Kathmandu warns retailers of "new normal"

20 Sep 2012, 3:18 pm   -   Source: AAP
Retailer Kathmandu's full year profit has fallen 11 per cent to $A27.87 million. (AAP)

Retailer Kathmandu's full year profit has fallen 11 per cent to $A27.87 million. (AAP)

The head of outdoor clothing retailer Kathmandu says the tough trading conditions gripping the sector are the "new normal".

Retailer Kathmandu expects to bounce back from a difficult year with a higher net profit but warns that it sees the current tough trading climate as the new normal.

The outdoor clothing and equipment retailer posted a net profit of $NZ34.9 million ($A27.87 million) in the year to July 31, down 11 per cent from $NZ39.1 million ($A31.09 million) in the previous year.

However it has forecast continued growth in the outdoors sector it operates in, after posting sales revenue for 2011-12 of $NZ347.1 million ($A277.20 million), 13.4 per cent higher than in the previous year.

Profit margins shrank due to the cost of a new loyalty program, and operating costs were 18.4 per cent higher at $153 million due to store relocations and refurbishments.

The elimination of one-off expenditure meant costs would not increase by as much in the current year, it said.

Other retailers are faring worse, such as Myer or David Jones, with the latter posting a 40 per cent profit fall this week.

Kathmandu's chief executive Peter Halkett said he saw the current economic conditions as the "new normal".

"I think anybody waiting for a significant turnaround or a lift is going to be holding their breath and running out of air pretty quickly," he told reporters.

"This is a new world and there is every chance things could get a little more difficult."

However he said Kathmandu's outdoor category was resilient, evidenced by the increase in sales offset by increased competition in the space.

"Provided there is no further deterioration in economic conditions, following the investment program in 2012 Kathmandu expects am improvement in performance in the business," Mr Halkett said, without providing specific guidance.

He said the greatest growth opportunity was in Australia, where Kathmandu's market penetration per capita is only one-third of what it is in New Zealand.

Sales growth in 2011/12 was driven by a 30 per cent lift in loyalty members in its Summit Club, who spent 50 to 100 per cent more than other customers.

The Summit program is a key part of the a strategy to lift online sales, with Kathmandu able to market to those customers' through e-mail and membership approaching the

desired one million mark.

The company does not disclose what proportion of sales are online, but said they were well below five per cent.

Kathmandu opened 10 new stores in the year, taking the total number to 120.

It declared an unchanged fully franked final dividend of seven NZ cents per share.

The company's shares were one cent higher at $1.38 at 1509 AEST.

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