The head of outdoors retailer Kathmandu is hoping a bout of ‘revenge spending’ will improve the company’s fortunes ahead of the Christmas rush, as shipping issues and lockdowns weigh on sales.
Michael Daly, Kathmandu’s recently appointed chief executive, told The Age and The Sydney Morning Herald he was still positive on the outlook for the rest of the calendar year despite a weak start to the new financial year for the company’s eponymous brand and its surfwear division Rip Curl.
Kathmandu is hopeful for a rebound in sales ahead of the Christmas period.
“As we’ve seen historically, with other lockdowns easing there are all sorts of revenge spending [that occurs],” he said.
“I think there will be strong results that will arise in all parts of the world, particularly Australia, New Zealand, as we come out of a lockdown, but it’s just a question of when and how.”
On Tuesday, Kathmandu told investors the ongoing lockdowns in Sydney and Melbourne had continued to batter the business over the start to the new financial year, with Rip Curl sales down 12.8 per cent in the six weeks to September 12, and Kathmandu sales down 19.9 per cent.
Supply chain issues are also stymieing the retailer’s stock levels, with reduced factory capacity and freight congestion leading to delays and increased costs. Mr Daly said these delays were predominantly affecting the company’s Oboz footwear business, which the company was “actively managing”.
“The Oboz business as a whole is not a material component to the overall business, but it certainly will have an impact if those factories don’t have free, full production in due course,” he said. “But we just don’t know how long it’s going to last for.”
Shares in the business fell 3.5 per cent to $1.38 after market open on warnings from the business its first-half profits would be lower this year. The company’s broader results for the past financial year were strong, largely thanks to a better-than-expected maiden contribution from Rip Curl.
Sales across the group, which includes Rip Curl, the eponymous Kathmandu brand and footwear brand Oboz, rose 15.1 per cent to $NZ922.8 million ($891 million) across the year, with earnings before interest and tax jumping nearly 50 per cent to $NZ92.2 million.
A full 12-month contribution from Rip Curl, which the business acquired in late 2019, underpinned this result. The division was responsible for $NZ490 million in sales and $NZ56.9 in earnings, the latter of which was up a massive 1252 per cent on the prior year.
New Kathmandu group chief executive Michael Daly warned first-half earnings would fall. Credit:
The company said the acquisition had outperformed expectations, and allowed Kathmandu to declare a final dividend of 3 cents per share, payable December 15.
Kathmandu itself saw sales plummet, however, down 17 per cent to $NZ354 million and earnings nearly halved to $NZ26.3 million. The division was heavily affected by the pandemic and associated lockdowns through much of 2021.
Mr Daly said Rip Curl’s strong performance was due to the business’ lack of reliance on the Australian market, with its overseas wholesale and retail operations continuing to thrive even as the Australian market remained largely shut down.
“Rip Curl can participate in all those markets that are freely open, so even with Australia and New Zealand locked down, we’re still seeing some reasonable results coming out of the US and Europe because those countries in those regions living with COVID,” he said.
Kathmandu’s results were bolstered by a total of $NZ27 million in government grants, including JobKeeper, the New Zealand subsidy and the US PPP small business loans. Mr Daly said the company still had no intention to repay the subsidies.
“Our business has clearly been impacted by the pandemic, so from our point of view, we don’t see a strong argument to make a repayment,” he said.
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