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Kathmandu and Rip Curl parent company KMD Brands has reported a slight nudge up in group sales for the first half of FY25 alongside a 114.2 per cent fall in total net loss.
Much of the sales momentum is driven by promotional pushes across its three brands – also including Oboz Footwear – which has impacted gross margin and profits.
Total revenue for the group was up by 0.5 per cent to NZ$470.9 million (~A$428.30 million), with net loss at NZ$20.7 million.
Gross margin across the group was down by 0.3 percentage points to 58.5 per cent, with the slip driven by a lift in operating expenses by 4.2 per cent to NZ$271.6 million.
“The sales result is underpinned by an improved trend in the direct-to-consumer (“DTC”) channel (including online) for all three brands,” KMD Brands reported. “Group online sales performance has been a highlight, with all three brands achieving double digit sales growth YOY. Online remains a key growth priority for the group.”
The group added that wholesale sales are taking longer to recover, as wholesale accounts remain cautious on pre-season commitments in a challenging market. “Forward orders and in-season buying from key accounts support an improving wholesale trend through 2025.”
Kathmandu and Rip Curl both supported total group sales, with Kathmandu sales up 3 per cent, improving from a drop of 2.7 per cent YOY during the first quarter to a lift of 6.9 per cent in the second quarter.
This has continued in the second half, with sales up 5.2 per cent for the seven full weeks to March 16, 2025.
Rip Curl sales also remained positive, with total sales up 0.1 per cent to NZ$278.5 million, which also improved in the second quarter.
In the first seven weeks of the second half, Rip Curl DTC sales softened to a lift of 0.7 per cent, down from a lift of 4.1 per cent in the first half. Wholesale sales remain challenged, down 7.9 per cent for the first half.
KMD Brands also noted the first few weeks of the new year is a seasonally non-significant trading period for Kathmandu and Rip Curl.
Oboz Footwear sales also continued to be challenged in the first half, down 6.3 per cent to NZ$35.6 million, driven by a slip in wholesale sales by 10.6 per cent, and offset by a 32.8 per cent lift in online sales.
“Direct-to-consumer sales have improved for all three of our brands, while the wholesale market is taking longer to recover,” outgoing group CEO Michael Daly said. “Global monetary policy settings have been easing, but the return of consumer confidence will take time.
“We are seeing short-term gross margin pressure for all brands in a highly competitive global market. However, our focus remains on growing gross margin in the medium-termas markets improve.
“We are monitoring the impact of geopolitical uncertainty on consumer confidence and supply chains.”
Across the brands, Rip Curl managed to hold up its gross margin in the first half, lifting by 0.2 per cent, while Kathmandu and Oboz Footwear gross margin fell. As with Oboz Oboz, both Kathmandu and Rip Curl’s online sales lifted by double-digits.
Meanwhile, KMD Brands’ balance sheet shows a net debt position of NZ$76.2 million as of January 31, down by NZ$20 million from the same time last year, with funding headroom of around NZ$215 million.
“January inventory investment results in typically higher net debt levels at the January measurement point,” KMD Brands noted.
Net working capital was NZ$33.6 million lower than January 31, 2024, with reduced inventory balances YOY, the group added. Inventory positions continue to moderate back towards historical levels.
“As previously communicated, the dividend policy remains aligned to earnings, with a target payout ratio of 50 per cent to 70 per cent of underlying NPAT. As a result of the 1H FY25 operating performance, the directors have not declared an interim dividend.”
Incoming group CEO and managing director Brent Scrimshaw is set to take on the helm fully in April, with a transition continuing over the next two weeks.
“I was pleased to announce earlier this week the appointment of Ashley Reade as the new CEO of Rip Curl and additionally, have also commenced a worldwide search for a Melbourne-based group chief financial officer,” Scrimshaw said. “Ben Washington will continue in his current role as interim group CFO until a permanent appointment is made.”
Scrimshaw added he and the team will continue to focus on driving sales, improving profitability, maximising cash flows and reducing inventory.
“We believe that with our portfolio of iconic global outdoor brands and leadership in sustainability, we remain a unique investment proposition and well-placed for the future.”