Retailers face lender controls as investors shun fresh equity raises

KMD Brands has blamed Kathmandu’s recent fall in sales to warmer weather in Australia. Picture: NewsWire / Gaye Gerard

A growing number of bricks-and-mortar retailers risk placing their future in the hands of their lenders in the coming months as investors pass up the opportunity to provide fresh equity and their peers pass on the opportunity to acquire their ­rivals.

Three examples include KMD Brands, David Jones and Cettire.

KMD Brands, which owns Kathmandu and Rip Curl brands, issued another market downgrade on Thursday, with the $189m retailer telling the market that its overall sales for the 2025 financial year to date would be down 0.5 per cent compared to the previous corresponding period.

It has $70m of debt and has ­received a waiver from its lenders, but market sources believe that even if it were the case that it wanted to raise equity, it would struggle to gain investor support to do so.

The group blamed Kathmandu’s 6.4 per cent fall in sales for the second half of the year compared to the previous corresponding ­period on warmer than expected weather in Australia.

But analysts said the tighter margins, down 140 basis points year-on-year, suggested that its real challenge was discounting to protect market share in a highly competitive environment.

KMD said all brands were focused on generating cashflow in a highly competitive global market.

Compounding challenges for its international online sales could be US tariffs imposed by US President Donald Trump.

RBC analyst Wei-Weng Chen said in a research note that the 10-month trading update represented a 50 per cent downgrade to analyst consensus earnings before interest, tax, depreciation and amortisation expectations, now guiding for EBITDA of $15m-$25m.

Luxury online retailer Cettire, meanwhile, rejected the claim that an equity raising would be on the cards in April with just $76m of cash and a $200m market value. But since that time, its performance has deteriorated further.

Since then, its share price has almost halved and it has further downgraded its earnings on the back of weaker demand in April and May.

Its net cash balance fell to $45m and for the year to date it reported a $500,000 EBITDA loss.

One of the company’s major supporters, Cat Rock Capital, sold out this month and ceased to be a substantial holder after it earlier held more than 10 per cent, making it one of the largest shareholders behind founder Dean Mintz.

Cettire was previously one of the market’s most shorted stocks, but most short sellers covered their shorts with the Cat Rock sale.

Some analysts believe it makes an equity raising far tougher.

The downgrades from KMD Brands and Cettire come after a downgrade by footwear retailer Accent Group.

The situation is also playing out amid reports that department store David Jones, owned by Anchorage Capital Partners, has been struggling, despite the chain’s well-regarded management, and has been extending the payment times to its suppliers.

The stock within the business is owned by lender Gordon Brothers. There were suggestions that its private equity owner Anchorage bought the David Jones business well, outlaying about $125m in 2022.

However, with there not expected to be any obvious buyers for department stores, the question is whether Anchorage would invest more equity into the business should the need arise.

One option floated has been a nil-premium merger with Myer, which is largely controlled by Solomon Lew, who holds a significant stake.

But most believe the billionaire retailer would be hesitant to take on Myer’s rival because it would increase the exposure to more retail leases in shopping centres at a time when most apparel chains and department stores are trying to have fewer stores.

It’s a business decision they are making as their businesses gets disrupted by online shopping.

As well as disruption from discount online retailers like Temu and Shein, apparel groups have also experienced tougher conditions with higher interest rates and higher living costs for consumers.