KMD Brands, the owner of outdoor clothing retailer Kathmandu, has reported record first-half sales growth and says momentum is continuing into the second half of the financial year.
The retailer’s sales revenue for the six months to January 31 came in at $547.924 million, up 34.5 per cent on thesame period last year, which was affected by Covid-induced lockdowns in Australasia.
KMD Brands also runs Oboz and Rip Curl.
Net profit after tax was $14m in the first half, up from a $5.1m loss in 2022.
Chief executive Michael Daly said for the first time since Rip Curl was acquired, the group has experienced a full 12 months of trade without significant interruption from the Covid pandemic, which resulted in group sales of over $1 billion over that period.
“Despite uncertainties in consumer outlook, all three of our brands – Rip Curl, Kathmandu, and Oboz – delivered strong sales growth in the half, and as a group we have improved our gross margin.”
Daly added: “The record sales result was further supported by an encouraging return of international travel and tourism.”
He doesn’t expect the current cost of living crisis and looming recession hitting many Kiwis to affect KMD’s bottom line.
“Our Auckland, Queenstown and Christchurch stores are full of tourists and they’re buying products so we’re experiencing a strong positive bounce back on the back of more tourism,” Daly said.
“I have no doubt there are more Kiwis going to Europe and overseas this winter,” he said.
He said the company is benefitting from locals getting ready to travel overseas.
“If people are continuing to enjoy the outdoors, we’re in a good position,” Daly said.
Michael Daly, chief executive of KMD Brands. Photo / Supplied
Pre-tax operating earnings were up 62 per cent from the last period at $90.8m. The company said underlying operating earnings were up 344 per cent at $45.3m.
Chief financial officer Chris Kinraid said in a call to investors that Rip Curl and Oboz have been left out of underlying figures.
The company said high operating expenses stem from brand expansion and the full reopening of stores.
The company declared an interim dividend of 3 cents per share, the same amount declared a year ago.
KMD’s net debt came in at $84.9m with significant funding headroom of over $200m.
In a call to their investors, Daly and Kinraid refused to comment on whether net debt is likely to improve or fall flat by the end of this year.
Daly said the retailer is still experiencing high international freight costs and raw material cost pressures.
“These pressures were offset by favourable exchange rates and careful moderation of the Kathmandu ‘high-low’ pricing model,” he said.
KMD’s margin was 58.7 per cent for the period, an increase of 100 basis points.
Daly said the company has “had the kitchen sink thrown at us in terms of margin in the last few months”.
“You wouldn’t know it because of of our margin growth,” Daly told investors.
Daly said higher inventory reflects investments in Oboz inventory to meet second-half forward orders and investments in wetsuit raw material “for perennial styles to mitigate international supply challenges”.
‘Positive’ outlook
Daly told investors he hopes Oboz and Kathmandu will have stronger a second half as consumers in the Southern Hemisphere gear up for winter. In turn, the company expects summer months in the Northern Hemisphere to drive sales growth across KMD’s range.
Daly said the company aims to achieve 15 per cent of equity if we can” and “has every intention to drive up EBIT”.
He said it was difficult to predict future forecasts during the pandemic but things were more settled now, albeit still uncertain.
The company has seen positive first-half sales momentum continuing through February, with strong sales growth across brands, channels, and key international regions.
We have strong resilience from consumers in all of our markets,” Daly said.
He said, “There are no obvious or clear signs of softening.”
“Positive direct-to-consumer sales trends have continued into the second half, and we are well positioned to continue to benefit from the return of international travel and tourism. Products across all three of our brands appeal to a diverse range of consumer interests, ages, and demographics,” Daly said.
“While the consumer outlook remains uncertain, with high global inflation and rising interest rates expected to impact consumer demand, we remain cautiously optimistic. The group is well capitalised and will continue to invest in the long-term global expansion of all our brands.”
