KMD
29/09/2015 10:52
FLLYR
PRICE SENSITIVE
REL: 1052 HRS Kathmandu Holdings Limited
FLLYR: KMD: KMD Media Release FY15 Full year Results
Kathmandu FY15 Full Year Results
Kathmandu Holdings Limited (ASX/NZX: KMD) today announced earnings before
interest and tax (EBIT) of NZ$33.2 million for the year ended 31 July 2015, a
decrease of NZ$31.1 million compared with the prior corresponding period. Net
profit after tax (NPAT) decreased from NZ$42.2 million to NZ$20.4 million for
the same period. A final dividend of NZ 5.0 cents per share will be paid,
bringing the full year payout to NZ 8.0 cents per share.
Summary of Results
NZD $m Change
FY2015 FY2014 NZD $m %
Sales 409.4 392.9 16.5 4.2%
Gross Profit 251.9 248.1 3.8 1.5%
EBITDA 47.1 74.5 (27.4) (36.8%)
EBIT 33.2 64.3 (31.1) (48.4%)
NPAT 20.4 42.2 (21.8) (51.7%)
NPAT excluding non-recurring items 21.8 41.2 (19.4) (47.1%)
Kathmandu's FY2015 result was a disappointing outcome from a challenging
year.
The key contributing factors to the reduction in earnings were:
o Excess inventory entering FY2015 requiring aggressive clearance activity in
Q1 FY2015 at compressed margins;
o Pricing and promotional activity during the first three quarters of FY2015
caused customer confusion, and was compromised by clearance activity;
o The rate of operating cost increases in anticipation of sales growth that
did not eventuate;
o Subdued consumer sentiment impacting on the Australian retail environment;
and
o Weakening foreign exchange rate increasing the cost of goods.
Chief Executive Xavier Simonet commented:
"The results for FY2015 were disappointing and well below our expectations.
After a challenging first three quarters, our Winter promotion delivered
improved same store sales and gross margin results year on year, which was a
significantly better outcome than our Christmas and Easter promotions. Summit
Club members responded to a shift in promotional strategy which focused on
new products and highlighted features and benefits, rather than a price and
discount message."
Non-recurring items incurred in FY2015 relate to the relocation of the
Australian distribution centre and Christchurch support office, along with
costs arising due to the Briscoe takeover process.
Sales, Store Numbers, Gross Margin and Inventory
Sales Growth FY2015
Sales growth in Australia was due to the expansion of the store network. Same
store sales reduced by 2.7% in Australia and 1.1% in New Zealand.
In the UK growth was recorded in both total and same stores sales during the
period.
Total Sales Total Sales Growth Same Store Sales Growth
NZD $m Local currency NZD Local currency NZD
Australia 264.6 6.3% 7.0% (2.7%) (2.0%)
New Zealand 139.1 -1.3% -1.3% (1.1%) (1.1%)
United Kingdom 5.7 17.3% 21.4% 15.7% 19.7%
Total 409.4 3.7% 4.2% (1.9%) (1.4%)
Note: Same store sales are for the 53 weeks ending 2 August 2015
Online Sales Growth
Online sales growth continued to be strong in all countries, with overall
growth of c.28% led by an uplift of over 79% in the UK. Online sales are now
6.2% of total sales.
Permanent Store Openings
Kathmandu opened eight new permanent stores in the first half of FY2015, and
two more in the second half of FY2015, all in Australia.
Gross Margin
Gross margin declined 1.6% pts from 63.1% in FY2014 to 61.5% in FY2015. In 2H
FY2015 gross margin improved by 0.7% pts from 62.6% to 63.3%. This
improvement, driven by less discounting, was particularly evident in the
Winter sale promotion where margins improved by over 3.5% pts year on year.
1H FY2015 margins declined as a result of a combination of factors including
the sale of a large amount of clearance stock, below target sales of higher
margin summer apparel product groups, and price pressure in some key product
categories.
Inventory levels
Total inventory levels increased by 9.2% (NZ$9.5m) on last year and by 2.3%
on a per store basis at actual exchange rates.
FY2015
NZD $m FY2014
NZD $m Change
NZD $m Change
% Change
per store %
Inventory
113.3
103.8
9.5
9.2%
2.3%
The timing of new season deliveries, fewer new store openings than planned
and stock investment required to support online growth have contributed to
this increase. The level of clearance stock was a particular focus throughout
the year, and we ended FY2015 with c.40% less aged stock than last year.
Clearance stock on hand was 15% below last year following the conclusion of
Winter sale.
Operating Expenses
Operating expenses have increased by NZ$29.8m and by 5.5% as a percentage of
sales compared to FY2014. The primary increases are:
o Over half is attributable to retail stores and online operating costs
including the full year effect of the 15 stores opening during FY2014, and
part year costs of the 10 new stores opened during FY2015;
o UK growth investment expenditure (NZ$2.8m);
o Increased promotional activity; and
o Non-recurring items relating to the relocation of the New Zealand support
office, Australian distribution centre and costs from the Briscoe takeover
process (NZ$1.9m).
Following a structural review, cost savings of c.NZ$7.0m have been planned
and are being implemented during FY2016.
Operating expenses (excluding depreciation)
FY2015
NZD $m FY2014
NZD $m
Rent 53.0 44.5
% of Sales 12.9% 11.3%
Other operating costs 151.8 130.5
% of Sales 37.1% 33.2%
Total 204.8 175.0
% of Sales 50.0% 44.5%
Other Financial Information
Capital expenditure decreased by NZ$4.2m compared to the prior period due to
reduced investment in new and refurbished stores and a reduction in core
systems investment as the upgrade project was completed in the first half of
FY2015.
Operating cash flow was NZ$1.6m or 5.1% lower than FY2015. However, cash
conversion was improved year on year. Gearing has increased from FY2014 but
remains conservative.
FY2015
NZD $m FY2014
NZD $m
Capital Expenditure 20.0 24.2
Operating Cash Flow 29.6 31.2
Net Debt 69.3 55.3
Net Debt: Net Debt + Equity 18.1% 15.5%
Final Dividend
A final dividend of NZ5.0 cents per share will be paid to shareholders on the
register as at 9 November 2015. The dividend will be fully franked for
Australian shareholders and fully imputed for New Zealand shareholders.
Outlook
Chief Executive Xavier Simonet commented:
"The FY2015 result has highlighted the need to review our cost structure and
we have taken decisive action on this already. It also emphasised the need to
optimise our pricing strategy and promotional model in order to improve same
store sales growth and profitability in existing stores. These levers will
remain a strong focus for management in FY2016.
We are committed to our long term target of 180 stores across Australasia. In
FY2016 three new stores are confirmed along with relocations of our flagship
stores in Melbourne and Adelaide CBD's.
The Board has taken the decision to exit the UK store network in FY2016. We
intend to build on our brand equity and online platform to expand
internationally using a capital light model.
I am immensely excited to have joined Kathmandu in July 2015. More than a
retail business, Kathmandu is an inspiring brand with a strong heritage. We
have already embarked on plans to make the brand more distinctive and engage
with its target customers, particularly through Summit Club.
Strengthening the distinctiveness of the brand will also open up
opportunities to be relevant in international markets as well as on social,
digital and online channels.
We remain committed to our FY2016 forecast."
ENDS
Media:
Helen McCombie
Citadel-MAGNUS
Tel: + 61 2 8234 0103 Investors:
Reuben Casey
Chief Financial Officer
Tel: +64 3 968 6166
End CA:00270915 For:KMD Type:FLLYR Time:2015-09-29 10:52:59
