KMD Brands (KMD) H1 2025 earnings summary

Executive summary

• Group sales for 1H FY25 rose 0.5% year-over-year to $470.9 million, driven by strong direct-to-consumer and online growth across all brands, while wholesale recovery remains slow.

• Underlying EBITDA dropped to $3.9 million from $15.1 million last year, and underlying NPAT loss was $16.1 million, reflecting margin pressure and higher operating expenses.

• Net debt reduced by $20.0 million year-over-year to $76.2 million, with net working capital down $33.6 million due to lower inventory.

• No interim dividend declared; dividend policy remains a 50%-70% payout of underlying net profit after tax.

• Management transition underway, with Brent Scrimshaw appointed as Group CEO and a new Rip Curl CEO in place.

Financial highlights

• Gross margin was 58.5%, down 0.3 percentage points year-over-year due to increased promotional activity and inventory clearance.

• Operating expenses increased 4.2% year-over-year to $271.6 million, including investments in brand development and new stores.

• Net working capital decreased by $33.6 million year-over-year to $192.6 million; net debt fell by $20.0 million to $76.2 million.

• Adjusted operating cash flow was negative $0.8 million, with capital expenditure of $14.1 million in 1H FY25.

• Basic earnings per share was a loss of 3.0 cps, compared to a loss of 1.5 cps in the prior period.

Outlook and guidance

• DTC sales growth continues for all brands, but wholesale recovery is expected to be gradual; short-term gross margin pressure anticipated due to competitive market and promotional intensity.

• Forward orders and in-season buying support an improving wholesale trend through 2025.

• Focus remains on stabilizing sales, growing gross margin, simplifying business, reducing working capital, and returning to dividends.

• Monitoring geopolitical risks, consumer confidence, and supply chain impacts.