KMD - Kathmandu

[silverblizzard888]

This acquisition probably isn't a splash in the water kind of move that investors like, but its a well calculated move to grow without putting too much pressure on the pace of store openings to bring all the growth.

For those that think Rod isn't entirely with this plan I'd say you're wrong. This is totally a Rod type move. By acquiring Oboz and as they have mentioned in the statement, they want to head into the wholesale market. Taking the wholesale market approach to expand into North America is totally the Rod approach, its very conservative and calculated. Its a way for KMD to sell more product without opening any stores, which lowers the downside by a lot if they don't do well there. I think they have learnt their lesson from the UK where opening stores wasn't a immediate hit. Its a bit different for Rod at Briscoes since he couldn't take the same approach cause it doesn't manufacture its own branded products, but Kmd do and this is a very similar strategy that Rod wanted to do when he wanted to acquire Kmd a couple years ago.

Its too easy to think KMD can do it all, considering their success in NZ and AUS its a easy mistake to think the same model works elsewhere. At the end of the day KMD is a manufacturer of their own goods who just happens to sell their own goods in their own stores too. The Oboz acquisition opens up channels and networks that will help them sell their product in overseas in the wholesale approach. If you looked at Adidas and Nike they used the wholesale approach for a very long time in a lot of countries and when their products grew too influential and sales amounted to the point where it seemed ridiculous not to open their own stores thats when they did. I think its a good approach.

The value of the deal is average on present financials, they are paying over $100 million NZ for about $5 million net profit for Oboz for the upcoming financial year, but the net profits are growing over 80% and revenues 36%, which probably if consistent then perhaps they will deliver 9 million net profit next financial year and from then on the profits will justify the price tag and bring a lot of future benefits for Kmd. On financial terms its average value, but for future profits and connections it brings then its not too bad. Long term holders its a pretty good thing, short term holders I don't think theres much for you.