Kathmandu and Rip Curl’s parent company KMD Brands is locking in a new strategy called ‘Next Level’ to drive its next chapter of growth, which includes a minimum $25 million cost reset.
According to a release to market, the cost reset includes a recently commenced “organisational restructure” aligned to the new strategy and a store network portfolio review. This includes more than ten senior leadership roles changing in 2025.
The overall aim is to unlock the full potential of KMD’s brand portfolio and deliver sustainable, profitable growth.
“Since joining KMD Brands as group CEO, I’ve spent time across each of our offices and regions, listening to our teams and retail partners whilst immersing myself in the business,” Brent Scrimshaw said. “What I’ve seen is clear: the potential of our brands is far greater than what we’re delivering today.
“That’s why we’re launching Next Level - a transformation strategy designed to align the Group behind a brand and product led customer-centric growth agenda. Core to our strategy is a clear integrated marketplace vision for each of our brands that aligns consumer, product and store format in each geography.”
Alongside the cost reset, KMD also plans to refocus product innovation, maintaining technical performance while investing in speed-to-market, design and style. This includes establishing product ‘Centres of Excellence’ at Rip Curl headquarters in Torquay, to enhance the output of global product teams and streamline organisational structure.
There is also a revamp underway with its store portfolio, which includes 21 stores identified for closure across the group, and a new store format for Kathmandu, with three of these set to open in ANZ this calendar year.
KMD also plans to rejig its digital and data intelligence to deliver on long-term goals. This includes new tools and initiatives that deepen data-led decision-making and enhance supply chain excellence.
“We are also accelerating our ecommerce platform rollout across our brands with investment in more effective digital marketing to reset international go to market approach,” the company shared in its release to market.
KMD Brands chairman David Kirk said he and his team believe the group is materially undervalued by the market.
“Over the last 18 months we have deliberately made significant executive team changes to enhance the core capabilities of the group,” Kirk said. “The board is fully aligned behind the Next Level strategy and is confident in the group’s ability to self-fund key initiatives and deliver increasing value for shareholders.”
Alongside the $25 million cost reset, KMD also noted a circa $15 million in growth investment. The financial ambition is to target a group-wide gross margin of around 60 per cent in the next three years, as well as less than a 50 per cent operating expenses percentage of sales, more than 10 per cent EBITDA margin and less than 16 per cent working capital percentage of sales.
These financial targets are expected to be driven by a reduction in style and SKU counts, improved demand and supply planning, shifting channel mix towards higher margin digital sales, and the immediate cost-out and reallocation program to address legacy costs.
All this comes after a challenging FY25 for KMD Brands, with sales falling 0.5 per cent across its three brands for the year to May 2025, which also includes Oboz Footwear. Kathmandu was a key dragger on group sales.
The key reason for the outdoor wear brand’s sales slip, according to KMD, is unseasonably warm weather in Australia, which had a “material adverse impact” on Kathmandu’s insulation product category.
This was offset by sales growth year-on-year in other key product categories such as rainwear, fleece, knits, and footwear.
However, a recent change to cooler weather in both New Zealand and Australia in June has reignited sales momentum, with the first 17 days of June delivering a 13.2 per cent sales growth year-on-year. KMD Brands reported that school holidays and the start of the ski season offer further opportunities to continue the momentum for the remainder of the financial year.
Total sales for Kathmandu in the second half to May 25 slipped 6.4 per cent, with its sister brand Rip Curl reporting a 0.9 per cent uplift in the same period. Oboz Footwear, KMD’s smaller footwear subsidiary, report a 1.1 per cent fall in sales.
Kathmandu’s fall in the second half followed a 3 per cent lift in sales for the first half of FY25.
“While the volatility of Kathmandu’s sales performance is frustrating, we acknowledge that unseasonably warm weather in Australia, including Victoria’s warmest Autumn on record, has negatively impacted sales,” Scrimshaw said.
“Kathmandu’s significant sales improvement, including strong online momentum in recent weeks, reinforces our enduring brand health and strengthens our confidence in the future growth opportunity.”