New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

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).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Kathmandu (KMD) Trading Update/Investor Day</h2>
KMD has released a trading update for the 3 months to 31 October 2021 ahead of its investor day, announcing operating profit is down c.NZ$35m from last year, due to the impact of ongoing Australasian COVID lockdowns, partly mitigated by strong online sales growth. The December trading period remains a key turning point for earnings recovery. We are mindful that (1) Q1 is generally a softer trading period, and (2) the entire quarter was impacted by Covid lockdowns and trading restrictions. This sets up opportunity for growth in Q2 as (1) trading restrictions ease and progressive border reopenings occur, and (2) continued momentum from pent up consumer demand.
Same-store-sales significantly impacted by ongoing Australasian lockdowns
<ul>
<li>NSW, Victoria, ACT and NZ trading restrictions more severe than previous period, however KMD has seen positive momentum in the short period following reopening of NSW and Victoria.</li>
<li>SSS for Rip Curl -9.4% overall, +1.6% adjusted for COVID, Kathmandu -17.6% overall, +16.3% adjusted for COVID. Online sales have grown at +33.8% for Rip Curl and +58.4% for Kathmandu.</li>
<li>KMD did not seek any Government subsidies in 1Q22.</li>
</ul>
December trading period a key turning point
<ul>
<li>Rip Curl and Kathmandu inventory remains sufficient to meet expected demand, with growth opportunities expected in 2H22. However, Oboz deliveries will be impacted for 2Q22 (in line with our expectations) due to recent reopening of Vietnam factories which were closed during Q1. Rip Curl wetsuit demand also continues to exceed supply.</li>
<li>Rip Curl and Oboz wholesale order books remain significantly above pre-Covid levels.</li>
<li>KMD recognises challenging outlook for supply chain, with freight, logistics and raw material costs remaining elevated. Mitigating factors include pricing and raw material substitution.</li>
<li>Immediate launch of Kathmandu into Europe and Canada, followed by US and South Korean/Japan in the medium-term provides further upside to earnings.</li>
<li>Continued investment in loyalty platforms and website design, with the new Summit Club rollout expected in 3Q22.</li>
</ul>
Investor day
<ul>
<li>The company has issued a 78 page presentation that it will talk to during its investor day today.</li>
<li>The key initial takeaways reflect ambitious medium term sales growth targets for Kathmandu and Oboz in particular. Management is targeting a +NZ$250m uplift on FY21 sales for Kathmandu and +US$45m for Oboz.</li>
<li>The investor presentation from 11am today can be found <a href="https://www.i-search.nzx.com/blobs/KMD000000/520889/KMD000000-358805.pdf" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.i-search.nzx.com/blobs/KMD000000/520889/KMD000000-358805.pdf&amp;source=gmail&amp;ust=1636505636496000&amp;usg=AFQjCNG8y_a7vYXFk3SeG1KrD-t7-juIgA" rel="noopener">here</a>&nbsp;with access to the webcast&nbsp;<a href="https://event.webcasts.com/starthere.jsp?ei=1506471&amp;tp_key=c1c6346f58" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://event.webcasts.com/starthere.jsp?ei%3D1506471%26tp_key%3Dc1c6346f58&amp;source=gmail&amp;ust=1636505636496000&amp;usg=AFQjCNGU9K6CviXTNbPjxszxjsQ9WGGyHw" rel="noopener">here</a>.</li>
</ul>

Kathmandu (KMD) Trading Update/Investor Day
KMD has released a trading update for the 3 months to 31 October 2021 ahead of its investor day, announcing operating profit is down c.NZ$35m from last year, due to the impact of ongoing Australasian COVID lockdowns, partly mitigated by strong online sales growth. The December trading period remains a key turning point for earnings recovery. We are mindful that (1) Q1 is generally a softer trading period, and (2) the entire quarter was impacted by Covid lockdowns and trading restrictions. This sets up opportunity for growth in Q2 as (1) trading restrictions ease and progressive border reopenings occur, and (2) continued momentum from pent up consumer demand.
Same-store-sales significantly impacted by ongoing Australasian lockdowns

NSW, Victoria, ACT and NZ trading restrictions more severe than previous period, however KMD has seen positive momentum in the short period following reopening of NSW and Victoria.
SSS for Rip Curl -9.4% overall, +1.6% adjusted for COVID, Kathmandu -17.6% overall, +16.3% adjusted for COVID. Online sales have grown at +33.8% for Rip Curl and +58.4% for Kathmandu.
KMD did not seek any Government subsidies in 1Q22.

December trading period a key turning point

Rip Curl and Kathmandu inventory remains sufficient to meet expected demand, with growth opportunities expected in 2H22. However, Oboz deliveries will be impacted for 2Q22 (in line with our expectations) due to recent reopening of Vietnam factories which were closed during Q1. Rip Curl wetsuit demand also continues to exceed supply.
Rip Curl and Oboz wholesale order books remain significantly above pre-Covid levels.
KMD recognises challenging outlook for supply chain, with freight, logistics and raw material costs remaining elevated. Mitigating factors include pricing and raw material substitution.
Immediate launch of Kathmandu into Europe and Canada, followed by US and South Korean/Japan in the medium-term provides further upside to earnings.
Continued investment in loyalty platforms and website design, with the new Summit Club rollout expected in 3Q22.

Investor day

The company has issued a 78 page presentation that it will talk to during its investor day today.
The key initial takeaways reflect ambitious medium term sales growth targets for Kathmandu and Oboz in particular. Management is targeting a +NZ$250m uplift on FY21 sales for Kathmandu and +US$45m for Oboz.
The investor presentation from 11am today can be found here&nbsp;with access to the webcast&nbsp;here.


Kathmandu (KMD): COVID Eats into Q1, but Strong Recovery Expected

Kathmandu Holdings

Kathmandu (KMD): COVID Eats into Q1, but Strong Recovery Expected