Kathmandu and Rip Curl’s parent company KMD Brands has reported a decrease in its group gross margin by 120 basis points in the first quarter of FY26, driven by ongoing aged inventory sell-off.
According to KMD, its group gross margin fell to 55.8 per cent in the first quarter compared to the same time last year. The company noted that this is above margins recorded in the second half of FY25.
KMD Brands’ group inventory balance at the end of October 2025 was $8 million lower than the same time in 2024, with forward wholesale order books reportedly stable and slightly above last year.
The group claimed it is on track to deliver $25 million of annualised savings in FY26, re-setting the cost base to mitigate cost pressure and to self-fund the ‘Next Level’ strategic growth plan.
The challenged margin comes as revenue lifted across the group by 7.9 per cent. This includes KMD’s predominantly wholesale subsidiary Oboz Footwear.
Direct-to-consumer same store sales, including online, for the 14 weeks ending November 2 lifted by 3 per cent at Rip Curl and by 14 per cent at Kathmandu
Rip Curl’s total sales from August to October this year were up 6.6 per cent, with Kathmandu up 13.9 per cent.
Oboz Footwear sales were down 1.3 per cent.
“Group sales results for the first quarter are encouraging and have demonstrated some early-stage momentum,” KMD Brands group CEO and MD Brent Scrimshaw said.
“However, the Group’s first half results are dependent on the key Black Friday and Christmas retail trading periods to come. Our focus remains on optimising the balance between sales and gross margin to make way for fresh new season product as we move into the traditionally more significant second quarter trading period.”
Scrimshaw added the group remains disciplined in its approach to strategic growth investments and reducing its net debt in FY26.