Kathmandu Holdings Ltd., based in New Zealand, reported net profits rose 13.7 percent in the year ended July 31 on a 9.7 percent revenue gain. The gains were led by Oboz, the U.S.-based outdoor footwear brand. Oboz’s sales grew 30 percent to U.S.$44.6 million.

Kathmandu acquired Oboz last year.

Revenues reached New Zealand (NZ) $545.6 million, up from NZ$497.4 million a year ago. Same-store sales grew 0.6 percent at constant exchange rates, with Australia up 2.7 percent.

Earnings reached NZ$57.6 million against NZ$50.7 million a  year ago.

Gross profit was up 5.4 percent to NZ$332.5 million, and declined as a percent of sales to 60.9  percent from 63.4 percent. EBIT increased 12.7 percent to NZ$84.3 million, EBITDA advanced 10.9 percent to NZ$99.6 million.

Commenting on the FY19 results, Kathmandu CEO Xavier Simonet said: “Over the past 12 months the team delivered another record sales and profit result. The key drivers of this growth were a positive contribution from the Australian business, and rapid sales and profit growth from Oboz.”

“We were particularly pleased to grow sales in the second half of FY19, even though we were cycling strong Australian sales growth in our key winter period last year. At the same time as delivering sales growth, we maintained our focus on cost control, and benefited from wholesale operating cost efficiencies that saw us grow earnings faster than revenue. The diversification of our sales channels, brands, products, and markets, underpinned this result,” added Simonet.

Kathmandu: Australia and Online performing well

Total sales in Kathmandu’s largest market, Australia, were up 4.5 percent, with continued growth in key product categories. Same stores sales growth of 2.7 percent in Australia reflected the team’s focus on providing a great customer shopping experience.

New Zealand sales were down 3.1 percent. The focus for FY20 is on driving increased foot traffic and conversion metrics in key metro markets, and the recent openings of Kathmandu flagship stores in key cities is expected to support this.

Online sales were up 9.2 percent at constant exchange rates, assisted by the successful re-platforming of Kathmandu’s online offering. Continued enhancement of the customer experience has contributed to higher conversion rates of online traffic to sales. Online now comprises 10.1 percent of direct to consumer sales (FY18: 9.4 percent).

North America: Oboz delivering rapid sales and profit growth

Following its successful integration, the Oboz business continued to grow strongly, with FY19 pro-forma sales growth of 30.0 percent to US$44.6 million, and pro-forma EBIT growth of 38.6 percent to US$7.9 million. Oboz grew in key accounts and core styles, while also diversifying its customer and product mix.

An investment of NZ$1.3 million was made during FY19, establishing Kathmandu’s wholesale business in North America. The early response has been positive, with FY20 orders secured for 45 doors and five online sites.

The overall North America contribution to FY19 Group EBIT was NZ$9.6 million, up from NZ$2.4 million in FY18.

Scale efficiencies lowering the cost of doing business

Total operating expenses increased 3.7 percent to NZ$234.0 million, including an NZ$11.8 million incremental increase from operating expenses relating to the first full year inclusion of Oboz, and establishment costs for Kathmandu North America.

As a percentage of sales, operating expenses fell 2.5 percent to 42.9 percent (FY18: 45.4 percent) reflecting the benefits of channel diversification into wholesale.

Improving balance sheet and strong cash flow enabled record full year dividend

Kathmandu’s balance sheet position continues to improve, with the strong cash flows generated in FY19 supporting a NZ$14 million repayment of net debt and NZ$15.7 million capital investment in store optimisation (new stores and refurbishments) and growth enablers.

The Oboz acquisition in April 2018 added circa NZ$60 million in net debt. The strong operating cash flows in the subsequent 16 months have reduced the Company’s net debt to NZ$19.3 million at 31 July 2019

A final dividend of NZ 12.0 cents per share has been declared, taking the full year dividend to NZ 16.0 cents per share, another record for Kathmandu. The final dividend will be fully imputed for New Zealand shareholders, and fully franked for Australian shareholders. The final dividend will have a record date of 30 September 2019, and payment date of 11 October 2019.

Trading performance for first seven weeks of FY20

For the seven weeks ending 15 September 2019, Group same store sales grew 6.1 percent at constant exchange rates. Australia same store sales grew 4.0 percent, and New Zealand same store sales grew 11.7 percent (albeit at lower gross margins). This initial period of FY20 is expected to comprise a small proportion of the 1H FY20 sales result.

Well positioned to deliver on future growth opportunities

Commenting on the outlook for Kathmandu, Simonet said: “Oboz has accelerated our transformation from a leading Australasian retailer to a global brand-led multi-channel business, and has enabled us to diversify our channels, brands, products, and markets.”

“Our entire team is proud to have delivered four years of innovative products, sustained sales and profit growth, strong operating cash flows, and significant value for our shareholders. In Kathmandu and Oboz, we have two distinctive brands, with strong fundamentals and significant international growth potential, delivering great quality products to our loyal customers.”

Photo courtesy Oboz