Why Kathmandu Share Price Is Down: Profit Guidance Misses

At time of writing, the share price of Kathmandu Holdings Limited [ASX:KMD] has fallen sharply, down 12.21%, to trade at $2.30 per share.

The fall puts the stock back to square one, trading close to where it was 12 months ago:

KMD Share Price

Source: marketindex.com.au

The latest news out of the company is that its 1H FY2019 profit will not meet management expectations.

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Kathmandu profit guidance down

As announced by the company:

Same store sales for the 22 weeks ending 30 December 2018 are below prior year by 1.0% (at constant exchange rates). Same store sales are below prior year by 0.2% in Australia, and below prior year by 2.4% in New Zealand.

In good news for the company however:

Partially offsetting lower than expected sales to date for 1H FY2019, is a c. 60 bps improvement in retail gross margins to c. 64%.

It thus appears that the sales bump that comes for retail around the Christmas and Boxing Day period, didn’t materialise for Kathmandu.

What’s next for Kathmandu’s share price?

It’s not all bad news for Kathmandu’s share price.

Factors worth considering is that it has a P/E of 11.9, which in retail terms is reasonably healthy, and a dividend yield of 5.13%.

For comparison the P/E of US based Columbia Sportswear is around 23 and it has a dividend yield of 1.14%.

Columbia Sportswear is a similar type of company, and given the negative headlines which have been dominating the retail sector, it is possible to view Kathmandu’s share price in a positive light.

That being said, the recent profit guidance miss is potentially concerning. Australian household debt has become increasingly important, as shoppers have less cash on hand to spend in stores.

Retail sales growth is beginning to trend downwards as you can see below:

Kathmandu Share Price

Source: ABS, Business Insider

Additionally, the retail failure rate has increased rapidly in the past two years.

KMD Share Price

Source: Illion Data Registries

A couple things to consider when looking at retail stocks.


Lachlann Tierney,
For Money Morning

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Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:

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