Why is this ASX All Ords share crashing deep into the red on Friday?

This retailer has dropped to a 52-week low today. But why?

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A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash

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KMD Brands Ltd (ASX: KMD) shares are ending the week deep in the red.

In morning trade, the ASX All Ords share is down 10% to a 52-week low of 35 cents.

Why is this ASX All Ords share crashing?

Investors have been hitting the sell button today after the Kathmandu owner released another disappointing trading update.

As a reminder, during the first half of FY 2024, group sales were down 14.5% compared to the same period last year.

According to today's release, the company's sales in the second half have improved since the end of the first half. However, they are still down compared to the prior corresponding period.

Investors appear particularly disappointed with the performance of the Kathmandu business. Management notes that it has experienced a slower than expected start to the key winter promotional period.

The first three weeks of the winter sale are 11.5% below last year and lower than the improving second half trend. This reflects significant weakness in New Zealand, with Australian sales down in line with current sales trends. They have also improved each week as it progresses further into the winter season.

One positive is that Rip Curl has started its peak summer trade in the Northern Hemisphere. Management notes that direct-to-consumer sales for the USA and Europe for the start of summer are showing positive single digit growth above last year and peak weeks are still to come.

However, Rip Curl and Oboz wholesale customers continue to reduce their inventory in response to the challenging consumer environment.

The sum of the above, is that second half group sales were down 8.4% through to the end of May. This reflects a 5.9% decline in Rip Curl sales, an 8.4% drop in Kathmandu sales, and a 21.8% fall in Oboz sales.

In light of this and based on the most recent sales trends across all brands, the company now expects underlying EBITDA to be approximately NZ$50 million for the full year. This will be down over 50% from NZ$105.9 million in FY 2023.

The ASX All Ords share's managing director, Michael Daly, said:

With six weeks of peak trade still to come, we remain focused on optimising our Kathmandu winter and Rip Curl Northern Hemisphere summer results in a challenging consumer environment. We are seeing a prolonged impact of cost-of-living pressures on consumer sentiment globally but particularly in New Zealand, and we continue to respond tactically to competitive market dynamics. Alongside immediate trading priorities, our focus remains on tightly controlling operating costs, moderating working capital, and maximising cash flows.

Motley Fool contributor James Mickleboro 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 Scott Phillips.

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