This year, Australia is witnessing its warmest winter since 1910, with spring not expected to make things better. Rough times lie ahead not just for Aussies but also for brands whose USP is winter clothing, like Kathmandu.

Seeing its first full financial year of uninterrupted trade since the pandemic, retail company KMD brands (ASX: KMD), the brand behind Kathmandu, Rip Curl and Oboz, has been working on managing costs and getting inventory on track. In a period of high interest rates, inflation and dampened consumer sentiment, it has a new woe: a hot winter. 

As per its FY23 report, Kathmandu faced the warmest winter on record in Australia and cycled its best-ever winter season performance last year. Even so, KMD’s overall brand portfolio managed to make record sales. The Company’s FY23 revenue was $1.01 billion, up 12.6% on FY22. All brands grew sales, with Rip Curl and Oboz achieving milestone numbers. The underlying EBITDA was $97.55 million, up 15.1% YOY, despite softening consumer sentiment in the fourth quarter.

Group CEO & Managing Director, Michael Daly, said,“FY23 Group results were underpinned by strong omni-channel sales growth from all brands. Customers returned to shopping in stores, with retail store sales increasing +17.5%. This had an impact on online sales, a trend noted across the industry as customers returned to prepandemic shopping behaviours. Online sales remain significantly above pre-pandemic levels. Despite a challenging wholesale market, Group wholesale sales grew by +11%.” 

KMD’s surfing sportswear brand Rip Curl achieved a record sales result, with total sales up 8.3% to $535.64 million. The results were underpinned by strong direct-to-consumer results particularly in Australasia following lockdowns last year, plus the return of international travel to Hawaii and Thailand. 

Kathmandu’s total sales increased by 10.6% to $388.91 million in FY23, with strong growth in the first three quarters as customers returned to shopping in stores. Cost of living pressures and a less-than-wintery winter softened consumer sentiment in the fourth quarter. In FY23, Australia sales grew by 7.0% and New Zealand by 13.1%. 

The Company undertook many strategic changes across its brands. For Rip Curl, it launched a new Fusion wetsuit targeted at core surfers (just in time for a long-lasting summer, too, it seems). For Kathmandu, it appointed a new CEO, Megan Welch, with extensive international brand growth experience. Finally, for its hiking footwear brand Oboz, it launched a new fast trail category to attract new customers and grow market share.

The economic uncertainty meant that the Company had to review its inventory to control costs. Oboz’s inventory position was impacted by restocking, cycling significant supply challenges last year. 

Having an all-season portfolio helped KMD keep its sales up. In FY24, its goal is to reduce working capital to 18% of sales target to drive strong cash flow generation. Plus, it has tailwinds from continued return to travel, positive impact from the launch of innovative products and the outdoor lifestyle trend post-pandemic. It also plans on expanding Oboz into Europe and setting up its relaunch in Australia and New Zealand, with the appointment of Brand Managers in Australasia and Europe.

KMD currently has a significant funding headroom of over $184.23 million.

The Group’s strong balance sheet compelled its directors to declare a final dividend of 2.76 cents per share (not franked and not imputed). The dividend is set to be paid on October 20, 2023.