Billion-dollar baby: KMD Brands reports more than $1 billion in full-year group sales

Kathmandu's underlying net profit after tax came to $43.3 million.

KMD Brands reported more than $1 billion in group sales in the 12 months ending July 31, reaching a new record for the outdoor and sports retailer in its first year of “uninterrupted trade” post-pandemic.

KMD’s group sales jumped 12.6 per cent to $1.1b, up from $979.8 million a year earlier.

Chief executive and managing director Michael Daly said strong sales growth had been delivered across all “key” geographies.

“Customers returned to shopping in stores, with retail store sales increasing 17.5 per cent,” he told the market. “This had an impact on online sales, a trend noted across the industry as customers returned to pre-pandemic shopping behaviours.”

Kathmandu

Underlying net profit after tax came to $43.3m – up 8.6 per cent from $39.8m in the previous corresponding period.

The retailer’s gross margin improved by 20 basis points to 59.1 per cent, and the company said wholesale pricing, improved channel mix, and international freight costs had “offset currency headwinds”.

Although the company experienced “softening” consumer sentiment in its fourth quarter, underlying earnings before interest, tax, depreciation and amortisation (Ebitda) rose 15.1 per cent to $105.9m.

Oboz and Rip Curl achieved record sales, while Kathmandu experienced strong trading in the first three quarters of the financial year.

“The fourth quarter for Kathmandu was more challenging, with increased cost of living pressures softening consumer sentiment, and the warmest winter on record in Australia, which cycled the best-ever winter trade season last year,” Daly said.

Kathmandu’s sales edged up 10.6 per cent to $422.2m in the full-year period, while Ebitda jumped 44.4 per cent to $52.5m.

The company said Kathmandu had “significantly reduced” its inventory levels, was now well-positioned and continued to cycle through its second phase of recovery.

“The international soft launch of the brand delivered initial sales of $2.6m, including first deliveries to select new wholesale customers in Europe and Canada,” the retailer said.

Oboz and Rip Curl

Across KMD Brands, Oboz reported the biggest jump in sales – up 61.8 per cent to $99.3m, which the retailer credited to Oboz’s wholesale channel recovering “strongly” after last year’s supply-constraint struggles.

The outdoor footwear company’s Ebitda also soared – rising 137 per cent to $7.9m in the 12 months to July 31.

Sales for KMD’s surf retail brand Rip Curl were up 8.3 per cent to $581.5m, due to the return of international travel to Hawaii and Thailand and particularly strong direct-to-consumer results in Australasia.

The group’s underlying operating expenses came to a loss of $546.1m, up 12.1 per cent from $484.7m a year earlier.

“We are well-positioned as we begin the 2024 financial year,” Daly said.

KMD Brands’ board declared a fully franked final dividend of 3 cents per share to be paid to shareholders on October 20, which takes the annual payout to 6cps.

Outlook

The retailer revealed group sales for the month of August were 6.4 per cent lower than in August 2022.

“Despite the challenging consumer sentiment, we expect tailwinds with the continued return to travel, positive impact from the launch of innovative products and the outdoor lifestyle trend post-pandemic,” Daly said.

A minimum of eight new stores had been committed in the first half of the 2024 financial year, and Daly said KMD Brands was spending “a fairly similar amount” across both Kathmandu and Rip Curl in terms of its retail rollouts.

The rollouts in Kathmandu are focusing more on Australia, as the retailer already had a “fairly high penetration” in New Zealand, Daly said, while the store rollouts for Rip Curl were focusing on all markets.

“E-commerce is a big focus for us,” he told analysts on the company’s investor call after the results were released. So are the company’s revamped loyalty programmes, which Daly said offer exciting opportunities for the brands.

“We think it’s really important in today’s day and age to engage with our consumers,” he said. “We’re trying to appeal to the lovers of the outdoors, and as you see with both of those programmes, we have interactive elements, with our programmes encouraging people to go out and surf, encouraging people to go out and enjoy hikes and be rewarded for that.”

Daly added that “robust” loyalty programmes would help encourage consumers to come back to KMD’s shops and drive increased frequency, “which ... our initial result tells us is going to drive some good commercial results”.

Daly was also quizzed about the challenging wholesale market, particularly in the US. He said it was a continuation of what the company had noted in its half-year results.

“What we’re seeing in the market is that everybody, including ourselves, is looking to reduce inventory. Everyone’s obviously nervous about what the economic conditions are moving forward, so no one wants to take a risk in this market.”

Shares in KMD Brands were down 2.4 per cent to 80cps by early-afternoon trading on the New Zealand stock exchange (NZX).