La Niña and its heavy rainfall transitioned to a brief El Niño in the latter half of 2023. However, since December, storms, cyclones, and heavy showers across much of the east and north of the country suggest a potential return to La Niña. This news is unwelcome for KMD (ASX:KMD), evidenced by shares in the adventure wear company slumping more than 10% at one stage on Tuesday, hitting a new all-time low of 51 cents on the ASX after it revealed a 14.5% slump in first-half sales.
The retailer had previously warned in December that its sales were down 12.5% for the first four months of the January half. Analysts were concerned about the acceleration in the rate of fall in the final two months.
The New Zealand-based company attributed the slide to weak consumer confidence and warmer weather in Australia, reducing sales of puffer jackets and raincoats. However, despite wet weather along the East Coast for much of February, sales did not improve significantly.
Ahead of the release of its half-year financial report on March 19, the company updated exchanges on both sides of the Tasman with the bad news. Sales totaled $NZ469 million ($A441 million) in the six months ended January 31, which weather experts noted as the worst period in history, with January being the warmest start to a year on record globally and in Australia.
This means the company will fall well short of matching 2022-23’s record sales of $NZ1.1 billion.
KMD expects group underlying EBITDA for the half to be in the range of $NZ14 million to $NZ16 million, around a third of the $NZ45.3 million of underlying EBITDA for the January 2023 half-year.
The company earned a statutory interim profit of $NZ14 million for that half and paid an interim dividend of 3 NZ cents a share—both of which have no hope of being matched in the March 19 financial report.
KMD said sales at its core Kathmandu chain were down 21.5%, while footwear brand Oboz saw a 205% drop, and the company’s big improver, Rip Curl, saw sales down 9.2% from a year earlier.
CEO Michael Daly stated in the release, "Rip Curl and Oboz are cycling record sales from last financial year, and while revenues from the direct-to-consumer channel for these brands are showing single-digit declines (-4.4 percent), the wholesale channel has been more challenging (-16.8 percent) as wholesale accounts reduce inventory holdings. We expect this inventory reduction cycle to end this financial year, giving us a more positive FY25 outlook in the wholesale channel."
“Kathmandu has experienced softer trading results since June 2023. A combination of weaker consumer sentiment, the warmest winter on record in Australia, and the brand’s reliance on winter weight product has resulted in a disappointing first half. We expect to see signs of improvement in the second half and into FY25 as we launch new innovative products, quick-to-market programs, elevated visual merchandising, increased personalization through the recently released 'Out There Rewards,' and an expanded third-party brand strategy. Improvement in Kathmandu’s sales performance remains an immediate priority as we approach the key winter trading period.”
Despite the sales slide in all chains, KMD noted that it has kept inventory and costs under control. Operating costs are $NZ16 million below last year, despite continued inflationary pressures, and group inventory at January 31 was $NZ5 million lower than at the end of January 2023. This means its working capital has fallen $NZ18 million, which is useful with interest rates in NZ and here at high levels.
