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Retailers can’t catch a Christmas break with the now-crucial Black Friday shopping season ahead of the holidays proving a flop for one big brand - and 2024 is not looking much brighter.
Forsyth Barr equity analyst Margaret Bei downgraded her rating on retailer KMD Brands (previously called Kathmandu) this week,to neutral from outperform, after it announced sales were down 12.5 per cent in the four months to the end of November, compared with the year before.
In a research report titled Tough Climb Ahead released on Thursday, Bei said the sales update was disappointing and significantly below market expectations.
She cut annual earnings expectations for the retailer to $1 billion this financial year, down from last year’s $1.1b.
“A recovery in earnings and wholesale channel demand may not appear until 1H25 [January 2025].”
Sales of Kathmandu gear were down 21.6 per cent on the year before as fewer Australians bought wet-weather equipment, while KMD’s Oboz shoewear brand sales were 18.2 per cent lower and Rip Curl surfwear sales were 5.7 per cent lower.
The four-month period reported included the Black Friday sale event on November 24.
KMD Brands, owner of Kathmandu, Rip Curl and Oboz shoewear, says earnings are $16 million behind last year due to reduced sales in the first half-year period. Photo / Natalie Slade
KMD chief executive Michael Daly said in its trading update this week its sales situation “reflected ongoing weakness in consumer sentiment” and followed a record year of sales for Oboz and Rip Curl.
Another challenge was the fact retailers it sold its clothing through were selling stock they already had on hand.
“Black Friday promotions for Rip Curl and Oboz delivered strong sales as these brands continued to deliver good results in direct-to-consumer channels, while navigating short-term weakness in wholesale channels as retailers reduce inventory in uncertain trading conditions.
“Improvement in Kathmandu’s sales performance remains our priority.”
The company’s underlying earnings were sitting about $16 million below last year, with the Christmas and January retail periods yet to be counted in its half-year result.
Shoppers are increasingly getting on the Black Friday bandwagon, potentially affecting Christmas sales, according to Forsyth Barr.
Another report from Bei titled Santa’s Stocking said “2024 is shaping up to be another year of subdued consumer spending”.
“Retailers may be in for a messy year ahead as consumers remain cautious due to a number of factors including high household leverage and cost pressures.”
She added credit arrears were growing and unemployment was likely to rise in the new year.
“While the macroeconomic outlook is less bearish than this time last year, we expect a recovery in sector earnings in 2025, or late 2024 at the earliest.”
Bei suggested the Black Friday global sale event could be cannibalising Christmas trade, with it now surpassing Boxing Day as the biggest sales day of the year.
“Christmas may be relatively weaker this year, particularly as New Zealand consumer surveys suggest spending intentions remain weak heading into the holiday period despite improved consumer confidence.”
She expected high-quality retailers with cash on hand and supplier power to fare better amid the downturn.
Forsyth Barr had a neutral rating on Hallenstein Glasson Holdings stock and underperform ratings on The Warehouse Group and Restaurant Brands, operator of KFC, Pizza Hut, Carl’s Jr and Taco Bell.
Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
