Kathmandu, Rip Curl stores to shut as coronavirus shutdowns bite

Kathmandu and Rip Curl outlets will be closed and hundreds of staff stood down as the retailer tries to limit coronavirus damage.

A Kathmandu store in Adelaide. Picture: AAP

Outdoor adventure wear and equipment chain Kathmandu is the latest retailer to close its doors and suspend paying dividends to shareholders in the wake of the coronavirus pandemic, as its Australian and New Zealand stores close and around 2000 staff are stood down.

Most Australian staff face at least four weeks without pay.

Kathmandu, which is listed on the Australian and New Zealand sharemarkets and which last year bought surfwear brand Rip Curl, says senior executives will take a 20 per cent pay cut and it is expecting an earnings hit in the second half.

It said all of the group’s major head offices are closed with staff working from home to minimise the spread of the virus.
All New Zealand retail stores and distribution centres were closed on March 24 in advance of that nation’s lockdown, which began on March 25 and will continue for a period of at least four weeks.

Kathmandu has around 170 stores in Australia and New Zealand, as well as 118 Rip Curl outlets.

Rip Curl stores will also close. Picture: Bloomberg

It says it is in the process of closing its Australian retail network by 5pm today, reflecting the need to ensure the health and safety of staff and customers, rapidly declining footfall and social distancing measures.

Kathmandu said other key regions including Brazil, North America and Europe are in a similar situation with stores, wholesale customers and offices closed due to government-mandated closures or lockdowns.

Online retailing in Australia, Europe and the USA continues. However in accordance with guidance from the New Zealand government, online distribution in New Zealand has been suspended.

The retailer said it is taking decisive and immediate action on significant cost savings and structural cost reductions, aided by government contributions and supplements to employee incomes where available.

In Australia, retail store and head office staff, with the exception of a skeleton crew, will be stood down without pay for four weeks, but with access to government assistance and leave entitlements.

During the lockdown in France, the base of Rip Curl’s European operations, and other European countries, employers are able to temporarily release staff while government funds the majority of employee salaries.
Kathmandu says it will implement “aggressive” cost-saving initiatives, negotiate with landlords, cancel orders and “challenge” operating expenses in a search for savings.

Kathmandu said planned capital expenditure has been cancelled or deferred.

Senior management across all brands have agreed a 20 per cent salary reduction until further notice.

“The group is implementing the structural changes necessary to conserve liquidity and streamline the business during this period of unprecedented challenge, whilst recognising the legal requirements and processes of the many jurisdictions in which it operates,” Kathmandu said.

Kathmandu is also suspending its dividend to preserve cash “until after such time as more normal trading conditions resume”.

The retailer has been given a waiver by the NZX to release its interim results a week later than scheduled, with earnings expected to be impacted by the pandemic.

“While COVID 19 had minimal impact on earnings for the six months ending January 31, 2020, there is likely to be a material adverse impact to earnings in the second half of this fiscal year.”

Kathmandu Holdings’ Group CEO Xavier Simonet commented “Our total focus is to protect the health and wellbeing of our teams and customers and ensure business continuity. I am so grateful to all our teams around the world for their resilience in this situation of uncertainty and challenges.”