Outdoor clothing and equipment retailer Kathmandu is preparing to launch into North America and select cities throughout Europe as part of plans to recover losses and expand the business outside of Australasia.
The namesake retail chain that was once KMD Brands' largest brand has been pummelled by the Covid-19 pandemic and subsequent lockdowns impacting trading across its 300 stores in New Zealand and Australia.
Winter is Kathmandu's all-important trading period, and this winter gone has been its first uninterrupted winter trading period with all its stores open since 2019.
Kathmandu will soon be pushing into Canada and Europe, through a wholesale distribution and online offering in the first instance. It has already begun shipping goods to wholesale customers in those markets, and will do the same in the United States later this year.
KMD Brands chief executive Michael Daly said the launch into North America and Europe would remain small initially while it tested demand. All going well, he said Kathmandu planned to follow with retail store openings to complement its e-commerce strategy.
The company has its eyes set on large cities that appeal to its active outdoor consumer, locations such as Vancouver in Canada, Denver in America and Munich in Germany, for flagship retail locations.
"It is very much a soft launch [at this stage] focusing on 20 to 25 select influential outdoor accounts to test our concept and give us confidence for future expanded distribution. We're focusing on wholesale and online at the moment in Europe and Canada, and likewise when we launch in the US later this year," Daly told the Herald.
"In 15 months' time from now, later in 2023, we'll have a good year's data on Europe and Canada, we'll have our first shipments going into the US and operating online across all of those markets, so at that point of time it will be good for us to sit and reflect about potential new stores in those markets."
Kathmandu has no plans at this stage to open hundreds of stores in those markets as it has done across Australasia.
It expects to open about 10 flagship stores throughout Canada, the United States and Europe over the next couple of years, and more throughout Australia at the same time.
"The Kathmandu brand has really strong potential. We'll open more stores in Australia than we will in international markets in the immediate next couple of years. But, it is a big world and there is a lot of opportunity for us long term."
Kathmandu is owned by KMD Brands, the dual ASX/NZX-listed company that also owns and operates surfing brand Rip Curl and wholesale footwear business Oboz.
In the year to July 31, KMD Brands posted a net profit of $36.8 million, a 40 per cent fall compared with the year earlier, but the company did meet market expectations.
Group sales rose by 6.2 per cent to a record $979m in the year to July 31 but earnings before interest, tax, depreciation and amortisation (ebitda) fell 16 per cent to $92m in line with guidance.
The slide in earnings was attributed to first-quarter lockdowns and supply chain disruption in Australia.
Yesterday it announced it would pay a final dividend of 3 cents per share, representing a total dividend of 6 cents per share for the year.
The dividend payout of $42.5m is a record for the firm.
Daly said FY22 year was "a tale of two halves" for the company, with significantly muted sales in the first half followed by a strong bounce back to record second-half sales.
"The first half we were [crimped] with lockdowns across Australia and New Zealand that both severely impacted Rip Curl and Kathmandu - Kathmandu particularly given the timing of those [store] closures on the back-end of winter. On top of that we had the factory closures in Vietnam for Oboz, which basically meant we had over three months of no supply. In that first half we had these issues that severely impacted our ability to trade but at the same time we had largely most of the costs and not as much landlord relief second time around as we did in FY21.
"Essentially the first half of this year we had all of the costs but not all of the potential income. Fast forward to the second half and what you see is more indicative of where we are at. All of our stores are open, are factories for Oboz are back and producing and so essentially we have the income we would expect."
In the first half it had underlying ebitda of circa $10m and sales of $400m and second-half underlying ebitda of $82m and sales of $550m.
"We certainly think the second half is more reflective of where we are as a company."
Rip Curl remains KMD Brands' bread-winning brand at present, having found its feet and flourished through the Covid-19 pandemic, with sales at record highs. However, the company believes Kathmandu will within time return to its largest brand by sales revenue.
Kathmandu was once the hero namesake brand for KMD Brands, previously known as Kathmandu Holdings. Kathmandu has been severely impacted by the pandemic due to the large number of stores it operates across New Zealand and Australia, and due to the timings of lockdowns that have fallen during the retailer's peak winter trade season.
"This current winter trade 2022 is the first time we have seen Kathmandu able to trade unrestricted since 2019 and with that we are seeing the numbers return back to pre-Covid levels, which gives us great confidence that we have got future growth available to us in Australia and New Zealand," said Daly.
Kathmandu faced a two-step recovery, Daly said, first through its stores trading for 12 months uninterrupted and the return of travel and tourists to Australasia.
KMD Brands has experienced strong sales in August and September into the new financial year.
Daly said the group's immediate focus in the quarter of trade was to see ebitda return after losing circa $35m underlying ebitda in the first half of last year, and bringing its brands back to optimum financial trading.
KMD Brand shares are trading at just over $1, down from a recent high of $1.50 at the start of the year.