Kathmandu chairman refuses to pay back JobKeeper

Kathmandu is surfing the success of its Rip Curl brand, which allowed it to lift profit, but is refusing to repay JobKeeper it received.

A Kathmandu store at Victoria’s Chadstone mall. Picture: Aaron Francis

David Kirk, former New Zealand All Blacks captain and the ex-boss of the now merged Fairfax Media, is standing firm as chairman of retailer Kathmandu that the business will not pay back around $18.4m in wages and other government subsidies despite a lift in first-half profit.

Mr Kirk said the pain had been shared by his investors and staff and that paying back JobKeeper and other wages subsidies paid by the New Zealand government would represent a transfer of shareholders’ funds to the government.

“We thought hard about it,” Mr Kirk said on Tuesday when the outdoor adventurewear company Kathmandu reported its latest financial results, but he said given the financial pain borne by its staff and management through COVID-19 it was right to keep the subsidies which included the Australian government’s JobKeeper.

The trans-Tasman Kathmandu, which also owns iconic Australian surf brand Rip Curl, issued its accounts which showed that it took in $NZ20m ($18.4m) in government grants and wages subsidies for the first half of which $NZ15.2m was in wages subsidies, including JobKeeper.

The retailer has resumed paying dividends after its first-half profit almost tripled to $NZ22.3m. The Christchurch-headquartered Kathmandu reports its accounts in New Zealand dollars.

Mr Kirk who for a spell in his corporate career the chief executive of Fairfax Media, the owner of the Sydney Morning Herald and The Age, was appointed chairman of Kathmandu in 2013. As All Blacks captain he led New Zealand team to world cup victory in 1987.

He said on Tuesday that his shareholders had suffered too with a loss in the value of the share shares as well as no dividends.

“Kathmandu has raised a lot of capital and our shareholders have suffered quite significant EPS. There have been no dividends paid to Kathmandu shareholders for a year, which is a loss that will never come back,” Mr Kirk said.

“There have been no bonuses to senior staff.

“When you think about the stakeholders, our shareholders, our staff, and the company generally … we think that pain has been pretty fairly shared among all those groups and obviously repayment of JobKeeper at this point would be a transfer of shareholders money to the government and we just feel as if the balance is about right and reasonable now.”

Meanwhile, Adventurewear retailer Kathmandu’s flagship brand has been dented by COVID-19 travel restrictions, posting a loss for the first half, but recorded strong sales for its Rip Curl surf business and its Oboz footwear chain.

Kathmandu’s camping and adventurewear business has been the company’s biggest victim of the pandemic, slumping to a pre-tax loss of $NZ7.1m compared to a profit of $NZ10.5m in the previous corresponding period.

But the better performance by Rip Curl and Oboz allowed the broader group to post a strong uplift in half-year profit and resume paying dividends.

Kathmandu’s first-half net profit of $NZ22.3m was up from $NZ7.57m in 2020, as sales lifted 12.9 per cent to $NZ410.7m, including a full six month contribution from Rip Curl, which it bought for $350m in late 2019.

Underlying EBITDA was up 19 per cent to $NZ48.2 million while underlying net profit was up 32.8 per cent to $NZ23.1 million.

Kathmandu booked net government wages assistance, which includes JobKeeper, of $NZ15.2m for the half.

The retailer ended the first half with a robust balance sheet, with $NZ10.1 million net debt, reflecting working capital management strategies.

Kathmandu announced a resumption of dividends, with a NZ2 cents per share interim dividend declared.

Kathmandu said Rip Curl achieved strong sales and profits, despite COVID-19 impacts in key global markets, validating the group’s diversification strategy. Oboz posted sales growth and a strong forward order book, benefiting from its product innovation strategy and a diversification of customer base.

However its flagship Kathmandu stores were hurt by pandemic travel restrictions, which curbed sales in adventurewear gear.

Outgoing Kathmandu chief executive Xavier Simonet said despite operating in challenging conditions over the first half due to the substantial impacts from COVID-19, Rip Curl delivered an outstanding first half result.

“Benefiting from increased participation in surfing in Australia, Europe and the USA, Rip Curl achieved strong sales and profits despite COVID-19 trading restrictions, reflecting the brand’s technical product focus and strong consumer engagement.

“Pleasingly, Rip Curl’s wholesale order book is back above pre-COVID-19 levels.”

He said Kathmandu was particularly impacted by reduced demand for insulation and rainwear resulting from a lack of international travellers to the Northern Hemisphere.

“Over the first half, we implemented a rapid response to changes in consumer preference resulting from COVID-19. To respond to increased participation in local travel and adventure, our brands adjusted their focus to product categories in high demand, such as wetsuits and surfboards for Rip Curl, and camping and footwear for Kathmandu. Omni-channel capability allowed our brands to capture record demand for the online channel, with online penetration now making up almost 13 per cent of the Group’s direct to consumer sales.”

Sales for Rip Curl rose 86.1 per cent to $NZ251.1m with EBIT up 173.9 per cent at $NZ44m.

At Kathmandu stores sales were down 34.9 per cent at $NZ127.3m while EBIT went from $NZ10.5m in 2020 to a loss of $NZ7.1m. At footwear brand Oboz sales rose 3.8 per cent to $NZ22.1m and EBIT fell 20.7 per cent to $NZ2.5m.

Originally published as Kathmandu chairman refuses to pay back JobKeeper