The first four months of FY24 have not been kind on clothing retailer KMD Brands (ASX: KMD), the Group behind the ubiquitous winterwear retailer Kathmandu (spotting Kathmandu jackets during Aussie winters could very well be a drinking game). However, with winters having passed, KMD has reported a 12.5% decline in group sales compared to the previous year, reflecting dwindling consumer enthusiasm.
Like the sales patterns observed in Q4 FY23, Kathmandu continues to struggle, performing weakly in the rainwear and insulation categories within the Australian market. The cumulative sales for Kathmandu in FY24 year-to-date have seen a 21.6% decline.
KMD’s sportswear brand Rip Curl and footwear arm Oboz have maintained positive outcomes in direct-to-consumer sales. Still, their year-to-date total sales have fallen by 5.7% for Rip Curl and 18.2% for Oboz, primarily due to a decline in wholesale sales for both brands. This reduction is attributed to retailers temporarily lowering inventory holdings.
Group CEO and Managing Director Michael Daly said, “Black Friday promotions for Rip Curl and Oboz delivered strong sales as these brands continued to deliver good results in direct-to-consumer channels, while navigating short-term weakness in wholesale channels as retailers reduce inventory in uncertain trading conditions. Improvement in Kathmandu’s sales performance remains our priority. We remain focused on optimising gross margin, controlling operating costs, and reducing working capital for all of our brands.”
In FY23, the Company touched record sales of $1.1 billion, surpassing the $1 billion threshold. In the same period, it launched Kathmandu in Europe and Canada. It also got started on extending the Oboz brand in ANZ and Europe.
Now, in FY24, things are not so cheery as KMD’s underlying EBITDA is $16 million lower than the previous year, with hopes pegged on Christmas and January retail trading periods. The ongoing retail period has a lot riding on the line as the Company’s working capital has decreased by 10.2%.
KMD started seeing a decline in Q4 FY23 itself. In hopes of boosting Kathmandu sales, it appointed a new CEO, Megan Welch, who has worked with the global footwear brand Crocs.
Daly added, “We continue to make progress towards our working capital target of 18% of sales for the full year, which is expected to drive strong cash flow generation in the second half year.”
For FY24, its focus is enhancing its e-commerce presence, and for that it will appoint a dedicated Chief Digital Officer. Kathmandu has now launched a revamped version of the Summit Club ‘Out there rewards’, which will incentivise members to get outside.
Plus, in November 2023, KMD appointed Ben Washington as interim CFO following Chris Kinraid’s departure. Lachlan Farran, Chief Commercial Officer, will absorb the remaining operational responsibilities on an interim basis until the Company finds a new CFO.
As it undertakes an organisational and operational restructure, KMD might need to pick up pace in FY24 if it wants to end on a positive note. With sales down in the first four months, the clothing giant is counting on new leadership and global bases to get things back on track.
Alinda is a Business Reporter for The Sentiment
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