Kathmandu lost a quarter of its market value yesterday after a poor trading update sparked a sell-off, pushing what has been one of the best-performing stocks of 2011 below its starting price for the year.
The outdoor clothing retailer’s shares, which are listed on both sides of the Tasman and were trading as high as $2.63 on the NZX last month, plunged 25.4 per cent to close at $1.64 after the announcement that Christmas sales had not met the expectations of management.
Mark Wade, an analyst at Sydney’s Linwar Securities, said the sell-off had been “fairly savage”.
After downgrades this week from other ASX-listed retailers, including JB Hi-Fi and Billabong, investors were taking a “shoot first, ask questions later” approach, Wade said.
Market commentator Arthur Lim said Kathmandu had consistently beaten market expectations since its sharemarket float in 2009, so yesterday’s bad news came as a shock, prompting the 56c drop in its share price.
Kathmandu said it was anticipating earnings for the six months to January 31 to be lower than the $23.2 million the company achieved in the same period during its last financial year.
Same-store sales grew 2.8 per cent during the 20 weeks to December 18 this year, well down on the 4.4 per cent growth Kathmandu saw during the previous comparable period, the company said.
Paul Harrison, head of equities at BT Asset Management, said the news the company announced yesterday did not warrant such a big fall in its stock.
Australian investors were “dumping anything with retail or consumer exposure”, Harrison said.
Kathmandu chief executive Peter Halkett said trading had taken a turn for the worse since the company began its Christmas campaign during the last week of November.
The drop in sales reflected weakened consumer spending, he said.
Halkett added that there had also been a trend over the past few years for shoppers to defer big ticket purchases until after Christmas in order to take advantage of January sales.
Kathmandu has been one of the top performers on the NZX this year, rising 46 per cent between the start of January and mid-November, from $1.80 to $2.63.
The company reported a strong full-year result in September, with adjusted net profit rising 55 per cent to $39.1 million.
But since the company’s annual meeting on November 18, when Halkett gave warnings on the state of the retail market, shares have fallen 37.7 per cent.
Kathmandu said same-store sales growth had been higher in New Zealand than Australia in the year to date, while in the United Kingdom same-store sales had continued to decline.
Halkett said full-year profit growth was still achievable.
“Our overall profit result for the full year remains primarily dependent on second half-year trading [from February 1 to July 31] which last year contributed almost 70 per cent of our total year profit,” he said.
“As Kathmandu continues to roll out more stores the weighting of our earnings towards the second half trading is expected to increase due to two of our three major sale events occurring in the second half.”
Halkett said a number of actions had been initiated to recover the shortfall in Christmas sales, including additional promotional activity aimed at stimulating revenue, which would have an impact on margins and costs.
Kathmandu was also reviewing its capital expenditure, which the company had intended to double in its current financial year.
By Christopher Adams | Email Christopher