Boosted by strong gains from Rip Curl and Oboz, Kathmandu Holdings Ltd. saw revenues jumped 15.1 percent in the fiscal year ended July 31, to NZ$922.8 million ($654MM).

COVID-related travel restrictions impacted the New Zealand-based Kathmandu outdoor retail chain.

Underlying EBITDA in the year was up 35.9 percent to $113.3 million, underpinned by a gross margin improvement of 40 basis points. Underlying net profit after tax for the financial year was $66.3 million, up 110 percent.

The sales gains were reflected by strong sales from Rip Curl and Oboz and included a full 12 months of Rip Curl (FY20 included nine months of Rip Curl post-acquisition).

“Rip Curl delivered strong direct-to-consumer sales. Same-store sales growth of 19.2 percent with online sales growing by 31.3 percent. Online growth was underpinned by changing consumer preferences brought about by the COVID-19 lockdown periods,” said CEO and managing director Michael Daly on a conference call with analysts. “We’ve successfully relaunched Kathmandu’s new brand platform in May, reminding people that being outside changes us and that as human beings, we are hardwired to be outside. The relaunch was very well received and pleasingly Kathmandu achieved an exceptionally high net promoter score of 76. Oboz successfully launched their online store in April, and the wholesale business is well-positioned with double-digit growth in forward orders.”

Rip Curl’s Sales Climb 10.5 Percent On Comparable Basis
Rip Curl’s results outperformed acquisition expectations, with total sales up 10.5 percent on the prior comparable twelve months and sales levels above pre-COVID levels in the key regions of North America and Europe during the Northern Hemisphere summer season. On a reported basis, sales reached NZ$490.4 million against NZ$315.7 million a year ago, reflecting a gain of 55.3 percent.

Direct-to-consumer (DTC) same-store sales growth (comprising owned retail stores and online) was up 19.2 percent overall. Rip Curl’s online sales of NZ$33.5 million represented 12.5 percent of DTC sales and generated a four-year CAGR of 44.4 percent per annum. Overall, DTC sales for Rip Curl returned to pre-COVID levels, even though stores in airports, Australia, Hawaii, Asia, and parts of Europe, continued to be affected in the fiscal year.

Wholesale sales for Rip Curl were 9.6 percent above the prior comparable twelve months despite a COVID disrupted sell-in period for first half of fiscal 2021. Wholesale forward order books are above pre-COVID levels.

Kathmandu Chain Sales Decline 17.0 Percent
Kathmandu’s performance continued to be impacted by ongoing COVID lockdown and travel restrictions. These included government-mandated closures of Australian stores in the key winter trading period and reduced demand for travel-related products. Same-store sales, including online, were down 18.2 percent overall for the full year and down 3.1 percent for the second half.

On a reported basis, the Kathmandu segment’s sales were NZ$354.0 million against NZ$426.4 million, a decline of 17.0 percent.

Gross margin for the Kathmandu segment increased by 130 basis points (1.3 percent of sales), benefitting from improved currency rates and a focus on promotional execution and inventory management. Online sales of NZ$56.8 million represented 15.8 percent of DTC sales and generated a four-year CAGR of 14.3 percent per annum.

Oboz Result Boosted By Strong Hiking Participation
On a reported basis, sales at Oboz grew 32.0 percent to NZ$78.4 million from NZ$59.4 million a year ago and gained 44.9 percent on a currency-neutral basis. The company said Oboz continues to see sales growth driven by a product innovation strategy and diversification of its customer base.

Gross margin at Oboz was impacted by significant one-off air freight costs to support key customer deliveries of seasonal winter styles in the first half of the fiscal year, plus increased ocean freight costs due to supply chain congestion in the second half. Gross margin is expected to normalize when global supply chain congestion and related shipping rates come back in line. The forward order book is at its highest level allowing investment to support future growth.

Growth Platforms
Discussing growth priorities across its segments, Daly said the company’s goal is for Rip Curl to be the number one surf brand in Australasia and a top-three brand in North America and Europe. He said, “We will be building Rip Curl’s North American presence and see the potential to double the North American business across our own stores, online and wholesale channels.”

Daly said Kathmandu is the leading outdoor brand in Australasia, with 2.1 million loyal and engaged Summit Club members, which the chain will target to further leverage. Daly said, “There is significant market opportunity to expand into Europe and North America, and we aim to launch in both Canada and Europe during FY22. We have an attractive new product pipeline, which includes an enhanced summer product offering.”

New programs for the current year include launching Kathmandu in Europe and Canada and the relaunch of the Kathmandu Summit Club.

Daly said Oboz is undergoing the expansion of its product range into adjacent footwear categories and the goal is to grow Oboz into a U.S. $100 million business in the medium term. Growth opportunities include the recently-launched online store and further expansion of the business in Canada and also Europe.

Overall, Daly said the company is investing in digital capabilities in step with the online shift caused by the pandemic and aims to increase Group online sales to 25 percent of DTC sales in the medium term. Daly said, “With this goal in mind, a new Group online platform is being rolled out across our brands. We also are making further enhancements to our omnichannel foundations, including making a point of sale upgrades to support unified commerce and click and collect functions for contactless purchases.”

The company is also investing in loyalty programs, including launching its Club Rip Curl program in the coming year to leverage its strong consumer following. Pricing and promotions are also being enhanced based on data algorithms and personalization.

Sluggish Start To New Fiscal Year
Same-store sales, including online, for the six full weeks to September 12 have been significantly impacted by ongoing Australasian COVID lockdowns. Rip Curl’s sales are running down 12.8 percent overall but were up 3.6 percent adjusted for COVID lockdowns. The Kathmandu segment’s sales were down 19.9 percent overall but grew 18.3 percent adjusted for COVID lockdowns. Online sales growth has been strong, up 25.9 percent across the company, with Kathmandu sales in regions less affected by COVID restrictions performing well. Rip Curl and Oboz wholesale order books are above pre-COVID levels.

“COVID continues to impact the global business. Lost trading days in FY21 due to lockdown restrictions were around 13,000, compared to 15,000 in FY20,” said Daly. “Continued lockdowns in New South Wales, Victoria, ACT, and New Zealand will continue to impact our results during the first half of FY22. Trade-in airport locations, in emerging countries such as Brazil, Indonesia and Thailand remains significantly impacted by COVID, while Northern hemisphere retail stores are managing with staff constraints and sporadic closures as positive team COVID results arise.”

Kathmandu said that in addition to ongoing Australasian lockdowns, COVID restrictions have impacted its supply chain. Suppliers have reduced factory capacity due to enforced closures, and freight congestion is leading to delivery delays and increased freight costs. As a result, Kathmandu projects the first-half FY22 profit to be below year-ago levels.

“We are encouraged that both Rip Curl and Oboz wholesale order books are significantly above pre-COVID levels,” added Daly. “In terms of the outlook, all of our brands are well-positioned to capitalize on growing participation in outdoor, beach and surfing activities. We are set to capitalize on opportunities resulting from the global COVID vaccination rollout as restrictions ease in key growth markets and international travel restrictions are expected to ease as FY22 progresses.”

Photo courtesy Oboz