KMD Brands, the owner of Kathmandu, Rip Curl and Oboz, has swung to a loss

The warmest winter on record ruined the sale of camping and hiking gear for Kathmandu, while a pullback in consumer spending dented surfing gear sales.

Kathmandu customer tries on a jackets. Picture: Mark Brake

The boss of the company that owns Kathmandu says the retail brand is as strong as it has ever been, but it needs to evolve beyond just being known for its puffy jackets at a time when the competitive landscape is tougher and consumer spending.

Michael Daly, chief executive of KMD Brands — which also owns surfing label Rip Curl and Oboz footwear — doesn’t believe Kathmandu is getting tired or less popular among shoppers, but rather needs to adapt to the more competitive times and rely less on its outerwear range, like its jackets.

This was especially prudent with volatile weather conditions which saw the warmest winter on record in Australia and New Zealand dent sales and profits for Kathmandu, which led KMD to swing to a first-half loss of $NZ9.7m ($A9m). This was mostly driven by an $NZ18m loss at its flagship retail arm Kathmandu.

“Kathmandu has been as strong as it has ever been, the brand awareness is strong and if you go to the football anytime this winter, you won’t go far without seeing a multitude of Kathmandu jackets,” Mr Daly told The Australian.

“I think our execution on outerwear and jackets has been really good but we probably just haven’t adapted and evolved our business for the broader competitive times. There’s a lot of competition in the market and we’ve got to be known for more than just jackets … that’s our challenge and until we address that we are going to see probably some rollercoaster rides in terms of trading because when it’s cold and wet people come to us and buy their jackets, and if it’s not, they don’t come to us.”

Promotional shot from the 2018 Kathmandu winter collection.

It comes as, on Tuesday, KMD Brands crashed to a first-half loss as its sales sank amid tightening spending on discretionary goods, especially in camping, trekking and surfing.

Weakness in consumer sentiment punctured demand for the popular items sold at its retail chains, from puffy jackets at Kathmandu to wetsuits at RipCurl, while the warmest winter on record in Australia and Kathmandu’s reliance on winter products led to a disappointing first half.

It has been a tough five years for its flagship Kathmandu retail business, the company said on Tuesday, as it suffers from inconsistent trading conditions, closed borders and tourist flows from the pandemic and a highly competitive Australia and New Zealand camping retail sector.

There was also weak consumer markets for its RipCurl surfing brand, as retailers resist buying new products from the company as they sell down their current inventory into a weak and slow market.

There was a similarly challenging consumer environment in the hiking and trekking footwear industry, which hurt sales for its Oboz footwear brand.

Mr Daly has pledged to initiate a raft of new strategies at Kathmandu, from improving the current offer, widening its range outside of jackets and cold-weather clothing as well as improve product innovation and customer loyalty.

KMD, which is listed on the Australian and New Zealand markets, said it had swung to a loss of $NZ9.67m for the first half, against a profit of $NZ14m last year, with sales down 14.5 per cent to $NZ468.64m. It also skipped paying an interim dividend.

Sales for its Kathmandu brand fell 21.5 per cent to $NZ152.3m, and it recorded an earnings loss of $NZ18m.

At RipCurl, sales fell 9.2 per cent to $NZ278.3m and posted a profit of $20.8m, while Oboz’s sales dropped 20 per cent to $NZ38m with the division posting a loss of $NZ500,000.

“Kathmandu has recorded softer sales since June 2023. A combination of weaker consumer sentiment, the warmest winter on record in Australia and the brand’s reliance on winter weight product has resulted in a disappointing first half,” Mr Daly said.

Mr Daly said a key focus for KMD would be to lessen Kathmandu’s reliance on outerwear and have a greater presence in its stores on hiking and outdoor exercise and travel.

“And that’s everything from the shoes that you are wear, hiking shoes or trail runners, through to shorts and long pants, fleeces, right up to headwear and the equipment such as backpacks and sleeping bags.

“We will probably focus our efforts on apparel, accessories and equipment. So in time when people are thinking about travel and they are thinking about exercising outdoors and travel, or hiking, we want them to be thinking about Kathmandu.”

In a trading update provided along with the results, KMD Brands said Kathmandu sales for February were down 2.8 per cent and down 19.9 per cent year to date. Rip Curl’s sales fell 1.7 per cent for the month and 8.2 per cent year to date, while Oboz sales were down 13.3 per cent in February and down 18.8 per cent year to date.

Group sales were down 3.5 per cent in the month and down 13.2 per cent year to date.