KMD Brands profit plunges 40% despite making record sales

Kathmandu Brands had a record second-half after facing significant disruption in the first six months of trading. Photo / Supplied

KMD Brands has posted a net profit of $36.8 million, a 40 per cent fall compared with the year earlier, but the company did meet market expectations.

Group sales rose by 6.2 per cent to a record $979m in the year to July 31 but earnings before interest, tax, depreciation and amortisation (ebitda) fell 16 per cent to $92m in line with guidance.

The slide in earnings was attributed to first-quarter lockdowns and supply chain disruption in Australia.

The company owns and operates Kathmandu, Rip Curl stores and wholesale business Oboz Footwear.

KMD will pay a final dividend of 3 cents per share, representing a total dividend of 6 cents per share for the year.

The dividend payout of $42.5 million is a record for the firm.

The company had a record second-half trading period but said lockdowns and ongoing Covid-19 disruption hit sales in the first half.

Chief executive and managing director Michael Daly said the company was able to deliver strong results despite the impact of Covid-19 disruptions.

"The brand achieved its highest ever sales result in Australia for the key winter promotion period during Q4, and its highest ever second half gross margin result," Daly said in an NZX update.

Daly said Oboz continued strong growth and experienced record demand in the year, despite supply challenges.

"With the effects of Covid now largely behind us and international travel returning, we are very focused on executing our growth strategy through expanding our global footprint, investing in digital platforms, leveraging operational excellence, and leading the industry through sustainability and innovation."

He said Rip Curl achieved sales growth across all channels and key international regions, especially Europe, Hawaii and South-East Asia.

"Rip Curl's wholesale order books remain significantly above pre-Covid levels, allowing us to better manage supply chain disruption through near-term inventory investment," he added.

KMD said it had a strong balance sheet and net debt position of $40.1m.

It said sales growth in the year was driven by Rip Curl and Kathmandu, while its wholesale channel now accounted for a similar level of sales to that of its retail store network.

Outlook ahead

Daly said strong momentum in the final quarter of FY22 had continued into the new financial year.

Sales for the group in August were up over 44 per cent on the same month a year earlier and were 10 per cent above pre-Covid-19 levels in August 2019.

"Heading into FY23, the group is well capitalised and I'm excited by the opportunities ahead as we invest in the long-term expansion of our global house of brands, and build a truly unique global business headquartered in Australia and New Zealand," Daly said this morning.

"With the return of international travel and uninterrupted trade, combined with further
strengthening our Rip Curl, Kathmandu and Oboz brands, KMD Brands is well positioned to deliver continued sales and earnings growth."

Daly said growth for the company would come from strong wholesale demand for Rip Curl, tourism and store foot traffic increasing, along with its planned expansion of the Kathmandu brand to Europe and Canada and a return to normal supply conditions for its Oboz brand.