KMD Kathmandu Brands

[Shareguy]

Should point out brokers figures above are normalised before adjustments.

[Basil]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/KMD/399077/379334.pdf

Not one I follow but I couldn't help noticing the pretty slow stock turn v other retailers, (from memory 1.7 times but DYOR) but the gross margin is impressive in this environment.  About 20 times FY22 profit, feel like a lot of the recovery and we cycle pandemic lockdowns is possibly built in but I am sure they will do much better in FY23.  Most of their products are "outdoors" lifestyle orientated so I would expect a huge uptick in demand as we cycle the endless drudgery of Covid restrictions.

On the other hand, no imputation credits for Kiwi investors will annoy dividend hounds and retail is challenged by a multiplicity of factors already debated at great length on this forum and elsewhere.  That very modest stock turn, the complete lack of imputation credits and their modest level of digital sales, (about 16% from memory but again DYOR) make other best of class retailers like HLG look more attractive to me, not to forget HLG have far more attractive metrics, (very early teens PE and partial imputation credits giving a yield of approx 8% gross).

That said brokers expect a huge increase in eps in the years ahead to 10 cps in FY23 and 13 cps in FY24 so maybe this is a good retailer for a springboard to growth as we emerge from the recession in FY24 ?
https://www.marketscreener.com/quote/stock/KMD-BRANDS-LIMITED-103506238/financials/

Final thought.  Just brought up a 1 year chart and had a look at the T.A.  Oh my goodness that looks ugly.  You'd have to be a VERY brave investor to buy into that confirmed downtrend.

Thoughts ?

[lorraina]

ONLINE SALES GROWTH BEYOND COVID STEP-CHANGE
• Kathmandu +47.1% online sales growth since FY19 (pre-COVID), and now
comprising 18.7% of sales
• Rip Curl record online sales at full margin, more than double FY19 (preCOVID), and highest-ever penetration at 13.0% of DTC sales
• Oboz online sales exceeded expectations in Q4 once inventory levels
recovered. Significant growth opportunity, supported by inventory depth and
product range expansion

Still poor.
More effort required.
Looks to me as though their business model is still based on 3 or 4 so called sales a year.

[BlackPeter]

I guess there is some light as well as some shade

Inventory up, Receivables up and Intangibles up ... hmm.

RoE of 4.3 % isn't yet ready for the Guinness Book of records either, and in the combination with the high intangibles one could wonder, whether they paid too much for their intangibles, couldn't one?

Anyway - dividend (6 cts for the year) is amazing (considering the share price) and higher than their earnings for the year (5.1 cts per share), so board must be really optimistic.

Better not check the cashflow statements ... but hey,

NTA did go up by more than 10% ... (this is good  ) reaching an outstanding 18.5 cents per share (  ); Ah, well ...

what possibly could go wrong?

Did I mention it? Despite some warts I think around $1 they are worthwhile a punt ... The outlook sounds clearly better than last year, the outdoors are calling and tourists are coming back.

Discl: bought some more cum div ...

[Basil]

You're very brave BP.  KW would give me a darn good tongue lashing (Beagle is VERY scared of that), if I dared buy this in such a horrible confirmed downtrend.

[BlackPeter]

You're very brave BP.  KW would give me a darn good tongue lashing (Beagle is VERY scared of that), if I dared buy this in such a horrible confirmed downtrend.

Fair enough, according to KW's well known slogan it might have been as well dumb move - or maybe not.

I guess we will see ... it just feels, given these results, it can't go much further down anymore ... and the analytical power of the NZ Superfund (just last week backing up the truck) is as well on my side ; But for sure - nobody knows what the future will bring.

[Shareguy]

FY22 result a bit short on expectations. As we no with the 1H result covid had a big impact ($35M plus $8M Oboz)).

Currently trading at $1.03 which gives us a trailing PE of 20.6.....not cheap.

History says a lot about this company, with the purchase of Ripcurl a fantastic acquisition and probably saved the company in my opinion.

EPS was really taking off until covid hit, as follows (taken from result announcements)

2018  $23.8cps
2019  $15.9
2020  $1.6
2021  $8.6
2022  $5.0

2023  $11.26  Craigs Forecast which on $1.03 is a forward PE of 9.1
2024  $13.48                                                                                 7.6

The outlook was the key with CEO stating that August sales above August 2019 (pre CVD) by 10.3 percent continuing trajectory of Q4 FY22.  Group direct to consumer sales for the first 6 weeks of FY23 plus 86.7 percent YOY.  Inventory to reduce.

KMD is my only retail stock and I like it because the products they sell are designed by them which enables them to command a great margin.  The question is are the bad times over?  If we agree that lockdowns are a thing of the past and supply issues normalize, then the future does indeed look brighter for KMD. That's my thoughts, what's yours?

[lorraina]

https://finnewsnetwork.us1.list-manage.com/track/click?u=4e327af0b9377422183e60879&id=900867fd8c&e=2039e3d3d1

[Basil]

A few more thoughts. Objectively it must be acknowledged they've done a fabulous job to maintain the gross margin at a very high 58.9% given the enormous challenges thrown up by Covid and supply chain issues.

It also has to be said that there's a readily apparent pathway forward to better times given its obvious many of the challenges experienced in the first half are on the balance of probabilities either non-recurring or the impact going forward is now considerably ameliorated.

I also suspect that more than two and a half years into this pandemic most people are well and truly "over it" and the sort of products KMD sell are directly related to getting out there into the great outdoors again which is something I suspect many people are really looking forward to.

If Craigs are right with their forecast for FY23 then the shares are very cheap with further growth forecasted into FY24.  I've put these on my watch list and will follow the TA closely.

[Shareguy]

Craig's have updated today to outperform at $1.46 from $1.56

EPS FY23 9.37 which is pe 11
    FY24 11.81         Pe 8.7

While FY22 proved to be another challenging year for KMD, highlighted by 1H22 uEBITDA down -80% on the pcp, our thesis has been that KMD will benefit as travel restrictions unwind. 2H22 provided some evidence to support this view, with the Kathmandu brand producing record Q4 sales and 2H22 Group uEBITDA up +34% on the pcp. Further, management have commented that strong momentum has continued into FY23. With travel returning, supply chain disruptions easing and forward order books holding strong for Rip Curl and Oboz, we expect the post COVID earnings normalisation will continue through FY23/24. With a forecast 3 year EPS CAGR of 37% to FY25, low net debt and trading on an FY24 PE of 8.7x, we continue to see KMD as a strong reopening trade, maintain Overweight.

[BlackPeter]

America and Europe - here we come!

CEO does not lack ambitions:

https://www.nzherald.co.nz/business/what-expansion-looks-like-for-kathmandu-as-it-pushes-into-europe-and-north-america/IVH6U3VHCIMJ3BURBREUOW4DOE

(probably paywalled)

Strategy, though sounds sensible:

KMD Brands chief executive Michael Daly said the launch into North America and Europe would remain small initially while it tested demand. All going well, he said Kathmandu planned to follow with retail store openings to complement its e-commerce strategy.

The company has its eyes set on large cities that appeal to its active outdoor consumer, locations such as Vancouver in Canada, Denver in America and Munich in Germany, for flagship retail locations.

"It is very much a soft launch [at this stage] focusing on 20 to 25 select influential outdoor accounts to test our concept and give us confidence for future expanded distribution. We're focusing on wholesale and online at the moment in Europe and Canada, and likewise when we launch in the US later this year," Daly told the Herald.

[Hectorplains]

America and Europe - here we come!

CEO does not lack ambitions:

https://www.nzherald.co.nz/business/what-expansion-looks-like-for-kathmandu-as-it-pushes-into-europe-and-north-america/IVH6U3VHCIMJ3BURBREUOW4DOE

(probably paywalled)

Strategy, though sounds sensible:

Interesting, Canada is well served already with established outdoor clothing and apparel retailers.  I'm not sure what KMD would offer that's not already there? 

[Basil]

Interesting, Canada is well served already with established outdoor clothing and apparel retailers.  I'm not sure what KMD would offer that's not already there? 

Canada Goose jackets are really awesome BUT check out the prices...   https://www.matchesfashion.com/intl/mens/designers/canada-goose  makes Kathmandu jackets look like they're very good value at full retail price, which is no easy feat !

[Shareguy]

Added another parcel today on the back of further insider buying.

[BlackPeter]

Added another parcel today on the back of further insider buying.

Well, yes - three of the directors accumulated or bought recently ....

Philip Bowman increased his holding in two steps from 400k to 650k;
David Kirk bought 250k shares and
Abby Foote increased her holding from 65k to 130k.

All quite meaningful holdings .... I assume this means they are reasonable optimistic re Kathmandus  fortunes :