The Christmas Sales Aren't Working For Kathmandu - Stock Falls 20% Amid 'Challenging Conditions'

(Photo: Getty Images)

The first five weeks of the Christmas sales are below last year’s levels for outdoor wear company Kathmandu, another sign of fast weakening consumer sentiment.

The stock is getting destroyed on the ASX, trading down more than 20% today.

The company says the total sales increase for the 2015 year so far is 14.1%, down from an expected 18.6%.

This will mean a “substantial reduction” in the gross profit earned in the pre‐Christmas Day trading.

There is still the potential for improved performance by the end of the first half of 2015.

“However, given the results to date and the widely acknowledged negative consumer sentiment in Australia, Kathmandu anticipates any recovery in trading from now till January 31 will not be sufficient to make up the shortfall,” acting CEO Mark Todd said in a sales update.

There are a number of measures showing rapidly weakening consumer sentiment in recent weeks. One of those is the Westpac-Melbourne Institute Consumer Sentiment Index which fell 5.7% in December from 96.6 in November to 91.1 in December.

Kathmandu’s overall profit remains primarily dependent on second half year trading which in last financial contributed more than 70% of total year’s profit.

“We anticipate challenging conditions in the Australian market may continue for some time, and as a consequence, we are reassessing our sales and pricing strategy,” Todd said.

In the 2014 financial year, Kathmandu’s profit fell 4.6% after a weaker dollar and a slump in demand during the key selling month of June.

Kathmandu shares were trading at $2.11, down more than 20% on Friday’s close, a short time ago.

This post has been updated.

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