KMD Brands Limited, the New Zealand-based parent of the Kathmandu, Rip Curl, and Oboz brands, has reported that sales trends have continued to improve since its first quarter trading update provided during its Annual Meeting on November 19, 2024.
Sales in the company’s fiscal first quarter ended October 24, 2024, continued to trend negative at the time, but second-quarter trends turned positive for the Kathmandu and Rip Curl brands through the Christmas selling period.
KMD Brands Limited reports financials in New Zealand dollars (NX$).
Fiscal 2025 Year-to-Date Trend Lines by Brand
The company said in its preliminary report that total sales results were driven by improved trends in the direct-to-consumer (DTC) channel for all three brands.
- Rip Curl global DTC sales were 2.4 percent above last year YTD, with strong global sales growth in the key Christmas selling period, assisted by additional stores operating year-over-year (y/y).
- Kathmandu DTC sales were in line with last year YTD, with sales trends continuing to improve and more recent positive performance in New Zealand.
- Oboz DTC online sales grew strong y/y over Black Friday and Christmas promotions, reinforcing the growth opportunity for the brand.
Wholesale sales took longer to recover and continue to decline year-over-year.
- Wholesale accounts remained cautious on pre-season commitments in a challenging market, said to be reflected in Rip Curl wholesale sales decreasing 13.4 percent below last year YTD, and Oboz wholesale sales decline of 12.1 percent below last year YTD.
- Forward orders and in-season buying from key accounts supported an improved wholesale trend leading into 2025.
- Group online sales performance was highlighted, with YTD sales up 18.4 percent above last year, with all three brands achieving double-digit sales growth YTD. The online channel reportedly remains a key growth priority for the company.
Income Statement Notes
Rip Curl and Kathmandu gross margins reportedly remain resilient YTD despite increased promotional intensity and a tough trading environment, while Oboz clearance of inventory has contributed to lower gross margins year-over-year.
KMD reported that all brands continue actively managing costs while facing global cost pressure. Kathmandu has invested an additional NZ$3 million YTD to refresh brand advertising (increased first-half weighting), increase product newness and innovation and improve the customer experience.
Outlook
KMD expects first-half (1H FY25) underlying EBITDA to be in the range of NZ$1 million to NZ$3 million (1H FY24 $15.1 million).
KMD expects net debt at the end of January 2025 to be approximately $85 million (1H FY24 NZ$96.2 million). Funding headroom half-end is expected to be approximately NZ$200 million.
KMD reported that it continues to have a strong active working relationship with, and support from, its bankers. The company has taken pre-emptive action to amend the January 2025 covenant measurement point with no restrictions.
KMD is targeting further improvement on recent positive sales growth trends in the second half of the financial year, which is historically the company’s most profitable and generates significant cash flows.
All brands continue to actively manage working capital and inventory investment. KMD targets net debt below NZ$50 million at fiscal year-end on July 31, 2025, at least NZ$10 million lower than the prior year.
KMD CEO and Managing Director Michael Daly said, “Direct-to-consumer sales trends continue to improve for all three of our brands, while the wholesale market is taking longer to recover. We continue to focus on delivering positive sales growth, maximizing cash flows and reducing inventory.”
Image courtesy Rip Curl