Kathmandu's sales in Australia and New Zealand declined by double-digit figures over the last financial year. Photo / Nick Reed
Kathmandu's sales in Australia and New Zealand declined by double-digit figures over the last financial year. Photo / Nick Reed
KMD Brands chief executive Michael Daly is confident the business will bounce back thanks to a diversified product range and better economic conditions across Australia and New Zealand.
The business’s latest annual report revealed an 11.2% decline in sales for the year ended July 31, while theOboz brand faced a goodwill impairment of $40.3 million.
But Daly remained positive for the coming year, focusing on the brand’s outlook moving forward.
“I’d like to think by the end of this financial year we’ll be back there, particularly with wholesale trends moderating, we’re already seeing some parts of the business trading up in Australia and parts of online businesses.”
The first eight weeks to September 22 showed direct-to-customer sales growth for the Australian market of 2.1% year on year.
Speaking to Oboz’s goodwill impairment, Daly maintained the brand was key for the group, and saw continued growth in the future, pointing to its strong performance in online sales, which were up 31.7% year on year.
He said the current outdoor market in North America, particularly for wholesale, was challenging not just for KMD, but for its competitors.
Michael Daly, group chief executive and managing director of KMD Brands, is confident that the business will return to previous highs.
Total group sales fell from a record $1.1 billion in the year to July 31, 2023, to $979.4 million in FY24.
To get the group back to its former highs, his focus was to maintain consistent sales momentum across all brands and channels.
Part of that focus was diversifying Kathmandu’s product portfolio.
New product lines introduced by the brand over FY24 included heritage t-shirts and fleece, with added category depth given to packs and bags.
“It’s not healthy for brands to have an undue reliance on one particular category, and as we’ve previously stated, our reliance on outerwear has been as much as 45% of sales,” he said.
“From our point of view, it doesn’t mean we want to reduce our outerwear, it just means that we think we can execute better in categories outside outerwear so that we are not as reliant on that category.”
Kathmandu also expanded its third-party brand strategy, including an increased focus on Oboz. In FY24, Kathmandu added On Running shoes, Blunt umbrellas, Hydroflask, and Korjo travel accessories.
“We think that will definitely be good for the brand long term, to build out other categories built around those three activities that we’ve mentioned, hike, outdoor active and adventure travel.”
Economic challenges
The group put struggling consumer sentiment down to the wider macroeconomic pressures affecting Australia and New Zealand, alongside wider geopolitical issues.
One of the largest points of concern in the current economic environment for KMD was wholesale, particularly for Rip Curl and Oboz.
“The wholesale channel has been more challenging for both brands as wholesale accounts continued to reduce their inventory to manage risk in a challenging economic environment,” Daly said.
While, admittedly, there were challenges, he was confident in time the prospects would look up.
“I think that cycle’s still got probably another six to nine months to go in the outdoor market, although I do feel that we’ve probably seen the end of that cycle in surf.”
“If you step back and look at Oboz online sales through our own e-commerce, it was up 31% while our wholesale business was down 23%, now both of those trends can’t be right in terms of the underlying confidence and trajectory of the brands.”
He believed the underlying confidence and underlying brand demand were more indicative of the e-commerce performance rather than wholesale.
The business in New Zealand continued to face sales pressures, down 13.5% from $128m in FY23 to $110.8m in FY24.
The outlook for New Zealand also seemed unsteady, with the first eight weeks to September not replicating the success of Australia, with direct-to-customer sales down 23.2% year on year.
“Australia is performing better for us than New Zealand, and the New Zealand consumer seems to be hurting a little bit more,” Daly said.
Recent cuts to interest rates by the Reserve Bank were a good sign for consumers in need of relief.
Daly was disappointed KMD could not pay dividends to shareholders this year, but was adamant they would return as quickly as possible.
“We hope that would be in FY25 and certainly, we think that the share price is not a true reflection of the current and future value of the company,” he said.
