5 May 2010

Presentation to Macquarie SecuritiesAustralian Emerging Leaders Conference - 5 May 2010

Peter Halkett – Kathmandu Managing Director

Presentation to Macquarie SecuritiesAustralian Emerging Leaders Conference - 5 May 2010

Peter Halkett – Kathmandu Managing Director

5 May 2010

Agenda

• Business and Market Overview

• Key Growth Strategies

• Summary and Outlook

• Q&A

5 May 2010BUSINESS OVERVIEWBUSINESS OVERVIEW

5 May 2010

Overview of Kathmandu

• Vertically integrated business from in-house design team to company-owned retail chain

• Total sales are split approximately 60% clothing and 40% equipment

• Design tailored specifically for Australian and New Zealand conditions

• 93 stores as at 5 May including 6 UK

• Sales of approximately NZ$240 million and EBITDA of NZ$57 million forecast in FY2010

Kathmandu is a leading retailer of clothing and equipment for travel and adventure in Australia and New Zealand

Existing stores in Australia and New Zealand

5 May 2010

Addressable Market

• Kathmandu divides the clothing and equipment for travel and adventure market into three categories:

– Specialist - highly technical products

– Mainstream/lifestyle - some of the technical characteristics of specialist products

– 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

Kathmandu’s wide appeal and technical credibility increases the size of its addressable market

Note: Not to scale

5 May 2010

Specific Market Participants

45 60 36 39 39 30 18 13

31

11

10 277

5

6

9

BCF Mountain

Designs

Ray's

Outdoors

Aussie

Disposals

Snowgum Anaconda Macpac Paddy Palin Bivouac R&R Sports Columbia The North

Face

Australian stores New Zealand stores

The Kathmandu brand has the largest number of stores across New Zealand and Australia

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

Financial Summary

$151.4

$192.8$215.6

$240.0

FY2007 FY2008 FY2009 FY2010 forecast

Historical and forecast sales (NZ$m)

$33.1 $32.9

$44.1

$50.6

FY2007 FY2008 FY2009 FY2010 forecast

Pro forma historical and forecast EBIT (NZ$m)

FY2007 –FY2010

1st HalfFY10

5 May 2010

Business Highlights

• Kathmandu has grown from 41 stores in FY2005 to 82 as at the end of FY2009

• Plans to open 12 new stores during FY2010, of which three have already opened and a further three are expected to open before Christmas

• 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)

Significant store rollout potential

• Vertical integration allows Kathmandu to achieve both a retail and wholesale margin

• Gross margin >60% maintained every year since FY2007Attractive and stable margins

• 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

Distinct advantages from vertical integration

• Kathmandu offers a wide range of products with technical specifications which appeal to a broad market

• Kathmandu’s customer base is not limited to recreational activity participants as its products appeal to many customers as a lifestyle brand

Technical products with wide market appeal

• 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

A market leader in Australia and New Zealand

• 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 GORE-TEX® brand survey*

Brand recognition

* 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 2010KEY GROWTH STRATEGIESKEY 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

• Profitability of current network

• Penetration of NZ versus AU

• Regional and infill opportunities

• Formats and size

• Destination, strip and mall locations

• Cannibalisation

5 May 2010

New Store Results

• Over 40 new stores in past 4 years

• Set up costs vary significantly – Regional, CBD, large or small

• Rapid profitability ramp up with average payback period better in NZ than Australia

• Stores to come still generally representative of current portfolio range in terms of store format

• Generally smaller catchments from now on

• No loss making stores NZ/Aust

New Zealand stores

7

9

12

3

High footfall Destination Regional /

provincial

Clearance

Australian stores

25

11

5 4

High footfall Destination Regional /

provincial

Clearance

5 May 2010

New Christchurch Store

5 May 2010

Upgrade Existing Store Network: 5-8 stores p.a

• Target stores: • Smaller stores • Secondary locations• Older, inefficient fit outs

• Enlarge, relocate and renovate

• Recent upgrades:• Canberra CBD• Queenstown• Brisbane CBD• Cashel St, Christchurch• Bourke St, Melbourne

• Before 31 July 2010:• Kent St and Dunedin

Significant opportunity to enhance brand profile, grow floor space and lift same store sales

5 May 2010

• Growth over last 3 years in ranges such as Active, Kids, thermals

• Many gaps in our product range – clothing and equipment

• Keep away from fashion – stay technical

• Stay within technical travel and adventure

• Specific future opportunities – examples: luggage and bags, travel accessories, more cycling and active, tee shirts, underwear and footwear

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%

5 May 2010

Expand the Product Offer: Just released Winter 2010 Range

• Example of new products for winter 2010

• Ultra core, Gore-Tex, merino, packs and bags etc

• Innovation and points of difference

5 May 2010

• Summit Club members attributes and opportunity:– Loyal customers, frequent purchasers and lower marketing costs to service

• Current membership 340,000+ across all 3 countries, increased 20% + in last year

• Membership has more than doubled in past 4 years with average spend up

• Significant further potential to grown numbers, especially in Australia

• Doubling of membership numbers realistic objective

• Supported by improved recognition and reward of individual members utilising effective CRM tools

Grow and Maximise the Customer Database: At least double in 3 years

5 May 2010

Grow and Maximise Customer Database – Understanding our Customers

Adventurous Families

Typically professionals who enjoy the outdoors

Higher than average incomes

Have children

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

Emerging professionals (become Adventurous Families)

Explorers who make time to travel and enjoy the outdoors

They also fit walks, gym, jogging, swimming and cycling into busy lives

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

5 May 2010

Deliver Operational Efficiencies – Target - reduce CoDB by 1% by FY13

• Internal systems and processes– Core systems upgrade to enable new efficiencies– Improved reporting and mgmt information

• Reduced cost of goods/improved supplier terms– 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

Lower cost of doing business in percent terms / Gain operating leverage.

5 May 2010

Deliver Operational Efficiencies – Supply Chain Example

• 95%+ of stock currently passes through Melbourne and Christchurch warehouses

• Bulk deliveries currently received from suppliers in numerous categories where effective demand forecasting will reduce order sizes and stock holding

• Last year was first time where we trialled stock deliveries direct to stores through 3rd party warehouse (Auckland)

• Very little custom packing of stock at source

• No “smarts” in picking systems and technology in our warehouses

• 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

• We have identified 31 key workstreams– To deliver the 5 growth strategies – Supported by Brand, People, Systems & Processes

• “Destination 2013”– 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 2010SUMMARY & OUTLOOKSUMMARY & OUTLOOK

5 May 2010

Summary and Outlook

• Summary– 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:

• 2009 Stimulus impact

• Rising interest rates

• Increasing cost base – rents, salaries etc• Volatile and unpredictable economic environment

• Weather impact

• Trading Update– Confirming previous guidance

– Remain on track with prospectus forecast

5 May 2010

Q & A

5 May 2010

THANK YOU

I WELCOME YOU TO ENJOY OUR NEW WINTER RANGE!

THANK YOU

I WELCOME YOU TO ENJOY OUR NEW WINTER RANGE!