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KMD Brands Announce Record First Half Year in Sales With Rip Curl up 18.8% From 2022
KMD Brands – formerly Kathmandu Holdings – has announced a record first half year in sales for the 6-month period ending 31st January 2023, with its leading brand Rip Curl, achieving growth across all channels and recording an 18.8% increase in sales from the previous year. With Direct-to-consumer sales growth particularly strong in Australasia and recording key growth in USA with sales up 8% in the territory, Rip Curl also curbed the trend of closing stores post-Covid managing a retail store increase of net 9, as operating expenses for the brand hit 50.4% of sales.
KMD saw an increase of 34.5% in sales revenue compared to the same period in 2022, taking in NZ$547,924m over the 6-month period, announcing a net profit of NZ$ 13,977m a record first half for KMD Brands. The group reports an underlying EBITDA of NZ$45.3 million (1H FY22: $10.2 million) with group underlying EBITDA margin improving on a rolling 12-month basis.
Group Financial Performance
The 1H FY23 Group results were boosted by record first half sales, cycling Australasian COVID lockdowns last year, and supported by the return of international travel and tourism. Although the Group continued to experience elevated international freight costs and raw material cost pressures, gross margin increased by 100 bps to 58.7%.
The group suggests that operating expenses reflect its continued investment to support brand expansion, while leveraging sales growth. 1H FY23 operating expenses are 50.4% of sales, with a strong sales recovery post-COVID lockdowns last year.
FY23 full year operating expenses are expected to be c. 48% of sales, with ongoing initiatives to further reduce annualised operating costs by up to 2% of sales for FY24.
KMD has seen continued sales growth for Rip Curl, with the brand achieving NZ$306.4 in sales, an 18.8% increase on the previous year.
Rip Curl: Sales growth across all channels
KMD commented that Rip Curl’s sales results were strengthened by growth across all channels, with Direct-to-consumer sales growth particularly strong in Australasia after COVID lockdowns last year, with Hawaii also performing strongly off the back of a return of international travel.
Rip Curl wholesale sales showed resilience with 2.2% growth at constant exchange rates, despite softening wetsuit demand from record highs, and strategic destocking from retailers.
Whilst online traffic reduced year on year, online sales remain significantly above pre-COVID levels. The direct-to-consumer (DTC) channel, including owned retail stores and online, generated same store sales growth of 13.9%.
EBITDA was up 11.4% to $37.6 million, moderated by the impact of channel mix and freight costs on gross margin, and increased distribution costs.
KMD expects that the Rip Curl inventory balance will reduce during the second half as purchase orders placed during 1H align to improved supply chain timelines c. $15m, but the second half period is traditionally the strongest cash generating period for the group.
The brand also achieved retail store expansion with net 9 new stores and key growth in USA with sales up 8% in the territory.
Commenting on the 1H FY23 results, Group CEO & Managing Director Michael Daly said: “We are delighted with the results our team has delivered in 1H FY23, building on the strong momentum of the previous six months. We achieved record sales results for the Group, highlighting the strength of our global brands. 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.”
Daly continued; “Despite uncertainties in consumer outlook, all three of our brands – Rip Curl, KMD, and Oboz – delivered strong sales growth in the half, and as a group we have improved our gross margin.
With a healthy balance sheet, and expectations for strong cash flow generation in the second half, we are in an excellent position to execute on our growth strategy through expanding our global footprint, investing in digital platforms, leveraging operational excellence, and leading the industry through sustainability and innovation.”
As at 31 January 2023, the Group had a net debt position of $84.9 million with significant funding headroom over $200 million.
