KMD Brands books 40pc profit slide but strong winter points to a revival in 2023

Adventure retailers Kathmandu and Rip Curl are still wearing the bruises of Covid-19 despite easing restrictions delivering a bumper sales boost to the brands.

Aussie surfer Stephanie Gilmore during a lay-day at the Rip Curl pro at Bells Beach. The Rip Curl brand is enjoying a sales rebound as the easing of pandemic restrictions encourages travel, tourism and surfing. Aaron Francis/The Australian

KMD Brands chief executive Michael Daly says his customers are happy to spend up on boardshorts, hiking boots and puffer jackets as they seek functional apparel for the great outdoors while at the same time “looking good” after years of lockdowns and travel restrictions.

The retailer, whose fashion, apparel and equipment portfolio includes the Kathmandu chain, surfwear brand Rip Curl and US hiking boots outfitter Oboz, is enjoying a revival in its fortunes after two years of suffering through lockdowns and store closures as the opening up of international travel and adventure holidays propels sales.

“Our brands appeal to an active and outdoor consumer and what we see from all of our sales across all three brands is that the consumer — as we saw through Covid and now coming out of Covid – wants to be active wants to be in the outdoors,” Mr Daly said on Tuesday after KMD Brands posted a 40 per cent slide in its full-year net profit to $NZ36.82 ($32.77m).

The annual result was wearing the bruises of lockdowns, travel restrictions, store closures and the protracted shut down of a key Oboz factory in Vietnam but a resurgence towards the end of the year helped sales for the 12 months to July 31 rise 6.2 per cent to $NZ979.8m.

And that resurgence through winter and the final quarter of fiscal 2022 – that helped its Kathmandu stores post a quarterly sales record — was revealed to have pushed into the new year with KMD Brands reporting August group sales were up 44.2 per cent on the same time last year.

“Certainly puffer jackets, insolation and it has been a cold winter on the eastern seaboard and a wet one and certainly we are seeing people preparing themselves for the outdoors, and I’m not sure if it’s for the footy or the snow or just going on hikes.

“And what I will say is, is that good, functional and practical products for the outdoors is what we are seeing selling and that goes right through to Rip Curl, with swimwear, boardshorts and T-shirts for people looking to get away for those holidays whether it is domestic or international are all going well.

“What we are seeing from the customer is that if they are willing to come into the store they want to spend and want to look good, something that’s practical and they are not afraid to spend the money if they need to.’’

The slow trickle of returning tourism, outdoor adventure and surfing is feeding into better sales for the company’s key retail brands as the promise of a return to full travel traffic and uninterrupted trade positions KMD Brands for sales and earnings growth in 2023.

The gradual improvement of global supply chains has also benefited the retailer, with the three-month shutdowns last year of its key factories in Vietnam which produce its Oboz footwear range constricting earnings now full production now resumed.

It recorded a strong winter season due to the easing of restrictions, especially around travel, with Rip Curl sales strong in Europe, Hawaii and South-East Asia.

A final dividend of 3c NZ per share (fully franked for Australian shareholders) was declared taking the total dividend of 6c NZ per share. The final dividend will be paid on November 25.

“With the effects of Covid-19 now largely behind us and international travel returning, we are very focused on executing our growth strategy through expanding our global footprint, investing in digital platforms, leveraging operational excellence, and leading the industry through sustainability and innovation.”

At its flagship Kathmandu retail arm, its 2022 performance was underpinned by a strong winter season, with fourth quarter sales and gross margin both above pre-Covid levels. Total sales were up 6.8 per cent to $NZ381.6m. Kathmandu earnings fell 26 per cent to $NZ18m.

Rip Curl sales rose 9.5 per cent to $NZ536.8m as earnings fell 15.3 per cent to $NZ43.5m, while at Oboz sales fell 18.2 per cent to $NZ61.3m as earnings shrank 78 per cent to $NZ2.5m mostly due to its supply chain problems during the year.

KMD shares closed up 2.2 per cent, or 2c each, at 91c.

Kathmandu enjoyed record sales in the fourth quarter as people returned to the great outdoors, camping and hiking. (Picture: Mark Brake)

Rip Curl, owned by KMD Brands, has witnessed recent strong sales growth across Europe, Hawaii and South-East Asia as the end of pandemic restrictions and the return of travel boosts demand for surfing gear. (Photo by Francisco Leong/ AFP)