On a Wednesday morning, the shares of KMD Brands, the New Zealand-based owner of Kathmandu, Rip Curl and Oboz, slipped as the company's chief executive described a retail world where price has become the sharpest tool in the shop. Across the group's major markets, softer consumer sentiment is pushing retailers toward discounting, and each of its brands is finding its own way through that pressure. It is a familiar moment in commerce, when people hold their money more tightly and sellers must decide whether to chase volume or protect their margins. KMD's answer, so far, is to trade a little gro
KMD Brands CEO says discounting is rising as consumer sentiment softens across key markets
"No one wants to take a risk in this market."
Mark
Rip Curl grew sales but profit fell. What's going on there?
Mimi
Sales rose 8.3 per cent to NZ$582 million, but EBIT dropped 9.2 per cent to NZ$44 million and margins fell from 9 to 7.6 per cent. Selling more, keeping less.
Luke
The article doesn't say why margins fell. Discounting is the obvious suspect given Daly's comments, but that link isn't spelled out for Rip Curl specifically.
Mark
And Kathmandu went the other way?
Mimi
Yes. EBIT up 85 per cent to NZ$33.3 million, margins from 4.7 to 7.9 per cent, as it eased off constant promotions.
Luke
Worth noting that's against a market Daly says is getting more price-aggressive. Whether the gains hold is open.
Mark
What about the international target?
Mimi
NZ$2.6 million now, NZ$100 million aimed for. Daly himself called the path steep and five years ambitious.
Luke
No new timeline was given, so the target stands but the date is unknown.
Mark
Is the weaker consumer a fact or Daly's view?
Luke
It's his reading of economic indicators in the group's markets. The article doesn't cite the indicators, so it's one executive's account, though the share fall and wholesale order cuts are consistent with caution.
Il Polso
- KMD Brands shares dipped to 75.5 cents, sharply down from $1.06 in late May, as investors reacted to a market turning hostile on price.
- Rip Curl grew sales 8.3 per cent yet its profit fell 9.2 per cent, squeezed by margins that slid from 9 to 7.6 per cent.
- Kathmandu is working to unwind its high-low promotional habit, a slow and deliberate shift that its chief executive admits is harder in a slowdown.
- Kathmandu's international goal of NZ$100 million stands far from its NZ$2.6 million reality, and retailers are trimming wholesale orders to protect inventory.
On a Wednesday morning, the shares of KMD Brands, the New Zealand-based owner of Kathmandu, Rip Curl and Oboz, slipped as the company's chief executive described a retail world where price has become the sharpest tool in the shop. Across the group's major markets, softer consumer sentiment is pushing retailers toward discounting, and each of its brands is finding its own way through that pressure. It is a familiar moment in commerce, when people hold their money more tightly and sellers must decide whether to chase volume or protect their margins. KMD's answer, so far, is to trade a little growth for a healthier foundation, a choice that will only be proven over the seasons ahead.
On Wednesday morning, KMD Brands shares dipped 2 per cent in early trading on the ASX, down sharply from late May. Chief executive Michael Daly described a retail market where price has become the main weapon. Across all of the group's major markets, economic indicators point to a weaker economy, and shoppers and retailers are both feeling it. "We're definitely seeing a market that is quite aggressive on price," he said.
The two flagship brands told different stories for the year to July 31. Rip Curl's sales rose 8.3 per cent, but its earnings fell 9.2 per cent as margins slipped. Daly credited hot weather and busy airport and holiday outlets for the brand's strong trading. Kathmandu's sales grew 10.6 per cent and its profit rose 85 per cent, as margins recovered from 4.7 to 7.9 per cent. The gain came from stepping back from constant promotions. Daly admitted the change was slow and never something that could happen "by a click of the fingers."
Kathmandu's international push is still young. Its offshore sales reached only NZ$2.6 million against a NZ$100 million goal. Daly was candid: "Obviously the path to a hundred looks pretty steep from here." Megan Welch, a former Crocs executive, has just taken over the effort. At home, the company plans five to 10 new stores a year. "We'll be patient," Daly said.
The harder pressure is in wholesale, where retailers are trimming orders to keep inventory lean. "No one wants to take a risk in this market," Daly said. The coming months will test whether Kathmandu can hold its margin gains while discounting spreads around it.
On Wednesday morning, KMD Brands shares dipped 2 per cent to 75.5 cents in early ASX trading. In late May the stock had been at $1.06. The slide came as chief executive Michael Daly described a retail market where price has become the main weapon.
Daly said economic indicators across all of the group's major markets point to a weaker economy, and that this is showing up in how people shop and in how aggressively retailers discount. "We're definitely seeing a market that is quite aggressive on price," he said, adding that there is general softness in consumer sentiment across the board.
The group's two flagship brands told different stories for the year to July 31. Rip Curl sales rose 8.3 per cent to NZ$582 million, but earnings before interest and tax fell 9.2 per cent to NZ$44 million, and margins slipped to 7.6 per cent from 9 per cent. KMD bought the surf brand in 2019 from founders Brian Singer and Douglas Warbrick for $350 million. Daly said the hotter weather was a solid tailwind for Rip Curl, with airport locations and outlets in holiday destinations trading strongly.
Kathmandu's sales grew 10.6 per cent to NZ$422 million, though a warmer Australian winter slowed trade in May, June and July, with weaker demand for puffer jackets, raincoats and other outdoor clothing. Its profit picture was stronger: EBIT rose 85 per cent to NZ$33.3 million, and margins improved to 7.9 per cent from 4.7 per cent. The lift came as the group backed away from consistent discounting and promotional sales, a gradual move out of the "high-low" pricing strategy. Daly stressed the transition would be slow and harder during an economic slowdown. "That wasn't something we were looking to do by a click of the fingers," he said.
Kathmandu is also pushing offshore, with dedicated online sites for consumers in France, Germany and Canada. International sales were NZ$2.6 million in the year, against a goal of NZ$100 million. Daly was candid about the distance. "Obviously the path to a hundred looks pretty steep from here," he said, and he added that reaching it in five years might be a little ambitious. Former Crocs executive Megan Welch started last month to lead the international push. She is the third woman to head a KMD brand, alongside Brooke Farris at Rip Curl and Amy Beck at Oboz.
At home, Kathmandu is expanding its physical footprint in Australasia, where it has 158 stores and wants about 200. Daly plans to open five to 10 a year. "We'll be patient," he said. Oboz, the group's footwear brand, lifted sales 62 per cent to NZ$99.3 million.
The wholesale market is another pressure point. Daly said retailers generally are trimming forward orders to bring inventory down in response to softer conditions. "No one wants to take a risk in this market," he said. What to watch next is whether Kathmandu can keep its margin gains while discounting rises around it, and whether wholesale order cuts persist.
Citazioni salienti
We're definitely seeing a market that is quite aggressive on price.— Michael Daly, KMD Brands CEO
Obviously the path to a hundred looks pretty steep from here.— Michael Daly, KMD Brands CEO
Vuoi la storia completa?
Leggi l'originale su Australian Financial Review ↗
Economy & Finance