KMD Brands Limited Trading Update for FY24

KMD Brands Limited (ASX/NZX: KMD) has released a trading update for the year ending 31 July 2024. The update highlights improved sales trends for Rip Curl and Kathmandu during the first four months of the second half, with resilient gross margins and tightly controlled operating costs. However, Kathmandu has experienced a slower than expected start to the key winter promotional period, impacting Australian and New Zealand trade. Rip Curl's direct-to-consumer sales for the USA and Europe have shown positive single digit growth, while Oboz online sales continue to deliver strong year-on-year growth of 28.9% for the 10 months to May 2024.

Executive Commentary on Trading Update

With six weeks of peak trade still to come, we remain focused on optimising our Kathmandu winter and Rip Curl Northern Hemisphere summer results in a challenging consumer environment. We are seeing a prolonged impact of cost-of-living pressures on consumer sentiment globally but particularly in New Zealand, and we continue to respond tactically to competitive market dynamics. Alongside immediate trading priorities, our focus remains on tightly controlling operating costs, moderating working capital, and maximising cash flows.

Summary of Trading Update and Outlook

KMD Brands Limited's trading update for FY24 reflects improved sales trends for Rip Curl and Kathmandu, with resilient gross margins and tightly controlled operating costs. However, Kathmandu's slower than expected start to the key winter promotional period has impacted sales. The Group expects underlying EBITDA to be approximately $50 million for the full year and has taken pre-emptive action to lower the FCCR covenant ratio for the next three measurement points, with expected funding headroom of approximately $200 million at 31 July 2024. The company remains focused on optimizing Kathmandu winter and Rip Curl Northern Hemisphere summer results, responding to cost-of-living pressures on consumer sentiment, and controlling operating costs while maximizing cash flows in the challenging consumer environment.