Kathmandu shares plummet 23% on profit downgrade: Midday roundup

Outdoor clothing and equipment retailer Kathmandu has suffered a 23% plummet in its share price to $1.27, after the company announced a profit downgrade due to poor Christmas sales.

Shares were down 20% to $1.30 at 12.00 AEST.

The move comes after JB Hi-Fi and Billabong have announced similar downgrades.

In a statement, Kathmandu said it now expects EBITDA for the six months ending January 31 to be lower than the previous corresponding period. Chief executive Peter Halkett said in a statement the retail environment in both Australia and New Zealand has grown progressively worse.

“Our trading performance throughout the Christmas period to date has been below expectations, which is a reflection of weaker consumer spending,” he said, noting the company’s performance is dependent on second-half trading.

“As Kathmandu continues to roll out more stores, the weighting of our earnings towards second half trading is expected to increase due to two of our three major sale events occurring in the second half,” he said.

The company also said same-store sales had fallen over the past five weeks.

“In this period trading has been stronger in New Zealand than Australia and gross margins have been maintained at approximately the same levels as last year,” it said.

“As there are six more weeks of trading before the end of the first half FY12, it is too early to provide more specific detailed guidance on either total sales or profitability for the full period.”

European Central Bank completes record fund injection

Banks have borrowed nearly half a trillion Euros from the European Central Bank, with analysts saying the move should give certainty to the market.

The ECB has said more than 500 banks borrowed under new three-year lending facilities, with the demand spurring hope that a new deal will be reached to help solve the current debt crisis.

CreditSights analyst John Raymond told the Wall Street Journal the injection should give the markets a little more certainty.

“It’s much better to have this funding locked in rather than praying the market reopens,” he said. “I don’t think you can say it’s a game-changer…but it sort of slows down the vicious circle.”

Shares fall on more retail worries

The Australian sharemarket has fallen today after retailer Kathmandu announced its profit downgrade, confirming more trouble in the sector.

The benchmark S&P/ASX200 index was down 34 points or 0.8% to 4105.3 at 12.00 AEST, while the dollar rise slightly above parity.

AMP shares fell 0.95% to $4.15, while ANZ shares gained 0.14% to $20.88. Westpac lost 0.39% to $20.40 as NAB fell 0.47% to $23.45.

In the United States, the Dow Jones Industrial Average rose just 4.2 points to 12,107.

Moodys’ reaffirms Australia’s triple-A credit rating

Ratings agency Moody’s has reaffirmed Australia’s triple-A rating, citing the country’s economic resiliency and strong key sectors.

“Economic resiliency is demonstrated by the country’s very high per capita income, large size, and economic diversity,” Moody’s said.

“As one of the world’s most advanced economies, the country has not only a significant natural resource sector – including minerals, hydrocarbons, and agriculture – but also well-developed manufacturing and service sectors. It also demonstrates strong governance indicators.”

Treasurer Wayne Swan noted that Australia ends the year rated AAA by all three global ratings agency, which did not happen under the Howard Government.

“Despite the substantial global headwinds that are hitting our economy, Australians have reason to be confident about our economic strengths that are unmatched by just about any other developed economy,” Swan said.

“We have a solidly growing economy, low unemployment, contained inflation, strong public finances and a record pipeline of investment that is gathering pace.”