KMD Brands announced its results for the financial year.
KMD Brands announced its results for the financial year.
Sales at Kathmandu owner KMD Brands slumped by 11%, with all three of its brands feeling the effect of weak consumer confidence in its latest financial year.
Total group sales fell from $1.1 billion in the year to July 31, 2023, to $979.4 million in FY24, a dropof 11.2%.
The company had a statutory net profit after tax (npat) decline of $48.3m for FY24, including a one-off non-cash impairment on the goodwill of its shoe brand Oboz of $40.3m.
Its underlying net profit still declined by $1.1m for FY24.
Earnings before interest and tax (ebit) fell from $76.3m in FY23 to -$21m in FY24.
“Rip Curl and Oboz cycled record sales last financial year, with direct-to-consumer sales outperforming the wholesale channel this year,” Daly said.
“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.”
KMD Brands was also not able to declare a dividend for shareholders for the financial year.
During the company’s half-year results back in March, it revealed that it could not give an interim dividend to its investors.
Brand breakdown
Kathmandu reported a decrease in sales from $422.2m in FY23 to $361.3m in FY24, a drop of 14.5% to its lowest sales since FY21.
The report particularly acknowledged the performance in Australia and New Zealand, where sales declined 13.9% and 15.2% respectively YoY, reflecting the countries challenging economic environments.
Online Kathmandu sales declined by 18.9% YoY, with KMD’s immediate focus to return the ANZ market to sales growth with the diversification of its product range.
Rip Curl, the company’s surf brand, had a decrease in sales from $581.5m in FY23 to $538.9m in FY24, a drop of 7.3%.
Direct-to-consumer sales decreased by 2.8% for the financial year.
Rip Curl did report an 8.6% increase in online sales to $37.9m, but wholesale sales decreased by 13.0% as inventory holdings continued to decline.
Oboz, the company’s outdoor footwear brand, also reported a decrease in sales, down 20% from an underlying $99.3m in FY23 to $79.4m in FY24.
While the footwear segment of the brand benefitted from strong online sales, up 31.7% YoY, it similarly struggled in wholesale.
According to the annual report, the near-term wholesale market in the United States drove the impairment, with the company confirming that if the market does not rebound to its expectations by FY26, the group may need to reconsider its operating cost base.
Oboz was acquired by Kathmandu back in March 2018 for $83m, with its goodwill impairment this financial year of $40.3m representing almost half its purchase value.
As for the region’s overall sales, all reported declines; Australia by 11.3%, New Zealand by 13.5%, North America by 15.2%, and Europe by 3.9%.
Seasonal demand
Back in June, Daly said the company was looking for a lift as the northern hemisphere summer and southern hemisphere winter get underway.
“With six weeks of peak trade still to come, we remain focused on optimising our Kathmandu winter and Rip Curl northern hemisphere summer results in a challenging consumer environment.
“We are seeing a prolonged impact of cost-of-living pressures on consumer sentiment globally but particularly in New Zealand, and we continue to respond tactically to competitive market dynamics.”
He said Kathmandu had a slower-than-expected start to the key winter period, with early sales down 11% on last year, largely on the back of a challenging New Zealand market.
Rip Curl was showing modest growth as the northern summer got underway, but wholesale customers were not buying as much of the clothes or Oboz shoes as they also faced restrained consumer spending.
But KMD warned that because of the weaker sales it expected underlying pre-tax operating earnings of about $50m, compared to the previous year’s $105.9m.
It said it had also moved to tighten its financial settings and would have about $200m of funding available.
“Alongside immediate trading priorities, our focus remains on tightly controlling operating costs, moderating working capital, and maximising cash flows,” Daly said.
Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.
