KMD Brands, formerly Kathmandu Holdings, is confident it will return to profitability in its second half after its sales slumped and the company posted a $5.5 million loss in the first half of its financial year.
Group CEO and managing director Michael Daly told the Herald it believed the company's darkest days were in the past and it expected much better earnings in its second half.
KMD Brands reported a net loss of $5.5 million in the six months to January 31, compared to a profit of $22.3m in the same period a year earlier.
Its underlying earnings before interest, tax, depreciation and amortisation were $10.3m versus $48.2m a year earlier, attributable to Covid lockdowns and less government support and rent assistance.
Daly said with the all-important winter trading period for its flagship brand Kathmandu ahead it expected to regain lost momentum and aid a return to profit in the second half.
"We hope that the worst is behind us. The Rip Curl brand has continued good momentum and there are no signs to suggest that won't continue in the second half. The Oboz Footwear situation is slowly being overcome; we're definitely got shows back on the water and processing through our warehouse at the moment, so we should see that second half improve relative to the first half with the return of some of that production," Daly said.
"It will be FY23 until we see the full benefits of Oboz supply, but certainly the second half gives some good confidence.
"With the Kathmandu brand being able to be open for the whole period, particularly for the winter, is going to be a positive impact for Kathmandu. With that unrestricted trade through winter, we're confident that we will have a good second half," he said.
"Kathmandu's biggest half is always the second half because of winter so we're certainly looking to see some good trade due."
He said KMD Brands would no doubt turn a profit in the second half on the back of Kathmandu having unrestricted trade: "We expect all of our brands to turn a profit".
Daly said the first-half result was "disappointing" but the group "had its hands tied" as a result of Covid-19 lockdowns forcing store closures and delaying production in Vietnam affecting lost production within Oboz brands.
Kathmandu was in a loss in the first half, while Oboz Footwear just broke even. Its stores in Sydney, Auckland and Melbourne faced closures due to lockdowns in its first-quarter. At one point in time, it had 70 per cent of its store network closed at one time restricting trade.
Despite the net loss, the group will pay an interim dividend of 3 cents per share, up from 2c a year earlier, largely due to the strong outlook for a recovery.
Daly said the first half had been on par with the most challenging period since the start of the Covid-19 pandemic, alongside March/April 2020.
"At one point there we had pretty much all of our network in all markets closed at one point so that was certainly some dark days, but I'd say in terms of its impact on trade, particularly across Australia and New Zealand ... the first-half is second only to those early dark days of the pandemic when no one knew what was going on."
The Omicron outbreak across Australia and New Zealand had impacted foot traffic and physical trade but Daly believed this would return shortly as consumers learnt to live with the virus as had been the case in its European markets.
"Once we see that Omicron wave work through we see some good traffic again."
Daly said KMD Brands remained "cautiously optimistic" about trade prospects in the months ahead.
"We haven't seen any signs yet of inflationary talks or interest rates talks biting on consumer demand, and we're cautiously optimistic for the future."
KMD Brands remained open to the prospect of further acquisitions and its balance allowed it to grow its stable of retail brands, Daly said.
Kathmandu Holdings rebranded as KMD Brands earlier this month in a bid to distinguish the holding company from its Kathmandu chain given it also owns Oboz and Rip Curl.