Shares in KMD Brands Ltd (ASX: KMD) have punched up into the green during early trade on Wednesday following the release of the company's half yearly reports for the period ending January 31 2022.
At the time of writing, the company – formerly known as Kathmandu – has its share price fetching for $1.24 after releasing its earnings today.
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KMD Brands share price spikes amid flat earnings growth
Key takeouts from the company's earnings results today include:
- Sales of $407.3 million compared to sales in 1H FY21 of $410.7 million
- Gross margin of 57.7%, a slight decline from 59% this time last year
- Underlying EBITDA of $10.2 million, down from 1H FY21 result of $48.2 million – excluding the impact of IFRS 16 accounting changes
- Statutory net profit after tax (NPAT) loss of $5.5 million
- Strong balance sheet with $48.6 million net debt and comfortably within all covenants; significant funding headroom of circa. $250 million
- Interim dividend increased by 50% to fully franked 3.0 cents per share
- Rebranding to KMD brands "earlier this month" to reflect purpose and "commitment to operational excellence and leadership in ESG."
What else happened this period for KMD Brands?
Sales of $407 million came in slightly behind H1 FY21 and were heavily impacted by COVID-19 lockdowns. Thankfully as restrictions lifted, revenue came in ahead of Q1 FY22.
The cost of these revenues was higher, however, and gross margins saw a 130 basis points headwind at 57.7%. KMD says this was due to "elevated international freight costs, and increased clearance mix for the Kathmandu brand."
With respect to segments, Rip Curl delivered sales growth of almost 3% over the period, underscored by growth in online and wholesale sales. Most of the upside was recognised in Europe and Hawaii, KMD notes.
Whereas in North America, volumes were impacted by "short-term wetsuit shortages and port congestion," the company says.
Meanwhile, the Oboz brand was hit by store closured in Vietnam, also due to COVID-19. It's business again as usual for the segment but KMD notes the closures hit sales as orders couldn't be filled.
"However," the company says, "the demand for the Oboz brand and products has never been stronger, with forward orders into FY23 very strong and supporting our medium-term growth targets."
Management commentary
Speaking on the announcement, Group CEO & Managing Director, Michael Daly said:
We continued to deliver on our strategic objectives, positioning KMD Brands for growth as travel rebounds globally and COVID-related impacts on supply abate. We maintained a strong focus on building our global brands, sponsoring the first ever World Surf League finals, with the men's event won by a Rip Curl surfer. We opened twelve new owned / licensed retail stores globally, and online sales increased to 17.4% of direct-to-consumer sales, rewarding initiatives to elevate digital capabilities. Substantial progress was also achieved on our ESG strategy.
Our rebranding to KMD Brands earlier this month reflects our purpose to inspire people to explore and love the outdoors, with a vision of being the leading family of global outdoor brands – designed for purpose, driven by innovation, best for people and planet. It is with this ethos in mind that we look to develop our portfolio of global brands, underpinned by investments that deliver a world-class unified commerce experience, and our commitment to operational excellence and leadership in ESG.
What's next for KMD ?
Commenting on the Group's outlook, Daly also said there were challenges going forward – particularly related to COVID – but that the future looks bright under the new branding.
While we continue to navigate impacts from COVID on global supply chains, forward demand for our Rip Curl and Oboz products remains at record levels, and Kathmandu enters the traditionally strong winter season well prepared. We will continue to invest in building our global brands in the second half, with the launch of Kathmandu online sites in Europe and Canada and the merging of Canada and UK fulfilment centres for all brands.
I am excited by the opportunities we have to build our portfolio of brands under our new parent company KMD Brands. The parent company is providing vision and strategic guidance to enable group synergies, including sharing expertise in technology, materials and leveraging operational excellence in sourcing, supply chain and systems, to deliver the best customer experience across our brands.
KMD share price snapshot
In the last 12 months, the KMD share price has faltered and is now less than 1% in the red. It is down 13% this year to date.
During the past month of trading, shares have collapsed another 2% and are trailing the major indexes in 2022.
