;— What's in Store

OUTPERFORM
Kathmandu (KMD) will release its 1H21 result on Tuesday, 23 March 2021; with the result pre-guided, investor focus is likely to be on current trading and outlook for the seasonally important winter period. We expect KMD to report a soft 1H21, relative to other retailers, as border closures weighed on its travel exposed Kathmandu brand, however, view it as well positioned for a strong 2H21. KMD has guided to 1H21 EBITDA (pre-IFRS16) of NZ$47m–NZ$49m.


Key issues to consider at&nbsp;KMD's&nbsp;1H21 result



Soft Kathmandu brand sales performance — Digging into specific drivers of weak brand sales will be an area of focus, particularly given positive sales growth achieved by key competitor Macpac over the same period. Lockdown adjusted direct to consumer (DTC) same store sales (SSS) for the Kathmandu brand fell -27% on the prior year, as travel linked categories weighed on performance.&nbsp;
Wholesale channel order book —&nbsp;Wholesale sales in the Northern Hemisphere are seasonally weighted to the second half. Previous commentary suggests the order book has recovered well and is tracking ahead of pre COVID-19 levels. Further insight on trading and margin outlook will be of interest, particularly against the backdrop of a vaccine roll out and declining case numbers.
​​​​​​​Expansion strategy —​​​​​​​&nbsp;KMD is targeting international expansion of its Kathmandu brand through the wholesale channel. We suspect COVID-19 has likely slowed progress; growth ambitions/priorities from here would be of interest.
Inventory position&nbsp;—&nbsp;Supply chain congestion resulted in a&nbsp;lack of product depth over the summer period, but also limited industry discounting activity. We look for an update on stock levels and any signal of a return to normal promotional activity.
Dividends —&nbsp;KMD is expected to&nbsp;provide an announcement regarding dividend resumption at its result; our 1H21E forecast is 2cps (FY21E 4cps).



Conference call&nbsp;at 10:30am NZT (8:30am AEDT) on Tuesday, 23 March 2021


Dial in details are 0800 453 055 for New&nbsp;Zealand&nbsp;(1800 558 698 for Australia); Conference ID 10012888. Participants can pre-register&nbsp;https://s1.c-conf.com/diamondpass/10012888-t3oqev.html.



Guy Hooper
guy.hooper@forsythbarr.co.nz
+64 4 495 5255





Ashton Olds CFA
ashton.olds@forsythbarr.co.nz
+64 9 368 0127



Kathmandu Holdings: 1H21 Preview — What's in Store