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Sales of Kathmandu and Rip Curl outdoor clothing are suffering amid a consumer spending slowdown and after an anti-climatic Christmas shopping season.
KMD Brands revealed a 14.5 per cent drop in group sales to $469 million in the six months to the end of January today, causing its shareprice to tank by 19.3 per cent in the first hours of trading on the New Zealand Stock Exchange.
Kathmandu was worst affected, with sales for the brand down 21.5 per cent. Rip Curl was down the least, by 9.2 per cent.
Chief executive Michael Daly said it had been a challenging start to the year, especially with softer Kathmandu sales.
“A combination of weaker consumer sentiment, the warmest winter on record in Australia and the brand’s reliance on winter weight product has resulted in a disappointing first half.”
He noted Rip Curl and its Canadian shoewear brand Oboz were coming off record sales last financial year, where group sales rose 34.5 per cent in the same six month period.
“While revenues from the direct-to-consumer channel for these brands are showing single digit declines (-4.4 per cent), the wholesale channel has been more challenging (-16.8 per cent) as wholesale accounts reduce inventory holdings.
“We expect this inventory reduction cycle to end this financial year giving us a more positive financial year 2025 outlook in the wholesale channel.”
A warmer winter in Australia meant fewer were looking to buy Kathmandu puffer jackets. Photo / Nick Reed.
Daly said he expected an improvement in Kathmandu’s sales in the next six-month period as it launched new products and improved its visual merchandising in stores.
“Improvement in Kathmandu’s sales performance remains an immediate priority as we approach the key winter trading period.
“The whole KMD Brands team is focused on delivering sales improvement, optimising gross margin, controlling operating costs and reducing working capital.”
Despite the sales drop, the profit it made on its clothing remained resilient, with group margin at 58.8 per cent.
Costs had reduced by $16m in the year, despite inflationary pressure across the business.
The retailer already warned of a 12.5 per cent year on year drop in sales in the four months to November, after the Black Friday shopping event, causing Forsyth Barr analyst Margaret Bei to downgrade her rating on the stock to neutral, from outperform.
KMD Brands would release its audited six month financial results on March 19.
Madison Reidy is the host of the NZ Herald’s investment 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.
