Kathmandu Holdings Ltd said its New Zealand retail stores and distribution centers were closed on March 24 in advance of a lockdown in the country that commenced on March 25 and will continue for a period of at least four weeks, as mandated by the New Zealand Government.

The company said in its statement on March 27 that it is in the process of closing its Australian retail network by 5:00 pm today reflecting the need to ensure the health and safety of staff and customers and the rapidly declining footfall and social distancing
measures that have been imposed by the Australian Government. Other key regions including Brazil, North America and Europe are in a similar situation with stores, wholesale customers and offices closed due to government-mandated closures or lockdowns.

Online retail in Australia, Europe and the USA continues. In accordance with guidance from the New Zealand Government, online distribution in New Zealand has been suspended.

Cost savings and structural cost reductions

1. The Group is taking decisive and immediate action on significant cost savings and structural cost reductions, aided by government contributions and supplements to employee incomes where available. In particular:

  • In New Zealand, applications are underway to access the government wage subsidy for employees.
  • In Australia, retail store and head office staff with the exception of a skeleton crew will be stood down,
    without pay for 4 weeks, but with access to government assistance and leave entitlements.
  • During the lockdown in France, the base of Rip Curl’s European operations, and other European
    countries, employers are able to temporarily release staff while government funds the majority of
    employee salaries.
  • Employment is largely on an “at-will” basis in North America allowing for efficient right-sizing of the
    business in that region.

2. Aggressive cost-saving initiatives have or will be implemented to manage, where possible, expenses and
cash flow in line with sales performance. Measures taken or planned include:

  • Landlord partners have been engaged in negotiation to achieve a fair rental outcome that sees the
    Group’s rental costs aligned to sales performance.
  • Existing inventory orders have been reviewed with aggressive levels of cancellations made based on
    reduced demand levels.
  • All operating expenses have been challenged aggressively for potential savings.
  • Planned capital expenditure has been canceled or deferred.
  • Senior management across all brands has agreed to a 20 percent salary reduction until further notice.
  • Use of casual staff in retail networks and warehouses has ceased in all regions in response to reduced
    demand in recent weeks.
  • The company said it is consulting with employees around options for team members to continue on reduced hours and
    salary basis.

3. The Group is implementing the structural changes necessary to conserve liquidity and streamline the business
during this period of unprecedented challenge, whilst recognizing the legal requirements and processes of
the many jurisdictions in which it operates. Further updates will be made as necessary.

Dividend and Interim Results
Like many other companies, the Board is reviewing the Group’s outlook and capital structure in the light of the
COVID-19 situation. The Board has also taken the prudent decision to suspend dividend payments until after
such time as more normal trading conditions resume.

In reliance on a waiver issued by NZX, the Group’s half-year results announcement (including preliminary financial
statements) for the six months ending 31 January 2020 is now expected to be released by no later than Friday 3
April 2020, instead of Monday 30 March 2020 as previously advised.

While COVID 19 had minimal impact on earnings for the six months ending 31 January 2020, there is likely to be
a material adverse impact on earnings in the second half of this fiscal year.

Kathmandu Holdings’ Group CEO Xavier Simonet commented “Our total focus is to protect the health and
wellbeing of our teams and customers and ensure business continuity. I am so grateful to all our teams around
the world for their resilience in this situation of uncertainty and challenges.”

Kathmandu, the largest outdoor retailer in New Zealand and Australia, acquired the U.S. outdoor footwear brand, Oboz, in 2018 and bought the Australian surf brand Rip Curl last year.

Photo courtesy Kathmandu