The Australian summers boosted surf wear and travel equipment demand. Now, as we approach winter, it will be Kathmandu jacket season again. All things considered, outdoor apparel retail company KMD Brands (ASX: KMD) is having the best season of all.
After suffering losses to the tune of over $5 million in H1 FY22, the Company has bounced back in H1 FY23 with a profit of $14 million, an increase of 352.2%. Its underlying EBITDA also shot up from $10.2 million to $45.3 million with the group’s margin improving on a rolling 12-month basis. Finally, KMD’s revenue increased by 34.5% to $547.9 million.
Its results were boosted by COVID lockdowns subsiding and the return of international travel and tourism. Even as the Company experienced elevated international freight costs and raw material cost pressures, its gross margin increased by 100 bps to 58.7%.
Group CEO & Managing Director, Michael Daly, commented, “For the first time since Rip Curl was acquired, the Group has experienced a full 12 months of trade without significant interruption from the COVID pandemic, which resulted in group sales of over $1 billion. Despite uncertainties in consumer outlook, all three of our brands – Rip Curl, Kathmandu, and Oboz – delivered strong sales growth in the half, and as a group we have improved our gross margin.”
Surf wear brand Rip Curl’s sales increased by 18.8% to $306.4 million, bolstered by the Australian summers and greater tourism. Direct-to-consumer sales growth was also strong in Hawaii, which saw a host of tourists. Even as online sales remained low, the direct-to-consumer (DTC) channel, including owned retail stores and online, generated same-store sales growth of 13.9%.
Travel clothing brand Kathmandu’s sales also rebounded by about 60% in Australia, after its earnings fell by over $18 million in H1 FY22. Total sales were up 51.2% to $194.0 million, driven by its Australian growth, the return of domestic and international tourism in New Zealand (+22%), and international sales of $1.4 million, which includes first deliveries to select new wholesale customers in Europe and Canada.
KMD’s operating expenses increased by 23% to $230.9 million, reflecting its investment in brand expansion. In the first half of FY23, operating expenses amounted to 50.4% of sales, with a strong sales recovery post-COVID lockdowns last year. FY23 full-year operating expenses are expected to be about 48% of sales, with ongoing initiatives to further reduce annualised operating costs by up to 2% of sales for FY24.
Daly added, “We were also very proud to recently announce that KMD Brands and all three of its brands are now Certified B Corporations, becoming one of the first multinational companies in Australia and New Zealand to have all its brands individually certified.”
Pointing to the Company’s profitability, Daly noted that this sets the foundation for the Company to execute its growth strategy of global expansion, digital platform growth, leveraging operational excellence, and leading the industry through sustainability and innovation (as was made evident with its B-Corp certification, which Kathmandu got in 2019 itself).
He concluded, “Positive direct-to-consumer sales trends have continued into the second half, and we are well positioned to continue to benefit from the return of international travel and tourism.”
Despite the boom, the Company remains cautiously optimistic as rising inflation and interest rates have led consumers to become more conscious.
Alinda is a Business Reporter for The Sentiment
Latest posts by Alinda Gupta (see all)
- Ovanti’s iSentric signs contracts worth $14.4m with Malaysian commercial bank - June 27, 2024
- Baby Bunting fights back from retail downturn with 5-year strategy, includes Gen-Z focus and self-funded growth - June 27, 2024
- CLEO meets with US FDA to develop strategy for ovarian cancer test launch - June 26, 2024
Leave a Comment
You must be logged in to post a comment.