Down 44% in a year, this ASX All Ords company is officially losing money

A well-known retailer is no longer making a profit based on its FY24 result.

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Investors have frowned upon retail shares this year as cost pressures choke household spending and corporate earnings. However, few have felt the bottom-line bother greater than an ASX All Ords stock incapable of clearing a profit in FY2024.

In the last two months, we've seen retailers — including Nick Scali Ltd (ASX: NCK), Myer Holdings Ltd (ASX: MYR), and Premier Investments Limited (ASX: PMV) — lament the difficulty of trying to sell while many are hunkering down from amped-up interest rates. As such, falling revenues have been a common sight in recent results.

Yesterday, one ASX All Ords stock took the disappointment up a notch with its final FY24 numbers.

ASX All Ords retailer bleeding in 'challenging environment'

If a 44% share price decline in the past year wasn't disappointing enough, KMD Brands Ltd (ASX: KMD) did one better yesterday. Not only are most of its investors in the red, but the company's net earnings are now, too.

KMD Brands — which owns outdoor brands Kathmandu, Rip Curl, and Oboz — recorded an 11% fall in group sales to $979.4 million. Underlying (which removes one-off costs) operating earnings took a savage 53% hit to $50 million. But the deepest cut arguably lands at the bottom of the company's accounts.

Statutory (which includes one-offs) net earnings cratered from $36.6 million down to a $48.3 million loss in FY24. A fair chunk of the smack came from a $40.3 million one-off impairment in the intangible value of KMD Brands' Oboz operations.

Nonetheless, even if the one-time value scratch is removed, KMD Brands' net profits tanked to a $1.1 million loss from a $43.3 million profit in the prior year. The dispiriting result reflects the company's inability to reduce operating expenses (4%) at the same pace that customers shrank KMD's sales (11%).

KMD Brands Group CEO Michael Daly commented on the hard retailing landscape with an ounce of optimism, stating:

In a challenging sales environment, gross margin remained resilient despite increased promotional activity for Kathmandu. Operating costs reduced year-on-year despite ongoing inflation pressure, and working capital reduced as inventory investments were carefully managed.

Still, the pain of FY24 was apparent across all three segments. Kathmandu sales fell 15%, Rip Curl dropped 7%, and Oboz collapsed 20%. Interestingly, sales in the North America region were hit the hardest (down 15%), while the 'rest of world' region declined the least (down 3%).

Is it improving?

There are glimmers of improvement from the troubled ASX All Ords stock.

A trading update for the first 8 weeks of FY2025 shows a 2% year-on-year uptick in direct-to-consumer (DTC) Kathmandu Australia sales. However, it's not so pretty in New Zealand, with its DTC segment 23% lower from the prior corresponding period.

In the wholesale channel, KMD Brands is seeing double-digit declines improve to single-digit falls (i.e. from >10% to 9% or less).

The ASX All Ords stock finished yesterday 1.08% lower at 46 cents apiece.

Motley Fool contributor Mitchell Lawler 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 recommended Nick Scali and Premier Investments. 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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