Kathmandu slumps to net loss as store closures take a toll

For Kathmandu stores, the first quarter included 6,891 lost trading days due to Covid lockdowns. Photo / Supplied

KMD Brands, formerly Kathmandu Holdings, reported a net loss of $5.5 million in the six months to January 31, having posted a profit of $22.3m in the same period a year earlier.

Underlying earnings before interest, tax, depreciation and amortisation (ebitda) were $10.3m versus $48.2m a year earlier, as Covid lockdowns took their toll, with less government support and rent assistance.

The earnings were in line with guidance given in February.

Still, the retailer will pay an interim dividend of 3 cents per share, up from 2c a year earlier, largely due to the strong outlook for a recovery post-lockdowns.

Kathmandu's first-half was heavily impacted by the lockdowns, given it has a higher store concentration in Australasia. For Kathmandu stores, the first quarter included 6,891 lost trading days compared to 2,432 in the prior year. During a three-week period spanning August and September, more than 70 per cent of the store network was closed.

The company said there was a rebound in the second quarter as stores reopened, with same-store sales growth of 15.4 per cent.

The Rip Curl network is more diversified globally. However, its first quarter still included 4,249 lost trading days compared to 3,700 in the year-earlier period. Rip Curl was also hurt by wetsuit shortages and port congestion in North America.

Same-store sales growth was up 3 per cent in the second quarter.

Oboz was also hurt by the three-month closure of Vietnamese factories, which have since reopened, and international freight delays.

According to the investor presentation, 50 per cent of orders in the first half were unable to be fulfilled.

"However, the demand for the Oboz brand and products has never been stronger, with forward orders into FY23 very strong and supporting our medium-term growth target," said Daly.

On another front, online sales continue to gain ground, representing 17.4 per cent of direct-to-consumer sales, versus 12.8 per cent in the same period a year earlier.

Looking ahead, KMD said second-half gross margins were expected to be in line with the 58.4 per cent in the prior year based on promotional plans, and expectations of international freight costs and currency impacts.

Inventory was $20m above January 2021 and being managed to mitigate increased production lead times and international shipping delays, KMD said.

"While we continue to navigate impacts from covid on global supply chains, forward demand for our Rip Curl and Oboz products remains at record levels, and Kathmandu enters the traditionally strong winter season well prepared," said chief executive Michael Daly.

Kathmandu Holdings rebranded as KMD Brands earlier this month in a bid to distinguish the holding company from its eponymous Kathmandu chain given it also owns Oboz and Rip Curl.

The second half is traditionally the strongest cash-generating period for the company.

- BusinessDesk