KMD Brands Sees 6.2 Percent Growth In Fiscal Year

KMD Brands, Ltd. reported sales grew 6.2 percent in the year ended July 31. The gains were driven by continued growth in Rip Curl sales, Kathmandu’s highest sales in Q4 and record order demand for Oboz product.

Sales reached $979.8 million, a record for KMD Brands, underscored by sales growth from Rip Curl and Kathmandu product. Gross margin maintained at 58.9 percent despite elevated international freight costs and raw material cost pressures. Operating expenses reflect higher wage and rent costs relative to sales, supporting its teams during COVID-related store closures, particularly in Q1. The Group also up-weighted investment in brand marketing and ESG to drive future brand growth (+$18.6 million increase YOY). EBITDA of $92.0 million was down 16.0 percent from $109.5 millions a year ago. The decline reflects the impact of Q1 Australasian lockdowns and Oboz supply chain COVID disruption. Total profit was $36.8 million, down 40.0 percent. All amounts are in NZ$ unless otherwise noted.

Rip Curl Sales Growth Across All Channels
Rip Curl’s results were underscored by sales growth across all channels, with total sales up 9.5 percent to $536.8 million. Europe, Hawaii and South-East Asia achieved strong sales growth. Wholesale sales were up 16.5 percent with fewer COVID disruptions to the 1H FY22 sell-in period and continued strong growth in 2H. Rip Curl wholesale forward order books remained above pre-COVID levels. The wholesale channel accounts for a similar level of sales to the retail store channel. The DTC channel includes owned retail stores and online, generating same-store sales growth of 3.9 percent. EBITDA was reduced given elevated international freight costs and planned investment in long-term brand building in key markets.

Kathmandu Strong Winter Season Performance
Kathmandu’s performance was underscored by a strong winter season, with Q4 sales and gross margin both above FY19 (pre-COVID). Total sales were up 6.8 percent to $381.6 million, with a strong rebound after lockdowns. The wholesale channel strategy represents a global growth opportunity for the brand, with early wholesale orders taken from a select number of retailers in Europe and Canada. DTC still accounts for nearly all of Kathmandu’s sales, with DTC’s same-store sales growth up 9.1 percent. Online sales grew 24.9 percent, now representing 18.7 percent of total sales. The sales result was supported by continued investment in the long-term value of the brand and a loyalty base of close to two million customers. Full-year EBITDA reduced slightly, with profitability rebounding in 2H following COVID lockdowns in 1H. Kathmandu its highest 2H gross margin result. Raw material and international freight cost pressure was more than offset by currency benefit and its strategy to moderate the historic ‘high-low’ pricing model. Brand momentum is building from a renewed focus on, and investment in, marketing and product.

Oboz Impacted By Transitory Supply Challenges
Oboz wholesale and online sales were impacted by the three-month COVID closure of Vietnam factories and compounded by international freight delays, with approximately 40 percent of FY22 orders unable to be fulfilled. Factories resumed full production during Q3, with sales growth resuming as inventory levels recovered in Q4. EBITDA reflected the lower sales level and elevated international freight costs. Brand momentum remains strong with forward orders into FY23 supporting the path to Oboz’s US$100 million medium-term revenue target and online performance indicates a significant growth opportunity.

Group CEO & Managing Director’s Comments
Group CEO & Managing Director Michael Daly said of FY22 results: “KMD Brands continued to deliver strong results over the past 12 months while navigating substantial COVID challenges in the first half. The strength of our brands was evident in record Group sales of nearly $980 million, with a strong return to sales growth across all of our brands in the final quarter. In addition, we made significant progress across each of our strategic pillars to build global brands, elevate our digital presence, leverage our operational excellence, and be a leader in ESG.

“Rip Curl achieved sales growth across all channels and key international regions, particularly Europe, Hawaii and South-East Asia, as we continued to invest in the long-term value of the brand. Rip Curl’s wholesale order books remain significantly above pre-COVID levels, allowing us to better manage supply chain disruption through near-term inventory investment.

“Although impacted substantially by COVID lockdowns and restricted travel in the first half of FY22, Kathmandu saw a strong rebound in the second half. The brand achieved its highest ever sales result in Australia for the key winter promotion period during Q4, and its highest ever second half gross margin result. Oboz continued its strong brand momentum, with record demand for Oboz products as COVID supply challenges were addressed.

“With the effects of COVID now largely behind us and international travel returning, we are very focused on executing our growth strategy through expanding our global footprint, investing in digital platforms, leveraging operational excellence, and leading the industry through sustainability and innovation.”

Photo courtesy KMD Brands