Scrutiny over the capital position of KMD Brands has intensified this week after reports suggested the owner of Kathmandu and Rip Curl had engaged advisers to explore a potential recapitalisation, pushing the company to issue a response.
In a statement to the ASX, KMD Brands confirmed it has engaged investment bank Goldman Sachs to assist the group with its treasury and capital management strategy “as part of an ongoing review of funding options.”
The clarification followed reporting by the Australian Financial Review that the outdoor apparel group had enlisted Goldman Sachs to assist with a major recapitalisation.
In the same statement, KMD clarified that no decision has yet been made to undertake any recapitalisation initiatives, nor have the terms of any refinancing been agreed.
However, KMD did confirm that it is in discussions with lenders on the refinancing of its long-term debt facilities.
All this speculation arrives at a time when analysts are increasingly focused on the group’s balance sheet and earnings outlook.
An investor note from Jarden last month scrutinised KMD’s preliminary first-half FY26 trading update, in which the outdoor apparel group projected a first-half underlying EBITDA guidance of between NZ$8 million and NZ$11 million. This would be up from the first half of FY25, when underlying EBITDA was NZ$3.9 million, but down from H1FY24 when it was NZ$15.1 million.
According to the broker, the H1FY26 earnings guidance indicates growth in KMD’s underlying cost of doing business.
At the same time, KMD’s net debt is expected to rise to between NZ$85 million and NZ$90 million, compared with NZ$76 million a year earlier.
Jarden noted that while this, in part, is explainable by foreign exchange impacts on conversion, it does fuel questions around the more than NZ$10 million debt reduction targeted for FY26.
“The company is partway through a cost-out programme, although a combination of reinvestment, underlying cost inflation and FX headwinds is likely to more than offset this,” Jarden pointed out.
In its preliminary trading update for the first half, KMD confirmed it had extended its existing debt facility term to April 2027 and reduced its total syndicated bank facilities to approximately NZ$283 million. The company will release its statutory half-year report on March 25 next week.
Jarden also noted that KMD’s gross margin is improving off lows, but still remains suppressed year-on-year.
KMD Brands signalled during its FY25 results announcement that margin pressure was expected to remain in place through the first half of FY26 ahead of a recovery beginning in the second half.
At the end of December 2025, KMD’s group gross margin was around 56.7 per cent, down by 100 basis points year-on-year. Jarden highlighted that this is a slight improvement from the 120-basis-point compression experienced in the first quarter of FY26.
“Margin improvement is expected to have been driven by a combination of mix, lower clearance, and new product introductions,” Jarden wrote. “We note the launch of the new Team New Zealand gear in Kathmandu, which equates to c. 3 per cent of online SKUs.”
The above bottom-line targets come alongside a soft improvement to top-line results, with KMD reporting a 7.9 per cent lift in total sales between August and December 2025.
Kathmandu drove the lift, with its total sales for the five months up 12.9 per cent. Rip Curl is a little more modest, with its sales up 5.6 per cent in the same timeline, while the group’s smallest subsidiary, Oboz Footwear, reported a sales lift of 4.5 per cent. For Obiz, its sales lift boomed in November and December by 21 per cent, offsetting a slip of 1.3 per cent between August and October.
For Rip Curl and Kathmandu, sales slowed in the final two months of 2026 compared to sales in August to October. Jarden analysts claim this generally reflects harder comps to beat in the second quarter, with prior years showing sales jumping higher in the last leg of the year
Jarden also noted that the competitive dynamics for Kathmandu versus Super Retail Group’s Macpac retailer appear to have converged, with Macpac reporting total sales growth for the six months to December 2025 of 13 per cent.
“Within Rip Curl, North America is called out as showing strong sales growth, though we will look for more colour at the result on the impact of tariffs on gross margins in that market,” Jarden analysts wrote.
The broker also pointed out that 14 store closures are planned across KMD in FY26, as reported previously as part of a cost reset strategy, but that they expect these will be weighted to the back end of the period, given they were not strongly evident in KMD Brands’ latest trading update earlier this year.
In its investor note last month, Jarden retained an overweight rating of KMD stock. KMD’s share price has since sunk to its lowest point this morning at $0.18 per share, down 25 per cent year-to-date.
“KMD has shown a stabilisation in the base, but at low levels, and now needs to deliver on underlying improvements in margin through better product and mix,” Jarden told investors. “New product launches and a reshape of the store network should begin to take place in 2H26 [and] will help provide some confidence.”
Jarden added that the turnaround could likely take more than 12 months to cement the trajectory.