KMD Brands has closed the retail leg of its NZ$65 million capital raise, pulling in NZ$11 million as retail shareholders appear less gung-ho about the group's recovery story than market analysts.
According to the owner of Kathmandu, Rip Curl and Oboz Footwear, eligible shareholders in the retail component subscribed for approximately 182.6 million new shares at NZ$0.06 each, raising around NZ$11 million. The company noted this represented a participation rate of approximately 52 per cent of the entitlements available under the offer.
The retail component was part of a NZ$58.5 million entitlement offer, with the retail portion targeted at around $21.1 million of that. But retail shareholders only subscribed for $11 million — meaning they left roughly $10 million on the table that now needs to be mopped up through a shortfall bookbuild.
Shareholders who took up their full entitlement also applied for an additional NZ$4.5 million in shares. The remaining 169.3 million unsubscribed shares will be offered through a retail shortfall bookbuild today, with KMD shares placed in a trading halt in the meantime.
Trading is expected to resume on the NZX on Wednesday. Any premium achieved above the offer price through the bookbuild will be paid to relevant shareholders by 5 May.
This comes despite some investment banks calling on investors to buy into the “heavily discounted” equity raise.
On the day KMD announced the results of the institutional component of its raise – and shared its long-awaited half-year results – UBS analysts pointed out that KMD’s first half underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were slightly ahead of its $8 million to $11 million guidance range.
“While the raise is clearly painful for shareholders, it materially de-risks the balance sheet, removing funding and covenant pressure,” UBS analysts noted.
“Importantly, the 1H26 result provides the first credible signs that the ‘Next Level’ turnaround is gaining traction, with a clear sales inflection at Kathmandu, improved group inventory and working capital discipline, and cost savings tracking ahead of plan.”
UBS analysts added that with the balance-sheet risk now largely removed – thanks to the initial raise, which saw NZ$44.2 million in the first component, and the locking in of a new NZ$205 million multi-year debt facility – they believe the investment debate shifts from survival to earnings delivery, “albeit with near-term EPS optics distorted by dilution.”
“While digestion of the equity raise makes a near-term re-rating unlikely, we see scope for a more meaningful re-rate into FY27 as margin recovery and cost-out benefits translate into sustained per share earnings momentum.”
UBS cut its earnings per share estimates for KMD by around 63 per cent for FY27 and FY28 — not because of any change to the underlying business outlook, but purely due to the approximately 1.09 billion new shares being issued.
KMD Brands’ turnaround is being largely driven by Kathmandu, with the outerwear retailer’s direct-to-consumer same-store sales (including online) lifting by 11.1 per cent in the six weeks to March 15 this year.
The retailer has also improved its gross margin by around 50 basis points.
Kathmandu’s recent sales follow a 12.3 per cent lift in underlying sales in the first half of FY26 to NZ$176.1 million. This joins an 81.6 per cent improvement in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to negative NZ$2.4 million, with its EBIT losses slashed by half to negative NZ$10.2 million, up from a negative NZ$22 million in the first half of FY25.
According to KMD Brands, Kathmandu showed strong sales momentum throughout the first half, and improved from 2.5 per cent year-on-year in the fourth quarter of FY25.
Despite the sales boom, Kathmandu’s gross margin slipped by 1.5 per cent of sales, as management focused on selling through aged inventory in the first quarter, and maintaining competitive promotional intensity through the second quarter.
The company added that Kathmandu is also on track to achieve gross margin expansion YOY in the second half of FY26, with consumers responding positively to improved product flow and assortment.
The turnaround at sister subsidiary Rip Curl appears not as robust, with its EBIT slipping from NZ$16.1 million in the first half of FY25 to NZ$10.5 million in the first half of FY26, off the back of sales growth of 4.6 per cent to NZ$291.4 million.
That total sales lift for Rip Curl was helped by foreign exchange conversion rates. On a constant currency basis, Rip Curl's total sales were up by just 0.3 per cent.
The brand’s gross margin decreased by 1.2 per cent of sales, impacted by wholesale channel mix and elevated promotional activity.
UBS analysts stated that while Rip Curl’s underlying EBITDA remains under pressure, reflecting a cost and product reset in a still promotional wholesale market, early signs of wholesale stabilisation are emerging, though they believe a material Rip Curl recovery is unlikely before FY27.
As for Oboz, KMD’s smallest subsidiary, sales were up 6.5 per cent to NZ$38 million in the first half, with its EBIT losses slashed by half to negative NZ$1.1 million.
This comes as KMD’s total sales hit NZ$505.4 million, up 7.3 per cent, with its gross profit up 5.3 per cent to NZ$287.1 million. At the bottom line, the group’s net loss after tax hit NZ$13.1 million in statutory terms and NZ$11.5 million in underlying terms. In underlying terms, this is up by 28.4 per cent.
Group underlying operating expenses as a percentage of sales are also forecasted to improve, showing progress towards mid-term targets.
Meanwhile, underlying operating expenses for the full year are planned to be broadly flat year-on-year on a constant currency basis, with KMD noting this will be before any FY26 management incentives. The year-on-year impact of global currency fluctuation is expected to have a significant impact on underlying operating expenses.
KMD concluded its outlook by reporting that the group remains on track to achieve its ‘Next Level’ strategic cost reset savings. Launched in September 2025, KMD’s ‘Next Level’ strategy includes a minimum $25 million cost reset.
KMD Brands group CEO and managing director Brent Scrimshaw said that since launching its Next Level strategy, the company has accelerated the pace and quality of execution and returned each of our brands to growth in a short timeframe.
“Strong early progress has been made against our key initiatives, giving us further conviction in our potential,” Scrimshaw said.
“We’re particularly encouraged by the improved performance of Kathmandu, which has delivered double-digit same store sales growth for the first time in over two years. It’s also pleasing to see consumers responding positively to our accelerated product freshness, flow and assortment, along with a renewed focus on innovation.
“While Rip Curl has navigated more volatile global trading conditions, we remain confident that the brand’s repositioning will drive long-term growth and youthful energy, connected to the next generation of core surf and beach consumers.”