KMD - Kathmandu

[EBITDA]

Tough times for retailers ...wonder how much sales are down by?

Everything positive from Xavier but this statement slightly pessimistic ... Delaying and cancelling existing inventory orders where possible, based on reduced levels of expected demand in the medium term;

In the interim statements published last month, KMD is holding a TON of inventory at the moment. ($250m)
This is partially due to the recent acquisition of Ripcurl but it is still a very high level of inventory and in the current market it does make sense that new imports are being cut.

I think KMD was stocked up expecting a strong 2020 and are fortunate that their gear isn't as fashion focused as other clothing retailers, I would expect minimal write off on the value of existing inventory.
Not surprised about the cancellations of orders having viewed their balance sheet, don't think its an overly negative sentiment either. Seems in line with the current economy and honestly am fairly bullish here over a 24 month span.

Disc: Bought at 0.64, sold at 0.84 one week later.
Rebought at 0.73 last week and feeling quite bullish on a mid-long term hold.

[dreamcatcher]

interesting article yesterday in Stuff on NZ company in the south island that brought in Italian machine for sock making and the Italians send over software to make woolen masks. KMD is one of there biggest outlets and the manufacture cant wait for NZs store to open. I was thinking just that , where could KMD get fashionable PPE. Well its being manufactured in WOOL right here in NZ using modern Italian machinery brought into the country late last year.. DISC: often holding , buying and selling this stock. Well done NZ and the value in this stock is the BRANDS and every generation loves the outdoors more and more...Do we charge a special package to bring in echo tourists ? Special flights with a 6 month stay at the now closed heritage ? For a mere cool 1 million a person?

Interesting part is "Merino Wool Masks" are washable so no need for 2 a-day disposables

[Waltzing]

trades today in KMD are huge comapred to HLG. i thought at the time of the CAP raise that the BRAND alone was worth millions to KMD. Rip Curl alone is a huge brand. But i only took the allocated share and sold half for a profit. I really did not image that the market would understand the brand value but it has. Many investors here who are older and dont surf and dont wear KMD with them when they travel around the world with there surf boards and kit surfing gear just dont get it. KMD is NOT HLG. I thought the younger generation understood i would have bought every share i could have got and i bet people did and are now making big profits... i had the idea but failed to execute thinking all those investors would bump the stock on no take over. There is no doubt that may be a retest for the lows once death in the USA spike. Other on line retailers with spikes are JB HIFI.. kust coming over the CNBC broadcast now at 12.27PM. Sorry for the badly typed text as im surround by keyboards and screens and missing trades. Everything is moving so fast.

[nztx]

In the interim statements published last month, KMD is holding a TON of inventory at the moment. ($250m)
This is partially due to the recent acquisition of Ripcurl but it is still a very high level of inventory and in the current market it does make sense that new imports are being cut.

I think KMD was stocked up expecting a strong 2020 and are fortunate that their gear isn't as fashion focused as other clothing retailers, I would expect minimal write off on the value of existing inventory.
Not surprised about the cancellations of orders having viewed their balance sheet, don't think its an overly negative sentiment either. Seems in line with the current economy and honestly am fairly bullish here over a 24 month span.

Disc: Bought at 0.64, sold at 0.84 one week later.
Rebought at 0.73 last week and feeling quite bullish on a mid-long term hold.

Interesting all that Inventory

How much of it is seasonal .. what sort of % of their market will still be buyers on reopening .. and further Inventory write-downs potentially on the horizon out of this ?

Punting on large inventories is one thing but in the rag trade, the strategy can also come badly unstuck

Any word on any restructuring some stores coming from KMD yet ?

Many in Retail Sector may well be expected to re-optimise store exposures out of this on changing business environment & new retail climate .. C-19 & closures must surely provide the ideal opportunity to lop stores that don't meet the mark

[dibble]

. .. and further Inventory write-downs potentially on the horizon out of this ?

...perhaps but dont they have to value stock at cost? One of the higher margin operators so even a 50% fire sale likely to yield some sort of profit.

[EBITDA]

...perhaps but dont they have to value stock at cost? One of the higher margin operators so even a 50% fire sale likely to yield some sort of profit.

Yes, stock is realised at the lesser of cost or realisable value.

I doubt they will be pushed to the point where stock is being sold below cost, I think they will just be slowing down their supply chain as they are currently very high in inventory in proportion to what they can expect to sell in this economy.
My expectation is there will a bit of a slow down this year and lower margins reported in the November results as stock will likely be sold at a discount even larger than what is normal for KMD.

But it isn't food, inventory won't expire, the only way I would see a write down happening is if there is a serious going concern/solvency issue which I believe is unlikely following the capital raise last month.

Tldr: Predicting lower gross profit margin, but not an inventory write off. Annual result in November will be poor, but still deserving of a far higher share price than what we are currently at.
I'm up 27% since I bought on last Thursday at $0.74 and am less bullish on a buy in now that the price has reached $0.93, but am still quite content to hold for the coming months.

[EBITDA]

Interesting all that Inventory

How much of it is seasonal .. what sort of % of their market will still be buyers on reopening .. and further Inventory write-downs potentially on the horizon out of this ?

Punting on large inventories is one thing but in the rag trade, the strategy can also come badly unstuck

Any word on any restructuring some stores coming from KMD yet ?

Many in Retail Sector may well be expected to re-optimise store exposures out of this on changing business environment & new retail climate .. C-19 & closures must surely provide the ideal opportunity to lop stores that don't meet the mark

I haven't read anything on restructuring yet but you're right, definitely need to follow that very closely.

Only other interesting recent news I've read related to KMD was insider disclosures, 3 directors and CEO bought quite substantially last week. CFO had a small addition. But the were fairly major buy-ins by the other 4 execs I am finding very interesting and am hopefully not being naive on that one.

https://www.nzx.com/announcements/352408

[nztx]

...perhaps but dont they have to value stock at cost? One of the higher margin operators so even a 50% fire sale likely to yield some sort of profit.

How low will the fire sale prices go, if the intended buyers have evaporated & KMD may have full warehouses & stores of some lines
in a changed retail environment ?

Fair Realisation prices should then be the marker point on stocksheets, not cost whatever that was if higher

[dibble]

How low will the fire sale prices go, if the intended buyers have evaporated & KMD may have full warehouses & stores of some lines
in a changed retail environment ?

Fair Realisation prices should then be the marker point on stocksheets, not cost whatever that was if higher

Definitely a risk, just saying they probably have quite a lot of room to discount relative to other retailers before they lose cash on the stock investment. If they have enough volume to totally saturate local demand that would be worrisome.

[nztx]

Definitely a risk, just saying they probably have quite a lot of room to discount relative to other retailers before they lose cash on the stock investment. If they have enough volume to totally saturate local demand that would be worrisome.

Multiply that by other majors in the same Sectors with similar competing stock types & who may experience similar
that gives indication of potential magnitude - then look at KMD's dual country exposure
Across the ditch there has been a trail of earlier disasters which may not help things either, depending on how
the Group's Buying habits have adapted, if they have at all..