New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>We expect KMD Brands (KMD) to report a weaker second half in its FY23 result, due on 20 September 2023. KMD has guided to revenue of ~NZ$1.1bn and an EBITDA (pre-IFRS 16) range of NZ$105m to NZ$110m.</li><li>The key focus will be on the outlook for FY24 and beyond. Weak trading update comments from key peer Macpac highlight consumer demand challenges show no signs of abating. </li><li>We revise our FY24 expectations downward, reflecting (1) weaker 1H24 sales growth in Kathmandu, (2) operating de-leverage offset by some cost-outs, and (3) higher non-operating costs. </li></ul>

We expect KMD Brands (KMD) to report a weaker second half in its FY23 result, due on 20 September 2023. KMD has guided to revenue of ~NZ$1.1bn and an EBITDA (pre-IFRS 16) range of NZ$105m to NZ$110m.The key focus will be on the outlook for FY24 and beyond. Weak trading update comments from key peer Macpac highlight consumer demand challenges show no signs of abating. We revise our FY24 expectations downward, reflecting (1) weaker 1H24 sales growth in Kathmandu, (2) operating de-leverage offset by some cost-outs, and (3) higher non-operating costs. 

KMD Brands - FY23 Preview — Scanning Ahead

<ul><li>KMD Brands (KMD) trading update highlighted softer consumer sentiment through its fourth quarter.</li><li>Sales through the first three quarters were strong across all brands, however deteriorating Australian consumer sentiment and a warmer start to winter has weighed on KMD’s key winter sale period.</li><li>KMD has guided to NZ$1.10bn of full year sales (FB NZ$1.17bn, Visible Alpha consensus NZ$1.17bn) with gross margins expected to be in line with last year (FY22: ~59%, consensus: ~59%), likely benefitting from easing supply chains.</li></ul>

KMD Brands (KMD) trading update highlighted softer consumer sentiment through its fourth quarter.Sales through the first three quarters were strong across all brands, however deteriorating Australian consumer sentiment and a warmer start to winter has weighed on KMD’s key winter sale period.KMD has guided to NZ$1.10bn of full year sales (FB NZ$1.17bn, Visible Alpha consensus NZ$1.17bn) with gross margins expected to be in line with last year (FY22: ~59%, consensus: ~59%), likely benefitting from easing supply chains.

<ul><li>Australian consumer weakness weighs on key winter sale period: Revenue guidance of NZ$1.1bn is ~-6% or ~-NZ$66m, below our (and consensus) forecasts of NZ$1.17bn. </li><li>Delayed earnings recovery expectations: While we had anticipated travel tailwinds would support sales through to the end of FY23 (July 2023), this update brings forward our expectations for a weaker consumer outlook from 1Q24 to 4Q23. </li><li>Operating deleverage partly mitigated by cost controls: KMD noted gross margins are expected to be broadly in line with FY22 (~59%).</li></ul>

Australian consumer weakness weighs on key winter sale period: Revenue guidance of NZ$1.1bn is ~-6% or ~-NZ$66m, below our (and consensus) forecasts of NZ$1.17bn. Delayed earnings recovery expectations: While we had anticipated travel tailwinds would support sales through to the end of FY23 (July 2023), this update brings forward our expectations for a weaker consumer outlook from 1Q24 to 4Q23. Operating deleverage partly mitigated by cost controls: KMD noted gross margins are expected to be broadly in line with FY22 (~59%).

<ul><li>Strategic targets unchanged — short-term focus on efficiencies, medium term focus on brand growth</li><li>Consumer demand pressures still not clear for KMD — D2C is resilient, but wholesalers remain flighty</li><li>Ambitious capital allocation goals include potential acquisitions, and possible return of capital to shareholders </li></ul>

Strategic targets unchanged — short-term focus on efficiencies, medium term focus on brand growthConsumer demand pressures still not clear for KMD — D2C is resilient, but wholesalers remain flightyAmbitious capital allocation goals include potential acquisitions, and possible return of capital to shareholders 

KMD Brands: Investor Day — Mapping Out the Journey

<ul><li>KMD Brands’ (KMD) 1H23 result showed a rebound in revenue and profitability versus the prior year.</li><li>1H23 EBITDA (pre-IFRS 16) was in-line with guidance of NZ$45m. However, underlying NPAT of NZ$16.5m surprised to the downside, at -10% below FB, but in line with consensus</li><li>The primary driver of this has been higher debt levels from working capital impacts to cash flow, driving an increase in interest costs (in addition to higher interest rates).</li></ul>

KMD Brands’ (KMD) 1H23 result showed a rebound in revenue and profitability versus the prior year.1H23 EBITDA (pre-IFRS 16) was in-line with guidance of NZ$45m. However, underlying NPAT of NZ$16.5m surprised to the downside, at -10% below FB, but in line with consensusThe primary driver of this has been higher debt levels from working capital impacts to cash flow, driving an increase in interest costs (in addition to higher interest rates).

KMD Brands (KMD)  1H23 Result – Initial Impressions

New Zealand

Kathmandu Holdings Ltd. provides clothing and equipment for the travel and adventure market. The Company operates retail locations throughout Australia and New Zealand.

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Kathmandu Holdings (KMD NZ)

KMD Brands - FY23 Preview — Scanning Ahead

The key focus will be on the outlook for FY24 and beyond. Weak trading update comments from key peer Macpac highlight consumer demand challenges...

Forsyth Barr

KMD Brands (KMD): FY23 Trading Update

KMD Brands (KMD) trading update highlighted softer consumer sentiment through its fourth quarter; Sales through the first three quarters were...

Forsyth Barr

KMD Brands: Uphill Climb Ahead

KMD Brands (KMD) released a disappointing FY23 trading update: While trading over the first three quarters of FY23 appeared to be robust across...

Forsyth Barr

KMD Brands: Investor Day — Mapping Out the Journey

KMD Brands' (KMD) investor day provided further clarity on its path to reaching its strategic targets, which were unchanged from its 1H23 interim...

Forsyth Barr

KMD Brands (KMD) 1H23 Result – Initial Impressions

KMD Brands’ (KMD) 1H23 result showed a rebound in revenue and profitability versus the prior year; 1H23 EBITDA (pre-IFRS 16) was in-line with...

Forsyth Barr

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