Tech Led Pull-Back| Kathmandu Surges +12%

26 June 2018

Global markets sold off overnight as an escalating trade dispute between the United States and other leading economies battered US stocks which experienced their biggest daily drop in over 2-months. 

Losses were broad based, although the Technology sector was the hardest hit on reports that the US Treasury Department was drafting curbs that would block firms with at least 25% Chinese ownership from buying US tech firms. As we have discussed previously, a global trade war driven by US protectionism is clearly a risk for global markets and we are watching developments closely.

 

Stock in Focus: Kathmandu (KMD:NZ / KMD:AX)
Shares in retailer Kathmandu surged +12% yesterday to the highest level in over 3-years on the back of a solid trading update as it expects to increase profit this year on higher sales and better margins. What makes the result more impressive in our view is the fact that Kathmandu is producing great numbers against a very difficult retail trading backdrop (with slowing retail spend and online competition from Amazon etc).

Looking at some of the detail, Kathmandu expects net profit of $48 million to $52 million in the year ending July 31, up from $38 million last year. At the top line, same store sales (in Australia) are up an impressive 7.7% so far this year covering the 47 weeks to June 24 as Kathmandu’s new CEO says they has been discounting less, selling more product at full-price and achieving a higher average selling price. 

Kathmandu said that "The autumn season and the start of our key winter promotion have delivered higher sales and profit than planned. The successful launch of innovative new products, enhanced in-store customer experience, inspiring content and engagement on social media and digital channels have contributed to the performance”.

We currently have HOLD rating on Kathmandu.

Members should look out for a full update on Kathmandu to be released in our weekly report.

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Australia & New Zealand Market Movers

The Australian share market continued to pull-back from a decade high yesterday (ASX 200 index -0.24%) as the share market lost ground with losses in the finance sector following Commonwealth Bank's announcement it will spin off its wealth management business. Commonwealth Bank is splitting with its wealth management and mortgage broking businesses as Australia's largest lender slims down and sharpens up following a series of industry scandals. CBA has cancelled the previously announced IPO of Colonial First State Global Asset Management and will instead bundle it with Colonial First State, Count Financial and Financial Wisdom, news which was not received positively by the market. At the same time, ANZ continues to divest assets, announcing it will sell its retail and commercial/SME banking business in Papua New Guinea to Kina Bank Limited. 

 

The New Zealand market was a touch lower on Monday (NZX 50 index -0.03%) led by Air New Zealand and NZ Refining while Kathmandu Holdings surged to a three-and-a-half-year high. Stock specific news was light, as the New Zealand dollar remained under pressure against the greenback as investors awaited any more news on the trade front as well as this week's cash rate decision from New Zealand's central bank (on Thursday morning).

 

3 Things Markets Will be Watching this Week

1.               Investors will continue to watch for retaliatory trade tariff measures between the US and China.

2.               The Reserve Bank of New Zealand makes an interest rate decision on Thursday morning.

3.               US economic growth (GDP) and inflation data is published at the end of the week

 

Have a Great Day,

Team

Global markets sold off overnight as an escalating trade dispute between the United States and other leading economies battered US stocks which experienced their biggest daily drop in over 2-months. 

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