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Kathmandu Reports Strong Results For Year Ended July 2021, Underpinned by Rip Curl

• Strong sales performance from Rip Curl and Oboz, driven by participation growth in surfing and hiking. Sales up 15.1% to $922.8 million
• Investment program in online capabilities delivering results, with online sales accounting for 14.4% of direct to consumer (DTC) sales; a 4-year CAGR of 21.9% p.a.
• Strong forward order books for Rip Curl and Oboz, above pre-COVID levels
• Strong balance sheet with $37 million net cash, and clean inventory position
• Underlying EBITDA up 35.9% to $113.3 million (excluding the impact of IFRS 16 and one-off abnormal costs), driven by strong sales performance and focused management of operating expenses

Commenting on the FY21 results, Group CEO & Managing Director Michael Daly said:
We are proud of the results we have been able to produce over the past 12 months in the face of ongoing COVID challenges, delivering strong sales and positioning the business for sustained growth.

Rip Curl achieved sales above pre-COVID levels in the key regions of North America and Europe during the Northern Hemisphere summer season, benefiting from increased participation in surfing, and reflecting the brand’s technical product focus and strong consumer engagement. Rip Curl’s wholesale order books are now significantly above pre-COVID levels.

While Kathmandu has felt the impacts of COVID related travel restrictions, we were pleased with the early momentum following the brand relaunch in May 2021. This relaunch will build on strong brand fundamentals and position Kathmandu to grow to a truly global brand.

Oboz continues its strong performance, with sales growth reflecting the successful product innovation strategy and diversification of its customer base. The forward order book is at its highest level ever, allowing investment to support future growth.

Our refreshed Group strategy ensures we are focused on the things that matter most as we move into FY22 – building global brands focused on active outdoor activities, investing in digital platforms to provide consumers with a truly world class unified commerce experience, operational excellence, and sustainability [ESG] leadership

The FY21 Group results were underpinned by strong sales from both Rip Curl and Oboz, and included a full 12 months of Rip Curl (FY20 included 9 months of Rip Curl post-acquisition). Earnings growth further reflected the Group’s focused management of operating expenses, including the benefit of rent abatements, and approx. $15 million annualised restructuring and synergy savings implemented during the onset of the COVID pandemic last financial year.

Rip Curl: result underpinned by growth in surfing
Results have outperformed acquisition expectations, with total sales up 10.5% on the prior comparable twelve months, and sales levels above pre-COVID levels in the key regions of  North America and Europe during the Northern Hemisphere summer season.  Direct-to-consumer (DTC) same store sales growth (comprising owned retail stores and online) was up 19.2% overall. Online sales of $33.5 million represented 12.5% of DTC sales, and generated a 4-year CAGR of 44.4% p.a. Overall, sales returned to pre-COVID levels, even though stores in airports, Australia, Hawaii, Asia, and parts of Europe, continued to be affected in FY21. Wholesale sales were 9.6% above the prior comparable twelve months despite a COVID disrupted sell-in period for 1H FY21. Wholesale forward order books are now significantly above pre-COVID levels.

Kathmandu: result reflects COVID impacts
Performance continued to be impacted by ongoing COVID lockdown and travel restrictions. These included Government mandated closures of Australian stores in the key winter trading period, and reduced demand for travel related products. Same store sales (including online) were down 18.2% overall for the full year, and down 3.1% for the second half year.  Gross margin increased by 130 bps (1.3% of sales), benefitting from improved currency rates as well as a focus on promotional execution and inventory management.  Online sales of $56.8 million represented 15.8% of DTC sales, and generated a 4-year CAGR of 14.3% p.a.

Oboz: result underpinned by strong hiking participation
Oboz continues to grow strongly, with sales growth driven by a successful product innovation strategy and diversification of the customer base.  Gross margin was impacted by significant one-off air freight costs to support key customer deliveries of winter seasonal styles in 1H FY21, plus increased ocean freight costs due to supply chain congestion in 2H FY21. Gross margin is expected to normalise to historical levels when global supply chain congestions and related shipping rates come back into line.  The forward order book is at its highest level ever, allowing investment to support future growth.

Sustainability is at the core
Commenting on the Group’s sustainability initiatives, Mr Daly said: “Our three brands are all about outdoor activities and experiencing the environment around us. Sustainability is at the core of our businesses.” “In 2019, Kathmandu became the largest certified B Corporation in Australasia at the time, and in 2021 the Group committed to the largest syndicated sustainability linked loan in New Zealand. Rip Curl has a wetsuit take-back program and is sourcing sustainable cotton, Kathmandu achieved carbon zero certification, and Oboz has planted four million trees since its establishment.” “We’re not slowing down and there’s a lot more we’re doing to cement our sustainability leadership position going forward.”

Trading update & outlook
Same store sales (including online) for the six full weeks to 12 September 2021 were significantly impacted by ongoing Australasian COVID lockdowns as follows:

• Rip Curl -12.8% overall; +3.6% adjusted for COVID lockdowns
• Kathmandu -19.9% overall; +18.3% adjusted for COVID lockdowns

These results include online sales growth to date of 25.9%, with Kathmandu sales in regions less affected by COVID restrictions performing strongly. Rip Curl and Oboz wholesale order books are now significantly above pre-COVID levels.

In addition to ongoing Australasian lockdowns, COVID restrictions are also impacting the Group’s supply chain. Suppliers have reduced factory capacity due to enforced closures, and freight congestion is leading to delivery delays and increased freight costs.  As a result, first half FY22 profit is expected to be below first half FY21.