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Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>KMD Brands<br>Trading Update</h2>
<p>KMD Brands (KMD) has provided first time FY22 guidance with pleasing sales momentum and a record promotional period for Kathmandu in Australia, but we see the potential for minor consensus downgrades to Underlying EBIT with consensus at NZ$58.5m versus the mid-point of company guidance at NZ$56m. The company has guided to total sales between NZ$955m-NZ$965m, Underlying (pre-IFRS 16) EBITDA of NZ$88m-NZ$94m, and Underlying EBIT in the range of NZ$53m-NZ$59m. We continue to like the long-term strategic direction of the business with a strong portfolio of outdoor brands, a growing global presence, and favourable sustainability characteristics.</p>
<p><strong>Key takeaways:</strong></p>
<ul>
<li>Positive same store sales growth was achieved for both Rip Curl (+2.1%) and Kathmandu (7.3%).</li>
<li>The Kathmandu brand experienced record winter promotional sales in Australia with second half gross margins well above last year. While the third quarter in Australia and New Zealand was impacted by the Omicron outbreak, profitability in the fourth quarter is expected to be above pre-COVID levels.</li>
<li>Oboz is recovering from the three-month closure of Vietnam factories in the first half, receiving over 200,000 pairs of footwear in the past two months with additional supply secured for future seasons.</li>
<li>Inventory is expected to remain above last year, however the company notes that inventory quality remains high, with depth in carry forward sales and lower clearance levels than the previous year.</li>
</ul>

KMD Brands Trading Update
KMD Brands (KMD) has provided first time FY22 guidance with pleasing sales momentum and a record promotional period for Kathmandu in Australia, but we see the potential for minor consensus downgrades to Underlying EBIT with consensus at NZ$58.5m versus the mid-point of company guidance at NZ$56m. The company has guided to total sales between NZ$955m-NZ$965m, Underlying (pre-IFRS 16) EBITDA of NZ$88m-NZ$94m, and Underlying EBIT in the range of NZ$53m-NZ$59m. We continue to like the long-term strategic direction of the business with a strong portfolio of outdoor brands, a growing global presence, and favourable sustainability characteristics.
Key takeaways:

Positive same store sales growth was achieved for both Rip Curl (+2.1%) and Kathmandu (7.3%).
The Kathmandu brand experienced record winter promotional sales in Australia with second half gross margins well above last year. While the third quarter in Australia and New Zealand was impacted by the Omicron outbreak, profitability in the fourth quarter is expected to be above pre-COVID levels.
Oboz is recovering from the three-month closure of Vietnam factories in the first half, receiving over 200,000 pairs of footwear in the past two months with additional supply secured for future seasons.
Inventory is expected to remain above last year, however the company notes that inventory quality remains high, with depth in carry forward sales and lower clearance levels than the previous year.


Kathmandu Holdings

KMD Brands: Trading Update