Kathmandu, Rip Curl owner warns of sales wipe-out as consumers remain nervous

Sales across key KMD Brands’ labels have worsened significantly in the last four months, with a Black Friday bump not enough to reverse the sharp declines.

KMD Brands, the owner of outdoor adventurewear retailer Kathmandu as well as surfing label Rip Curl, received a bump from the Black Friday sales in ­November but ongoing poor consumer sentiment, adverse weather and retailers holding back on new purchases have wiped out its sales growth.

Its sales retreat has worsened since August and was accelerating, the company revealed in an update on Wednesday.

Its flagship Kathmandu stores have suffered a 21.6 per cent decline in sales growth for the first four months of fiscal 2024, with much of the pain for the retail owner coming from wholesale channels as volatile trading conditions and macroeconomic challenges saw many retail customers withhold from purchasing orders.

The dour outlook so close to Christmas, and failure for Black Friday figures to reverse collapsing sales trends, could be an early sign of things to come for the wider retail sector as businesses navigate several economic headwinds.

KMD Brands, which also owns footwear brand Oboz, on Wednesday reported in a trading update that group sales were 12.5 per cent below last year for the first four months of the 2024 ­financial year, although gross margins had shown some improvement. It said the double-digit sales drop reflected ongoing weakness in consumer sentiment.

Rip Curl owner KMD Brands has warned of worsening sales. Picture: Getty Images

At its full-year results in September, KMD Brands said group sales for August were down 6.4 per cent.

It said consistent with sales trends in the fourth quarter of 2023, Kathmandu continued to experience weakness in rainwear and insulation categories in Australia. Kathmandu total sales for the 2024 fiscal year to date were down 21.6 per cent, cycling 71.7 per cent growth for the same time last year.

KMD Brands said following record sales in 2023, Rip Curl and Oboz continued to deliver good results in direct-to-consumer sales. However, year-to-date sales for 2024 were down 5.7 per cent for Rip Curl and 18.2 per cent for Oboz as wholesale sales for both brands declined, with retailers reducing inventory holdings in the short-term.

Group underlying earnings for the 2024 fiscal year was about $NZ16m ($14.88m) below last year, with Christmas and January retail trading periods to come.

“Black Friday promotions for Rip Curl and Oboz delivered strong sales as these brands continued to deliver good results in direct-to-consumer channels, while navigating short-term weakness in wholesale channels as retailers reduce inventory in uncertain trading conditions,” KMD Brands chief executive ­Michael Daly said.

“Improvement in Kathmandu’s sales performance remains our priority. We remain focused on optimising gross margin, controlling operating costs, and reducing working capital for all of our brands. We continue to make progress towards our working capital target of 18 per cent of sales for the full year, which is expected to drive strong cash flow generation in the second half year.”

In September KMD Brands – which is listed on the New Zealand and Australian stock exchanges – posted a net profit of $NZ36.6m, down 0.6 per cent, as revenue for the 12 months to July 31 rose 12.6 per cent to $NZ1.10bn.