Sales growth across KMD Brands continues to rightsize through FY25, offset by reported challenges that continue to hit the group’s wholesale channels.
In the last two months of 2024, sales at Rip Curl and Kathmandu lifted by 2.2 per cent and 1.7 per cent respectively, according to KMD’s trading update today. But the positive growth has been dragged back by negative sales growth for Oboz Footwear, down 5.1 per cent in the same time frame, resulting in a total group sales lift of 1.7 per cent in the busy Christmas period.
Despite the positive boost, year-to-date sales in the five months from August to December were down 2.5 per cent for the group, with Kathmandu hitting the lowest sales slip of 0.4 per cent, offset by a 7.7 per cent sales fall for Oboz.
KMD Brands CEO and managing director Michael Daly noted that much of the sales slips across the group were noted in wholesale - particularly for Rip Curl and Oboz.
“Direct-to-consumer sales trends continue to improve for all three of our brands, while the wholesale market is taking longer to recover,” he said. “We continue to focus on delivering positive sales growth, maximising cash flows, and reducing inventory.”
Wholesale accounts remain cautious on pre-season commitments in a challenging market, the trading update read. This is reflected in Rip Curl wholesale sales being down 13.4 per cent below last year YTD, and Oboz wholesale sales being down 12.1 per cent below last year YTD.
Forward orders and in-season buying from key accounts support an improving wholesale trend leading into 2025, KMD added.
Online, however, is a key growing channel for the group, where YTD sales were up 18.4 per cent above last year, with all three brands achieving double digit sales growth YTD.
KMD also reported that gross margins for Rip Curl and Kathmandu “remain resilient” YTD, despite increased promotional intensity and a tough trading environment. Meanwhile, Oboz clearance of inventory has contributed to lower gross margins YOY.
“All brands continue to actively manage costs while facing global cost pressure,” KMD’s trading update read. “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.”
KMD projects that first half underlying earnings before interest, tax, depreciation and amortisation (EBITDA) should be in the range of NZ$1 million to NZ$3 million, down from NZ$15.1 million in the first half of FY24.
The group also expects net debt at January 31 this year to be approximately NZ$85 million, down from NZ$96.2 million for the same time last year.
“Funding headroom at 31 January 2025 is expected to be approximately NZ$200 million,” KMD reported. “The group continues to have a strong active working relationship with, and support from, its banking syndicate. The group has taken pre-emptive action to amend the January 2025 covenant measurement point, with no restrictions in place.”
KMD is striving for further improvement on the recent positive sales growth trends in the second half of FY25, which the group reported is historically the most profitable, and generates significant cash flows.
“All brands continue to actively manage working capital and inventory investment,” KMD added. “The group is targeting net debt below NZ$50 million at 31 July 2025, which is at least NZ$10 million lower than last year.”