Kathmandu hikes into online shopping as Covid pandemic hits annual profit

The outdoor adventure retailer has dived deeper into online shopping as it battles ongoing store closures from the pandemic.

Kathmandu closed stores early on in the pandemic, to reduce costs. Picture: AAP Image/David Mariuz.

Outdoor adventure retailer Kathmandu is warning of potential store closures as online shopping soars during the COVID-19 pandemic at the expense of bricks and mortar outlets.

The company is evaluating how much of the 63 per cent spike it reported in online sales is permanent or a one-off fuelled by lockdown restrictions.

Retail outlets still account for more than 80 per cent of Kathmandu’s sales and the bounce from clicks to bricks was not enough to offset temporary coronavirus-fuelled store closures, which wiped $NZ50m ($46.3m) off the group’s revenue.

The pandemic sent Kathmandu’s full-year net profit tumbling 86 per cent to $NZ8.1m, and chief executive Xavier Simonet said “some changes will be needed” across its store portfolio, predicting some retail trends associated with COVID-19 will be permanent.

“We always been very disciplined in terms of understanding the customer journey and adjusting our story portfolio to what the customer wants and the profitability of the stores,” Mr Simonet said.

“We are going to continue that work. We will adjust our store portfolio to the level of profitability we need to deliver.

“We have to see what part of the online surge is structural versus a one-off, and we will adjust our store portfolio to customer demand. Some changes will be needed but we are still evaluating what that means.”

Mr Simonet’s comments come a day after Australian Retailers Association chief executive Paul Zahra and Afterpay co-founder Nick Molnar said pace of Australia’s shift to online shopping will only get faster as the COVID-19 pandemic resets the way consumers work and play.

Mr Zahra said the accelerated shift to online would see the closure of more physical stores, a trend that was already evident with the rising number of “for lease” signs in the windows of vacant stores.

Kathmandu owns 325 stores, which includes ones dedicated to its Rip Curl and Oboz brands, with an additional 196 under licence and 22 run with joint venture partners.

The pandemic has hit Rip Curl, which it acquired for $350m last year, the hardest, wiping $NZ70m off the brand’s revenue contribution.

Rip Curl’s total global sales were down 17.1 per cent from November to July - the time Kathmandu has owned the brand - versus the same period the previous year.

But in jurisdictions where lockdown restrictions have eased, Rip Curl sales have rebounded 17.7 per cent in Australia 20.6 per cent in Europe as interest in surfing increased. While Mr Simonet is still assessing how much the online sales surge is a one-off, he is tipping sales will continue to recover across all the group’s brands as people embrace the outdoors as they emerge from lockdown and look to go on holidays closer to home amid ongoing international travel bans.

“There has never been as many surfers on the beaches of California, France, Spain and Australia than this year. It was incredible the number of people going to the beaches, going to the surf because they wanted to stay fit.

“But also the fact that people are working from home has supported that trend. People have had the opportunity to go to the beach once a day versus once a week. So depending on how people work in the future, and the balance between home work and work from the office, there will be more opportunities for people to go to the outdoors and the surf.”

Despite the COVID-19 challenges, still was able to increase sales 48.7 per cent to $NZ801.5m, thanks to the Rip Curl acquisition which added $NZ315.7m,

Meanwhile, its core Kathmandu brand generated $NZ426.4m - a decrease of 9.7 per cent compared with 2019. Revenue from Oboz, a Montana-based footwear brand fell 15.2 per cent to $US37.8m ($52.8m).

“Beyond the short-term impacts from lockdowns, our long-term strategy remains unchanged. Product innovation, brand differentiation, a key focus on sustainability, and a step change in digital transformation, will enable us to continue answering the needs of our customers and also inspiring them,” Mr Simonet said.

Such innovation included Kathmandu becoming the first fashion retailer to piggyback off Uber’s network of drivers in Australia to help deliver orders, as the rush to online shopping trigg­ered by the coronavirus pandemic overwhelmed logistics providers and slows down delivery times.

The group will not pay a final dividend.