Kathmandu, Rip Curl owner warns of softer consumer sentiment as cost of living weighs on shoppers

KMD Brands, which owns Kathmandu, Rip Curl and Oboz shoes, says that it has experienced a slower start to winter due to adverse weather conditions and soft consumer sentiment.

KMD Brands, which owns outdoor adventurewear brand Kathmandu, Rip Curl surfwear and Oboz shoes, says that it has experienced a slower start to winter due to adverse weather conditions and soft consumer sentiment but that it was on track to book annual sales of more than $NZ1bn ($930m) for the first time.

Winter is a key selling period for the retailer, especially at its flagship Kathmandu stores where customers flock for new tents, puffer jackets and hiking gear to take on their outdoor ­pursuits.

But the slower than expected start to the season highlights the strains its key customer base could be under as they face rising interest rates, soaring inflation, rising rents and other cost of living expenses that is draining shoppers of discretionary income and making them pull back on other spending.

It is the latest in a growing line of retailers to warn of worsening trading conditions as tightening interest rates and higher cost of living expenses weighs heavy on consumers and trigger a pull-back in consumer spending on a wide range of categories, from fashion and apparel to takeaway pizza, wine and jewellery.

In a trading update on Wednesday, KMD said it expected sales for fiscal 2023 to be around $NZ1.1bn and that gross margins remained “resilient” and in line with last year.

Underlying earnings are expected to be in the range of $NZ105m to $NZ110m, with three weeks of trade still to come. This is against underlying earnings of $NZ92m in 2022.

Sales are expected to be a full-year record for the group, exceeding $NZ1bn for the first time, following strong sales growth from all brands in the first three quarters of the financial year, KMD Brands said.

However, the impact of rising interest rates, with KMD’s home market of New Zealand recently lurching into a recession, had seen a fall in in-store foot traffic and a pullback by shoppers.

“Recent trading in the fourth quarter has been more challenging, with increased cost-of-living pressures softening consumer sentiment,” the company said.

“Kathmandu has so far experienced a slower start to its winter trading period, cycling its best-ever winter season performance last year.

“Sales and retail footfall have been impacted by a warmer start to winter in Australia, and softening consumer sentiment overall.”

KMD Brands shares slumped 10 per cent on the trading update and later closed down 9c at 88c. The stock is down almost 13 per cent over the past year.

KMD chief executive Michael Daly said with three weeks of trade still to come, the retailer remained focused on delivering its key Kathmandu winter and Rip Curl northern hemisphere summer results while continuing to moderate its cost base for the year ahead.

“We’re looking forward to delivering more than $NZ1bn in sales at year-end – a first for KMD Brands.”

In May, KMD revealed more upbeat trading results that showed it had defied broad economic pressures on household spending to post sales growth across all its brands continuing into the third quarter.

In that trading update, issued before an investor briefing, KMD said third-quarter sales for its Kathmandu stores were up 11.3 per cent, Rip Curl sales up 7.9 per cent and Oboz sales up 120.3 per cent, compared to a year earlier.

Total sales for that quarter were up 15.6 per cent and gave ­investors hope the worst was behind the company.

In March, KMD revealed that it had returned to growth in the first half of 2023 after the Covid-19 pandemic slammed the retail, tourism and sports industries that saw shortages of wetsuits, shuttered factories and other disruptions to its business.