KMD Brands CEO and managing director Michael Daly has declared that improving Kathmandu’s sales performance is the company’s immediate priority following a 21.5 per cent revenue dive for the first half of FY24.
Kathmandu’s total sales dropped by $41.7 million to $152.3 million, with operating profits slipping from a positive $2.7 million in the first half of FY23 to negative $18 million in the first half of FY24.
Sales were down by 22.9 per cent in Australia and down 15.9 per cent in New Zealand.
Online sales plunged by more than a third (36.9 per cent) to $16.4 million, with KMD citing a return to stores following post-COVID transition. An online penetration at 10.9 per cent of direct-to-consumer sales remained above pre-COVID levels.
Meanwhile, Kathmandu’s gross margin decreased by 240 bps (down 2.4 per cent of sales), driven by clearance of end of line products in August.
Excluding August, gross margin for the period was down 50 bps (0.5 per cent of sales) lower year-on-year despite currency headwinds.
“In the second half, the group will be cycling less challenging sales performance last year, particularly Kathmandu in the fourth quarter,” Daly said.
“Improving Kathmandu sales performance is our immediate priority as we approach the key winter trading period. We expect to see progress in the second half and into FY25 as we launch new innovative products, quick to market programmes, elevated visual merchandising, increased personalisation through the recently released ‘Out There Rewards’ and an expanded third-party brand strategy.”
KMD Brands’ two other businesses, Rip Curl and Oboz Footwear, also recorded revenue dives in the first half, driving a total revenue drop across all three brands of 14.5 per cent to $468.6 million.
Rip Curl sales dropped by 9.2 per cent to $278.3 million, cycling record sales last year.
Direct-to-consumer sales including online decreased by 5 per cent, reflecting weakened consumer sentiment in key global markets, with KMD noting stronger results in Europe, Asia and South America.
Online sales alone increased by 4.3 per cent and remains above pre-COVID levels. Wholesale sales decreased by 14.1 per cent, as wholesale accounts reduced their inventory holdings in response to the challenging consumer environment.
Despite the challenging conditions, Rip Curl’s gross margin increased by 90 bps (0.9 per cent of sales) reflecting improved pricing and freight rates, plus exiting its low margin business in North America and Europe.
Rip Curl’s operating profit (EBIT) also remained positive at $20.8 million despite a 34 per cent drop on the prior corresponding period.
Meanwhile, Oboz Footwear recorded a 20 per cent drop in revenue to $38 million, driven mostly by a wholesale sales decrease of 23.5 per cent, which was also impacted by stockists reducing inventory.
Online sales boomed by 34.2 per cent, with KMD citing strategic promotional activity..
Gross margin increased 450 bps (4.5% of sales) reflecting lower freight rates, improved channel mix, improved pricing and new product introductions.
Oboz continued to invest in brand, online and product to support long-term growth objectives - including international expansion.
While the North American wholesale operating margin remained below historic levels, Oboz expects the operating expense investment to be leveraged with future sales growth opportunities.
First half sales trends have reportedly improved for all three brands as they begin the second half year. Group sales for February 2024 were down 3.5% on last year, noting that February is not a significant trading month.
“We expect the wholesale customer inventory reduction cycle to end this financial year, giving us a more positive FY25 outlook in the wholesale channel for both Rip Curl and Oboz,” Daly said.
“We believe that with our portfolio of iconic global outdoor brands and leadership in sustainability, we remain a unique investment proposition and well-placed for the future.”