Rip Curl owner Kathmandu hangs on to JobKeeper despite surfing, hiking, camping surge boosting sales

Rip Curl owner Kathmandu is hanging on to substantial JobKeeper payments despite riding the wave of a COVID-related leisure trend.

Outdoor and adventure clothing retailer Kathmandu has pocketed $NZ20.5m ($A19m) worth of JobKeeper and other wage subsidies but does not plan to hand it back despite achieving “an outstanding first half result”.

The group, which owns Rip Curl and Oboz, reported on Tuesday a net profit of $NZ22.3m ($A20.6m) for the six months to January 31 after sales rose 12.9 per cent.

Kathmandu also resumed dividend payments to shareholders, declaring a 2 NZ cents per share interim payout.

The result was attributed to the acquisition of the popular surf brand, which benefited from increased participation in surfing in Australia, Europe and the US.

Surfing boomed during lockdowns due to people having extra spare time. Picture: Tim Hunter.

“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, validating the group’s diversification strategy,” group chief executive Xavier Simonet said.

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

It was a different story for its namesake chain, which suffered reduced demand for warm clothes and rainwear due to a lack of international travellers to the northern hemisphere.

“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,” Mr Simonet said.

Warm clothing and rainwear demand dropped after international travel ceased. Picture: Aaron Francis/The Australian

“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.”

The group said Oboz would soon launch an online store and its forward order book was “well above” pre-COVID-19 levels.

On the outlook, the chief executive said the three brands remained well positioned to capitalise on the trend of more people surfing, camping and hiking.

Regardless, it will hang on to its pandemic-related government grants, saying it had taken a cautious approach to cost management in response to uncertain trading conditions, including reducing outgoings and securing rent relief.

Chairman David Kirk said the group had considered the subsidies very carefully.

More people took to hiking during the pandemic.

“We’re not intending to repay any of the JobKeeper payments,” Mr Kirk told a media briefing.

“JobKeeper is a good public policy - it in our case definitely prevented the loss of thousands of jobs and meant a significant number of stores were not closed indefinitely.

“The money we received of course was used to keep people in jobs.”

He said staff worked at 85 per cent of their usual pay for a significant period, staff eligible for bonuses didn’t receive any for 12 months and Kathmandu’s shareholders had not been paid a dividend in a year.

Mr Kirk said the group’s profitability growth was only just returning “and only very marginally”.

Labor MP Andrew Leigh said JobKeeper was meant to be for firms suffering a major drop in earnings.

“Yet Kathmandu got it while enjoying a rise in their profits,” he said.

“If they’re doing well enough to pay shareholder dividends, they’re doing well enough to repay taxpayers.

“And if the Morrison government hadn’t given so much JobKeeper to firms with rising profits, it wouldn’t have to be prematurely cutting off the program at the end of March.” 

Kathmandu joins a list of companies booking solid results that have not handed back JobKeeper and other subsidies, including Harvey Norman, which last month booked a record, more than doubling in first-half net profit, and also resumed interim dividend payments.