Release Date: March 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KMD Brands Ltd (ASX:KMD, Financial) achieved a 0.5% increase in total group sales compared to the previous year, with improving sales trends in the second quarter.
- The company reported double-digit sales growth in the online channel for all three brands, highlighting the success of their digital strategy.
- Net working capital efficiency improved significantly, with a reduction of $33.6 million year on year, and inventory levels moderated back towards historical levels.
- KMD Brands Ltd (ASX:KMD) maintained a stable balance sheet with net debt reduced by $20 million from the previous year, providing significant funding headroom.
- The company secured strategic partnerships, such as Kathmandu becoming the official apparel partner for the New Zealand team, enhancing brand exposure on the global stage.
Negative Points
- The group reported a net loss after tax of $20.7 million, with an underlying net loss of $16.1 million, indicating financial challenges.
- Gross margin decreased by 0.3% to 58.5%, with increased promotional intensity impacting profitability.
- Operating expenses increased by 4.2% year on year, partly due to investments in brand advertising and product innovation.
- Wholesale sales remained subdued, with accounts cautious on pre-season commitments, affecting overall sales recovery.
- The company did not declare an interim dividend due to challenging market conditions and financial performance.
Q & A Highlights
Q: Could you clarify the short-term pressure on gross margins?
A: The pressure varies by brand. Rip Curl's margins have been relatively resilient, but Kathmandu faces more pressure due to its operating environment in Australia and New Zealand malls. We expect softness in Kathmandu's gross margins into the second half, influenced by promotional activities and economic conditions. (Michael Daley, CEO)
Q: How do you see the impact of competitor liquidations on your brands?
A: Competitor changes create medium to long-term opportunities but present short-term headwinds due to changes in distribution strategies and liquidation of products, which pressure market prices. However, we believe these changes will eventually benefit us. (Michael Daley, CEO)
Q: Can you provide guidance on Kathmandu's gross profit margins for the second half?
A: We are not providing specific outlooks for gross margins due to market uncertainties. We need to remain competitive, and if the market becomes more price-competitive, we will adjust accordingly. We expect softer margins for Kathmandu in the second half. (Michael Daley, CEO)
Q: How is the wholesale channel performing, and what are the current challenges?
A: The wholesale channel has been challenging due to inventory wind-downs and consumer pressures. However, we are seeing some positivity in forward orders for the first half of 2026, indicating a potential recovery. (Michael Daley, CEO)
Q: What is the impact of Cyclone Alfred on sales, and how does it relate to consumer sentiment?
A: Cyclone Alfred resulted in approximately 100 lost trading days, but it is not a major call-out in terms of sales impact. Consumer sentiment remains cautious due to global uncertainties, but we are focused on delivering positive sales growth. (Michael Daley, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
