Outdoor clothing brand Kathmandu leads KMD Brands sales momentum

Outdoor clothing brand Kathmandu was the star performer for KMD Brands in the five months leading up to Christmas, with the parent company tipping stronger half-year earnings despite heavy discounting.

Kathmandu outpaced surfwear label Rip Curl and hiking boots brand Oboz, also owned by KMD, to post a near-13 per cent jump in sales in the five months to December.

That compared with the 5.6 per cent sales lift at Rip Curl and 4.5 per cent at Oboz, KMD’s smaller subsidiary focused on wholesale. Group sales rose 7.9 per cent over the period.

In a trading update on Monday, KMD said first-half underlying earnings were expected to hit between $NZ8 million ($9.52m) and $NZ11m, up from the $NZ3.9m recorded the same time last year.

That was despite gross margin being about 100 basis points lower year-on-year due to elevated promotional activity and inventory clearance.

Shares in KMD were down 1.25 per cent to 24¢ just before 10am.

KMD chief executive Brent Scrimshaw was pleased with the group’s early progress in the execution of its Next Level strategy, which was unveiled last September in a bid to drive growth and profitability.

As part of this turnaround plan, KMD announced it would shut stores across Kathmandu and Rip Curl’s global network. It’s set to save the company at least $25m.

“Whilst we are still at the early stages of our transformation, we are encouraged by the improved performance of Kathmandu, with an adjusted flow of fresh innovation planned in the second half which we believe will strengthen our ability to expand gross margin over time,” Mr Scrimshaw said on Monday.

Monday’s trading update from KMD came days after Country Road Group — the company behind the eponymous fashion label and other well-known clothing and accessories brands — revealed sales softened in the lead-up to Christmas.

The group’s South Africa-based parent company, Woolworths Holdings, told the Johannesburg Stock Exchange late last week that CRG — which is also behind brands Mimco, Witchery, Politix and Trenery — recorded strong sales during Black Friday and Cyber Monday.

But this was short-lived, with December trading performance being “softer than anticipated”.

Woolworths Holdings, which has no association with Australia’s Woolworths supermarket chain, said CRG sales growth averaged one per cent for the last seven weeks to December 28.