We might not be allowed out due to COVID-19 restrictions but that won’t stop Australians from getting their beloved puffer jackets for Winter with Kathmandu Holdings (ASX: KMD) reporting online sales to be up 78% over the past six weeks.
The business update comes as Katmandhu continues its gradual store re-openings where the global retailer closed all of their Kathmandu and Ripcurl stores in March in response to the pandemic. This effected their the entire network of stores across Australia, New Zealand, North America, Europe and Brazil were affected.
At the same time, Kathmandu’s head office re-focused efforts towards their online stores which have propped up sales for Kathmandu Holdings to report total revenue for the 10 months ending 31 May 2020 to only be down 15%, compared year-on-year.
This comes despite the retail network being closed for two months, or 20% of that period.
Despite the strong growth in sales where Kathmandu online sales were up 78% and Ripcurl online sales up 151% over the past six weeks, the company remains cautious about the outlook, conscious of a potential second wave of COVID-19 and a recent increase of new cases.
“Whilst we are pleased with the strong recovery in direct to consumer sales over the past six weeks, we remain cautious about medium-term levels of consumer demand,” said Katmandhu CEO, Xavier Simonet.
“We believe that some short-term factors, including Government support packages and pent up demand are underpinning current sales. The heightened level of uncertainty that currently exists is likely to persist over the medium-term, and we are focused on being well prepared to respond to the associated risks and opportunities as they emerge.”
The most heavily impacted division in the pandemic fallout has been Ripcurl’s wholesale division which has seen a 26% decline in sales. This comes after Kathmandu saves the brand when purchasing it for $350m in October 2019.
Based on current data available to them, Kathmandu Holdings anticipates EBITDA for FY20 to be north of $70 million but forewarns gross margin to be on the lower end of their 61% to 63% target range.
Since hitting a low of $0.48 at the peak of the pandemic in March, shares in KMD have made a strong recovery despite undertaking a $207m capital raise in April at $0.50 per share, strengthening its balance sheet to address COVID-19 headwinds.
The market responded well to the sales revenue update for KMD shares to open at $1.20, a rise of 11% on their previous $1.075 close.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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