Kathmandu owner KMD Brands forecasts weak earnings outlook

Kathmandu owner KMD Brands has released a trading update forecasting weaker than expected earnings. Photo / Supplied

Kathmandu owner KMD Brands shares are down 5% after it released a weaker-than-expected outlook.

The outdoor retailer and wholesaler released its first full-year underlying earnings before interest, tax, depreciation and amortisation guidance, forecasting it will be between $15 million and $25m.

Forsyth Barr equity analyst Paul Koraua called the update “disappointing” and said guidance was “well below” his expectation of $44m and the consensus expectation of $39m.

KMD Brands shares dropped 8.5% to 27c once the NZX opened and recovered to 28c after midday. The stock was down about 37% in the year to date.

‘Unseasonably warm’

The downgrade was driven by a 6.4% drop in Kathmandu sales over the first four months of the second half, reversing the positive sales trends disclosed in the company’s previous update.

“Unseasonably warm weather in Australia had a material adverse impact on the insulation product category, whilst Kathmandu achieved sales growth year-on-year in other key product categories such as rainwear, fleece, knits and footwear,” KMD Brands said.

Koraua also drew attention to margin pressure as a reason for the downgrade.

“Gross margins have been under more pressure than expected, as we expected – 60 basis points of gross margin contraction in 2025, though they have fallen 140bps year-to-date,” Koraua said.

With six weeks left in the fiscal year, Koraua said the group faced mounting pressure to boost winter sales.

“The group’s focus needs to be firmly on improving trading and releasing capital from inventory to repay debt.”

KMD Brands said cooler weather in both New Zealand and Australia had “reignited sales momentum”, with the first 17 days of June delivering 13.2% year-on-year sales growth.

Tariffs

Because of sourcing products through Asia and exporting Rip Curl and Oboz goods into the United States, KMD Brands was identified by analysts as having a “meaningful direct exposure” to President Donald Trump’s tariffs when they were announced on April 2.

Though many of the steeper tariffs were later reduced, a 30% levy is still imposed on Chinese goods entering the US.

Last week, Reuters reported that tariffs would be raised to 55% after negotiations between the world’s two largest economies.

On Thursday, KMD Brands said it was closely monitoring “the fluid US tariff situation” and said it anticipated tariffs to impact 2025 ebitda by approximately $1m.

Group chief executive and managing director Brent Scrimshaw said the company was working on “a range of initiatives to unlock future growth opportunities across the portfolio”.

“Kathmandu’s significant sales improvement, including strong online momentum in recent weeks, reinforces our enduring brand health and strengthens our confidence in the future growth opportunity.”