KMD Brands (KMD) H2 2024 earnings summary

Executive summary

• FY 2024 sales declined 11.2% year-over-year to $979.4m, reflecting weak consumer sentiment and challenging macroeconomic conditions across all brands and regions.

• Underlying EBITDA fell to $50.0m, down 52.8% year-over-year, with a statutory net loss after tax of $48.3m due to a one-off $40.3m impairment of Oboz goodwill.

• Direct-to-consumer channels outperformed wholesale, with record online sales for Rip Curl (+8.6% YOY) and Oboz (+31.7% YOY).

• Operating expenses were tightly controlled, decreasing by $19.6m year-over-year, aided by restructuring and lower variable costs.

• Inventory and net working capital were tightly managed, with inventory down $23.5m year-over-year and net working capital reduced 9.7% to $198.3m.

Financial highlights

• Group sales: $979.4m, down 11.2% year-over-year; gross profit: $576.5m, down 11.6%.

• Gross margin was resilient at 58.9%, down only 0.2% of sales, with improvements for Rip Curl and Oboz offset by Kathmandu promotions.

• Underlying operating expenses reduced by $19.6m (3.6%) year-over-year.

• Net debt at year-end was $59.7m, with $230m in available funding headroom.

• No final dividend declared for FY24 due to operating performance and market conditions.

Outlook and guidance

• Focus for FY25 is on stabilizing and returning to sales growth, improving gross margin, reducing working capital, and resuming dividends.

• Early FY25 trading update: Kathmandu Australia DTC sales up 2.1% year-on-year, New Zealand down 23.2% due to prior year clearance; Kathmandu gross profit dollars up 5.1%.

• Wholesale forward orders moderating from double-digit to single-digit declines for 1H FY25; some regions showing order book growth for 2H FY25.

• Cautious outlook maintained due to ongoing macroeconomic uncertainty and cautious wholesale accounts.