KMD Brands (ASX:KMD) shares spike on first results after rebrand. Has it worked?

Let's check in and see.

| More on:
a woman in full hiking gear carrying a backpack and camping equipment on her back takes a large step between two sections of a rocky pathway in a misty outdoor setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • KMD Brands shares are in the green following the company's first earnings release after it rebranded from Kathmandu 
  • Earnings took a hit year on year and the Group reported a loss for the half 
  • In the last 12 months, the KMD share price is now less than 1% in the red 

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.

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.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Earnings Results

ASX 200 stock jumps 10% on strong FY24 results

How did this KFC restaurant operator perform in FY 2024?

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just slashed its final dividend by 23%

This retailer had a tough time during the 12 months. Here's how it performed.

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »

increasing rural asx share price represented by happy looking sheep
Earnings Results

Why is this ASX All Ords stock staying strong as profits crash 76%

How is this company's share price marching higher after mowing down more than three-quarters of its profits compared to a…

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces as they react to the action in front of them in a home setting.
Earnings Results

Guess which ASX 200 stock is surging 11% on an 'outstanding' result

This ASX gaming giant just posted a 17% jump in profits, and its shareholders are basking in the glory.

Read more »