A trail of two halves for KMD Brands

Company News

by Glenn Dyer

A series of records for NZ-based clothing and adventure wear group KMD Brands (ASX:KMD) in the year to July helped it shrug off the dramatic impact on its trading performance of Covid lockdowns on both sides of the Tasman over that period.

KMD, which owns the Kathmandu and Rip Curl brands, reported a 40% drop in annual profit thanks to those Covid lockdowns which disrupted retailing in Australia and NZ in the trading year.

The company posted a $NZ36.8 million profit in the year to July 31, down from $NZ61.3 million the previous year. But sales rose 6.2% to a record $NZ979.8 million as the company enjoyed its best ever sales performance in the second half.

KMD said missed out on about $NZ35 million of earnings in its first half as the Covid-19 lockdowns hurt trading at its Kathmandu outdoor clothing and equipment stores and its surfing brand Rip Curl, resulting in more than 11,000 lost trading days.

As well its footwear brand Oboz was heavily impacted by a three-month closure of its Vietnam factories, compounded by international freight delays, which cut $NZ8 million from earnings.

All that played a huge part in the first half loss of $NZ5.5 million.

But with Covid restrictions easing in Australia and NZ (completely in NZ after balance date), the company saw a stepped-up trading performance in August.

August sales were 44% ahead of the same month last year, and 10% above pre-Covid trading in August 2019. Underlying profit before interest, tax, depreciation and amortisation was $NZ10 million above August last year.

CEO Michael Daly said in Tuesday’s statement that the company had navigated substantial Covid challenges in the first half but had had a strong final quarter and the momentum had continued into the new financial year which started in August.

“With the return of international travel and uninterrupted trade, combined with further strengthening our Rip Curl, Kathmandu and Oboz brands, KMD Brands is well positioned to deliver continued sales and earnings growth” in the coming year, Daly said.

The company reported annual underlying earnings before interest and tax of $NZ57.1 million, well within previous guidance for $NZ53 million to $NZ59 million for the year, but well under the $NZ80.9 million for the previous year.

Gross margin was steady at 58.9% despite elevated international freight costs and raw material cost pressures, with Kathmandu achieving a record margin in the second half.

The company has increased its wholesale prices for the coming financial year in response to inflationary cost pressures.

KMD will pay a final dividend of 3 NZ cents a share, taking the full-year dividend to $NZ0.06, ahead of the $NZ0.05 payment in 2020-21.

The $NZ42.5 million dividend payment sets a new record for the company.

KMD shares rose 2.2% on the ASX to $A0.915.

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