KMD Brands shares lift on lower-than-expected sales drop
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The news: Apparel retailer KMD Brands has said its sales trends have improved in the second-half despite challenging trading conditions and a retreat in consumer spending, sending its shares higher.
The numbers: Group sales for the year to 31 July, 2024, are now expected to be down 11.2% from a year ago, an improvement on the 14.5% decline in the first half.
Full-year sales at its key Kathmandu brand were down 14.5% compared to 21.5% in the first half while sales for surfing label Rip Curl were down 7.3% compared to 9.2%. However, footwear brand Oboz saw sales drop 20%, similar to the first half.
The ASX and NZX-listed company expects underlying earnings in the range of NZD49 million ($44.5 million) to NZD51 million for FY24, down from NZD105.9 million in FY23.
KMD shares were up nearly 5.68% to 46 cents in early trading and over the last 12 months its shares have plummeted 40.4%..
The context: The group said Kathmandu sales continued to improve in a challenging consumer environment, with enhanced in-store execution and new products, with Australian sales performing significantly better than New Zealand.
Rip Curl direct-to-consumer sales also outperformed the wholesale channel, where customers continue to reduce their inventory holdings. Gross margins for FY24 are down 30 basis points to 58.8% driven by increased promotional intensity in the fourth quarter.
RBC Capital Markets analyst Wei Weng-Chen said while revenue growth showed sequential improvement from the third quarter, overall results were broadly in line with expectations.
The analyst has a ‘sector perform’ rating on the stock with a price target of 45 NZ cents.
The sources: ASX announcement, RBC Research
