Presentation to Macquarie Securities Australian Emerging Leaders Conference - 5 May 2010 5 May 2010
Peter Halkett – Kathmandu Managing Director
Agenda
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Business and Market Overview
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Key Growth Strategies
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Summary and Outlook
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Q&A
5 May 2010
BUSINESS OVERVIEW 5 May 2010
Overview of Kathmandu Kathmandu is a leading retailer of clothing and equipment for travel and adventure in Australia and New Zealand
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Vertically integrated business from inhouse design team to company-owned retail chain
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Total sales are split approximately 60% clothing and 40% equipment
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Design tailored specifically for Australian and New Zealand conditions
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93 stores as at 5 May including 6 UK
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Sales of approximately NZ$240 million and EBITDA of NZ$57 million forecast in FY2010
5 May 2010
Existing stores in Australia and New Zealand
Addressable Market Kathmandu’s wide appeal and technical credibility increases the size of its addressable market
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Kathmandu divides the clothing and equipment for travel and adventure market into three categories: –
Specialist - highly technical products
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Mainstream/lifestyle - some of the technical characteristics of specialist products
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General merchandise retailers - targeting the price sensitive consumer
With affordable, technical products, Kathmandu competes in all three categories, recognising its view that the mass market represents a significant financial opportunity where buyers will pay for technical credibility
5 May 2010
Note: Not to scale
Specific Market Participants The Kathmandu brand has the largest number of stores across New Zealand and Australia
Australian stores
New Zealand stores
31 5 6
11 45
60
36
39
39
30
18
7
13
10
9
7
2
BCF
Mountain
Ray's
Aussie
Snowgum
Anaconda
Macpac
Paddy Palin
Bivouac
R&R Sports
Columbia
The North
Designs
Outdoors
Disposals
Source: Kathmandu store numbers as at 31 July 2009, which excludes three stores that have since opened between that date and the date of the Prospectus. Other store numbers (approximate) as at 7 October 2009.
5 May 2010
Face
Financial Summary Historical and forecast sales (NZ$m) $240.0
Pro forma historical and forecast EBIT (NZ$m)
$215.6 $50.6
$192.8 $44.1
$151.4 $33.1
$32.9
FY2007
FY2008
FY2007 – FY2010 FY2007
1st Half FY10
5 May 2010
FY2008
FY2009
FY2010 forecast
FY2009
FY2010 forecast
Business Highlights •
Amongst outdoor enthusiasts, Kathmandu is the #1 recognised outdoor clothing brand in New Zealand and Australia, with 99% recognition in New Zealand and 88% recognition in Australia, according to the latest GORETEX® brand survey*
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Kathmandu is a leading provider of quality clothing and equipment for the travel and adventure market with the largest number of retail stores in this category across Australia and New Zealand
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Kathmandu offers a wide range of products with technical specifications which appeal to a broad market
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Kathmandu’s customer base is not limited to recreational activity participants as its products appeal to many customers as a lifestyle brand
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From in-house design to Company-owned retail stores, Kathmandu’s vertically integrated business model gives the Company control of its brand, products and customer experience
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Vertical integration allows Kathmandu to achieve both a retail and wholesale margin
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Gross margin >60% maintained every year since FY2007
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Kathmandu has grown from 41 stores in FY2005 to 82 as at the end of FY2009
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Plans to open 12 new stores during FY2010, of which three have already opened and a further three are expected to open before Christmas
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70 locations in Australia and New Zealand have been identified to assess for suitable new store sites in the future (including the 12 FY2010 stores)
Brand recognition A market leader in Australia and New Zealand Technical products with wide market appeal Distinct advantages from vertical integration Attractive and stable margins
Significant store rollout potential
* Source: GORE-TEX survey June 2008 by W L Gore & Associates (Australia) Pty Ltd. Comprises both unprompted recognition of the Kathmandu brand, and recognition of the Kathmandu brand when prompted by the surveyor.
5 May 2010
KEY GROWTH STRATEGIES 5 May 2010
ANZ Growth Strategy
New store rollout Upgrade existing store network Expand product offer Grow and maximise customer database Operational efficiencies
5 May 2010
New Store Rollout: 15-20 stores p.a We have identified 150 potential Stores in ANZ, at least 60 further opportunities
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Profitability of current network
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Penetration of NZ versus AU
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Regional and infill opportunities
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Formats and size
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Destination, strip and mall locations
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Cannibalisation
5 May 2010
New Store Results
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Over 40 new stores in past 4 years
New Zealand stores 12 9
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Set up costs vary significantly – Regional, CBD, large or small
7
3
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Rapid profitability ramp up with average payback period better in NZ than Australia
High footfall
Destination
Regional /
Clearance
provincial
Australian stores
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Stores to come still generally representative of current portfolio range in terms of store format
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Generally smaller catchments from now on
25
11
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No loss making stores NZ/Aust
High footfall
Destination
5
4
Regional /
Clearance
provincial
5 May 2010
New Christchurch Store
5 May 2010
Upgrade Existing Store Network: 5-8 stores p.a Significant opportunity to enhance brand profile, grow floor space and lift same store sales
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Target stores: • Smaller stores • Secondary locations • Older, inefficient fit outs
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Enlarge, relocate and renovate
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Recent upgrades: • Canberra CBD • Queenstown • Brisbane CBD • Cashel St, Christchurch • Bourke St, Melbourne
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Before 31 July 2010: • Kent St and Dunedin
5 May 2010
Expand the Product Offer: 5-7% p.a. Product Design is a core competency, we have identified opportunities to grow our range by at least 20%
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Growth over last 3 years in ranges such as Active, Kids, thermals
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Many gaps in our product range – clothing and equipment
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Keep away from fashion – stay technical
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Stay within technical travel and adventure
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Specific future opportunities – examples: luggage and bags, travel accessories, more cycling and active, tee shirts, underwear and footwear
5 May 2010
Expand the Product Offer: Just released Winter 2010 Range
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Example of new products for winter 2010 Ultra core, Gore-Tex, merino, packs and bags etc Innovation and points of difference
5 May 2010
Grow and Maximise the Customer Database: At least double in 3 years
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Summit Club members attributes and opportunity: –
Loyal customers, frequent purchasers and lower marketing costs to service
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Current membership 340,000+ across all 3 countries, increased 20% + in last year
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Membership has more than doubled in past 4 years with average spend up
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Significant further potential to grown numbers, especially in Australia
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Doubling of membership numbers realistic objective
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Supported by improved recognition and reward of individual members utilising effective CRM tools
5 May 2010
Grow and Maximise Customer Database – Understanding our Customers Kathmandu’s core customer base can be classified into three categories, providing the company with access to a broad range of customers
Young Go-Getters
Adventurous Families
Emerging professionals (become Adventurous Families)
Typically professionals who enjoy the outdoors
Explorers who make time to travel and enjoy the outdoors
Higher than average incomes
Have children
They also fit walks, gym, jogging, swimming and cycling into busy lives
5 May 2010
Older Outdoor Enthusiasts
Enjoying their freedom as their children are partly or fully grown
Seeking new challenges and interests through outdoor experiences
Many are empty nesters
Deliver Operational Efficiencies – Target - reduce CoDB by 1% by FY13 Lower cost of doing business in percent terms / Gain operating leverage.
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Internal systems and processes – –
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Reduced cost of goods/improved supplier terms – – –
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Core systems upgrade to enable new efficiencies Improved reporting and mgmt information
New stock mgmt and forecasting systems Improved terms for larger orders as business grows Consolidation of suppliers while maintaining competitive pressure
Supply chain enhancements – –
DC Bypass & Cross Docking New WMS & Wireless technology to assist DC efficiency
5 May 2010
Deliver Operational Efficiencies – Supply Chain Example
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95%+ of stock currently passes through Melbourne and Christchurch warehouses
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Bulk deliveries currently received from suppliers in numerous categories where effective demand forecasting will reduce order sizes and stock holding
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Last year was first time where we trialled stock deliveries direct to stores through 3rd party warehouse (Auckland)
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Very little custom packing of stock at source
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No “smarts” in picking systems and technology in our warehouses
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Distribution of stock to stores intelligently around sales promotions requires high degree of manual intervention
5 May 2010
We present our “ANZ Growth Strategy” as “Destination 2013” The power the Kathmandu Brand is both internal and external
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We have identified 31 key workstreams – –
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“Destination 2013” – – – –
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To deliver the 5 growth strategies Supported by Brand, People, Systems & Processes
Clear focus for the medium term on ANZ UK is not a current priority Specific targets and goals for our team members Generating internal motivation and excitement
Considerable focus on “Execution” – –
Building capability in team to deliver Implemented new project management skills and processes
5 May 2010
SUMMARY & OUTLOOK 5 May 2010
Summary and Outlook •
Summary – – – –
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Proven business model with a track record of success Significant (proven/low risk) growth opportunities A business far from maturity Brand versus retailer
Outlook –
Much uncertainty exists in the short term: • • • • •
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2009 Stimulus impact Rising interest rates Increasing cost base – rents, salaries etc Volatile and unpredictable economic environment Weather impact
Trading Update – –
5 May 2010
Confirming previous guidance Remain on track with prospectus forecast
Q&A
5 May 2010
THANK YOU 5 May 2010 I WELCOME YOU TO ENJOY OUR NEW WINTER RANGE!
