Rip Curl proving key for Kathmandu’s COVID survival

Kathmandu’s Rip Curl acquisition is proving to be a saving grace as COVID continues to crunch its outdoor gear sales.

Rip curl sales were up 26.8 per cent in the 16 weeks to November 15. Picture: Getty Images

Kathmandu will focus on organic growth of its leading outdoor equipment and apparel brands, led by the Kathmandu camping and adventurewear label, Oboz footwear and Rip Curl surf gear, as the COVID-19 crisis cost it around $NZ135 million ($A128.25m) in sales for 2020 and continues to pinch earnings into fiscal 2021.

Addressing shareholders at the company’s annual general meeting on Wednesday, chief executive Xavier Simonet provided a trading update for the first few months of the new financial year which showed store closures, limited travel opportunities and lockdowns were still impacting its performance.

Mr Simonet said group total sales for the first quarter were up 72 per cent on prior year, benefiting from the transformational acquisition of Rip Curl.

He said group same store sales, including online, for the 16 full weeks ended November 15 were down 7.6 per cent adjusted for lockdown closures. Rip Curl was up 26.8 per cent, with retail stores trading strongly in all key global markets, where open. Kathmandu was down 26.8 per cent adjusted for lockdown closures, due to impacts from low footfall in CBD and tourist store locations, and lower demand for travel-related purchases.

Including store closures, Kathmandu direct to consumer same store sales were down 24.1 per cent, with Rip Curl down 1.7 per cent and Kathmandu down 37.7 per cent. Group online sales for the 16 full weeks ended November 15 were up 37 per cent above last year.

Group EBITDA for the first quarter was in line with last year’s pro-forma results, including government subsidies and the realisation of cost synergies, Mr Simonet told shareholders at the AGM.

The health crisis was still hurting sales into 2021, much of that coming from forced closure of stores in hotspot areas and the shutdown of international travel.

“COVID-19 has continued to impact trading in key markets at the start of fiscal 2021. We have had 60 Greater Melbourne stores closed for most of the first quarter, and 14 Auckland stores closed for over two weeks. Airport stores in Australia, as well as Rip Curl stores in Hawaii and Europe are still heavily impacted by either COVID-19 related travel restrictions or government mandated lockdowns and closures.”

Mr Simonet said the company was very pleased with the performance of Rip Curl in its key markets of Australia, Europe and North America, which he said highlighted the strength of Rip Curl’s global brand and innovative products as more people take to surfing.

“Encouragingly, wholesale sell-in for Rip Curl for the second half year is broadly at pre-COVID-19 levels. As for Kathmandu, camping and footwear categories have over-performed, but have not compensated for the impact of COVID-19 with low footfall in CBD and tourist locations as well as lower travel-related purchases.

“Oboz’s performance has been robust with strong sales to key accounts, and the forward order book tracking above pre-COVID-19 levels.”

Kathmandu dipped its toe in the global $11 billion surfing sector buy acquiring Rip Curl for $350m last year.

Since the COVID-19 pandemic emerged Kathmandu moved to strengthen its balance sheet by undertaking a $NZ207 million equity raising to pre-emptively fortify the balance sheet, reduce net debt and provide liquidity. The retailer also suspended the payment of dividends.

Mr Simonet said in his AGM speech that Kathmandu would look to organic growth and expanding its existing operations.

“We have been building a portfolio of brands that provides diversification across geography, channel, product and seasonality, which will allow us to meet global year-round demands of customers in the outdoor, sport and lifestyle categories. We are now starting to leverage this portfolio of brands, with plans to deliver operational excellence in sourcing, supply chain and systems.

“We plan to grow each brand by maintaining a relentless focus on core customers, delivering solutions to their needs, and enhancing customer loyalty. Each brand will continue to bring to market technical, differentiated and sustainable products, and accelerate expansion of the direct to consumer business.”