Kathmandu Share Price Drops on Dividend Cut (ASX:KMD)

Shares of outdoor leisure retailer Kathmandu Holdings Ltd [ASX:KMD] are trading lower today, on the release of its full-year financial results.

The forced store closures due to the coronavirus ravaged KMD’s bottom line as the retailer was forced to stand down about 4,000 staff worldwide.

Consequently, Kathmandu announced today it would not be paying a final divided.

At the time of writing the KMD share price is down 6 cents, or 5.11%, to trade at $1.12 per share.

ASX KMD Share Price Chart

Source: Tradingview.com

Sales buoyed by Rip Curl

The forced closure of stores worldwide at the height of the pandemic in April and May were a large contributing factor to the 85.9% drop in profit, according to KMD.

Net profit came in at NZ$8.15 million.

The impact of COVID-19 was thought to have impacted sales by ~NZ$135 million.

NZ$80 million at retail stores and NZ$55 million in wholesale sales.

Gross margins were also put under pressure, falling by 2.6% thanks to a combination of foreign currency and an increased mix of clearance sales and promotions.

Although, thanks to the recent acquisition of Rip Curl, revenue in FY20 grew by 48.7% to NZ$801 million.

A result propped up by NZ$316 million of sales attributable to Rip Curl.

Like many other retailers, KMD saw their online sales grow significantly.

Online sales rose 63% to NZ$106 million, now comprising 15.7% of direct to consumer sales.

However, there is a silver lining.

Underlying earnings before interest, tax, depreciation, and amortisation fell 15.3% to NZ$83.4 million.

A figure that beats KMD’s own revised guidance of more than NZ$70 million and consensus forecasts around NZ$73 million.

Four Innovative Aussie Stocks That Could Shoot Up after Lockdown.

Speaking on KMD’s performance, CEO Xavier Simonet said:

It has been a transformational year for us with the acquisition of Rip Curl and we are pleased with its integration into the Group over the last nine months. Unfortunately, the Group faced significant unexpected challenges with COVID-19 restrictions and lockdowns.

We took decisive action early to reduce costs, adjust the operating structure of the business, and raised NZ$207 million of equity. These initiatives have resulted in a strong balance sheet and healthy inventory level, which position us well for the future.

What’s next for the KMD share price?

With the NZ$207 million equity raise back in April, KDM helped strengthen its balance sheet and enable investment post-lockdown.

And importantly, replenish inventory levels.

Since lockdowns have eased, Rip Curl same-store sales have risen 14.4% and Kathmandu same-store sales increased by 6.9%.

Although, the short-term outlook is still looking shaky.

With Melbourne, Auckland, Hawaii, Bali, and airport stores closed and international travel severely restricted, it could still be some time until KMD fully recovers.

If you’re looking for high potential small-cap stocks, Kathmandu could be an attractive pick. But before you rush into it, be sure to check out these four innovative Aussie small-cap stocks first before lockdown ends. Download your free report now.

Regards, 

Lachlann Tierney,
For Money Morning


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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