Kathmandu and Rip Curl owner KMD Brands has launched a review of the business as its Next Level strategy shows green shoots amid ongoing challenges.
The business review also comes weeks after KMD rejected a proposal from US surfwear company Stokehouse Unlimited to demerge its Rip Curl business.
In a trading update today, KMD’s board confirmed it is undertaking a comprehensive business review to assess opportunities to accelerate shareholder value, examining the group's capital structure, portfolio configuration and other value-creation opportunities. External financial and legal advisers will be appointed to lead the process, with those appointments to be finalised over the coming weeks.
Chair Philip Bowman said the move was a natural next step for the group.
"Our commitment to creating long-term value for shareholders is the Board's clear priority,” Bowman said. “In parallel with our focus on improving KMD Brands' operating performance, this business review is an appropriate next step at this time. The board is committed to assessing all credible options that have the potential to deliver superior value for shareholders."
The review is expected to be complete on or shortly before the announcement of the group's FY26 annual results in September 2026. KMD stressed there is no certainty that any material initiative or transaction will result from the process, and that day-to-day operations will continue as usual.
The announcement accompanies KMD's Q3 FY26 trading update, which showed the group's total sales grew 5.2 per cent in the three months to April 2026, bringing year-to-date growth to 6.6 per cent. Group gross margin for Q3 reached 58.2 per cent, approximately 258 basis points higher year-on-year, with improvement across all three brands.
Kathmandu was the standout performer, with total Q3 sales up 12.0 per cent despite a net reduction of seven stores year-on-year. Same-store sales including online grew 12.6 per cent in the quarter, with consumers responding positively to improved product innovation and assortment. Gross margin improved 233 basis points year-on-year, driven by diversification of product mix and refinement of the brand's markdown management strategy.
The third Kathmandu "Next-Gen Concept Store" opened on Little Collins Street in Melbourne this month, showcasing the brand's return to product innovation and seasonal storytelling.
Rip Curl recorded total sales growth of 4.0 per cent in Q3, though direct-to-consumer same-store sales softened slightly, down 0.8 per cent year-on-year on a constant currency basis. The brand's gross margin improved 202 basis points year-on-year. KMD noted that sales momentum had been impacted by the onset of the Middle East conflict, with higher fuel prices and rising interest rates weighing on global consumer sentiment. North American flagship stores, however, continued to deliver strong comparable sales results.
Oboz was the one weak spot, with Q3 total sales declining 8.9 per cent due to wholesale shipment timing, after Q2 benefited from earlier-than-usual deliveries. Online sales for the footwear brand accelerated 19.3 per cent in Q3 following its Shopify launch, and KMD anticipates a return to sales growth in Q4.
Group CEO and managing director Brent Scrimshaw said the results reflected disciplined execution across the portfolio.
"Despite challenging broader market conditions, the group has continued to deliver encouraging progress in Q3, balancing sales execution and gross margin expansion together with operational and cost discipline,” Scrimshaw said.
"The quality of earnings across the group is strengthening, supported by disciplined pricing, improved product mix and ongoing cost control. Nine months into the first year of execution, our Next Level transformation strategy is demonstrating that we are building a stronger, deeply connected and more resilient business, while remaining on track to achieve our medium-term targets."
KMD said it remains on track to deliver $27.5 million in cost savings in FY26 and to hold operating expenses broadly flat year-on-year on a constant currency basis.
The group also flagged anticipated gross margin benefit from approximately US$5 million in net tariff receivables submitted in North America, awaiting formal acceptance by authorities.