While controlling stock inventory remains crucial, Kathmandu's full year performance now relies heavily on its forthcoming second-half, Easter and winter sales periods.
Kathmandu had warned late last year it needed a boost over Christmas and New Year, following lacklustre sales during an unseasonably warm winter, an event highlighted by several clothing retailers.
While group sales for the half were up 6.9%, from $167.6 million a year ago to $179.2 million, earnings before interest and tax was now expected in a range of $800,000 to a loss of $200,000, compared with $17.6 million last year.
Last year's after-tax profit of $11.4 million is expected to fall to a $1 million to $2 million loss.
The full result is due on March 24.
Kathmandu chief executive Mark Todd said the trading performance during the key Christmas and January period was below expectations.
''The reduction in same store sales in Australia throughout December and January, and in New Zealand from Boxing Day onwards, was disappointing,'' he said.
Craigs Investment partners broker Peter McIntyre said the market would be ''completely surprised'' at the extent of possible losses, to $1 million-$2 million for the half year.
''They were having to discount to get rid of [surplus] stock to get stock levels back in proportion. Obviously, they would have made losses on some [product] lines,'' he said.
Forsyth Barr broker Peter Young said Kathmandu had started the first half with excess inventory to clear, which weighed on margins because of more aggressive discounting than usual, but inventory levels were now in check, starting the second-half trading.
Kathmandu's earnings are seasonally weighted to the second half, so the key earnings period was still to come, Mr Young said.
Mr Todd said the main problems during the past two months included first-quarter sales levels, being at reduced prices to clear excess stock, particularly in Australia, which meant a corresponding reduction in second-quarter sales, which contributed to overall lower gross profit margins across the full period.
The sales mix across the Christmas and January period reflected lower-than-expected demand for summer and non-technical apparel categories in particular.
Mr Todd, noting 70% of last year's profit came in the second-half trading, said successful execution of key sales promotions during Easter and winter was ''core'' to the full year's earnings performance.
He declined to give any financial guidance for the second half.
Improvements in seasonal purchasing meant stock inventory at the end of January was expected to be down, compared with a year ago, he said.
