Kathmandu Holdings scored record sales for its financial year ended on July 31 2020, boosted by the acquisition of Rip Curl during the period. The group’s revenues soared by 48.7 percent to 801.5 million New Zealand dollars (€451.6m-$526.8m), with Rip Curl accounting for 40 percent of the total turnover, but all the group’s brands - Kathmandu, Oboz and Rip Curl - recorded sales declines.
However, Rip Curl made a strong recovery after its stores were reopened. As previously reported, Kathmandu, which specializes in outdoor products, took over the Australian surfwear brand nearly one year ago, more or less doubling in size.
At Rip Curl, sales from Nov. 19 to the end of July 2020 reached NZ$ 315.7 million (€177.9m-$207.5m). They were down by around 17 percent from the same period a year-ago. Covid-19 took a significant toll on the business, with an estimated sales impact of NZ$ 70 million (€39.4m-$46.0m). Despite this, Rip Curl contributed NZ$ 11.7 million (€6.6m-$7.7m) to the group’s underlying Ebitda during the initial nine months of ownership. The brand’s gross margin stood at 56.5 percent and the Ebit reached NZ$ 4.2 million (€2.4m-$2.8m).
After the retail lockdowns, Rip Curl’s retail sales jumped on a same-store basis by 17.7 percent in Australia, by 20.6 percent in Europe, and by 12.3 percent in the U.S. as interest in surfing increased, according to the group. The brand’s online sales for the full year were up by 52 percent overall, and now comprise 10.6 percent of DTC sales.
Overall, Kathmandu’s gross margin declined by 3.4 percentage points to 58.3 percent, due to currency headwinds and lower margins from Rip Curl. Ebitda fell by 15.3 percent to NZ$ 148.9 million (€83.9m-$97.9m), while net income tumbled by 86.0 percent to NZ$ 8.1 million (€4.6m-$5.3m), due to acquisition costs.
Like its peers, the group faced significant challenges with Covid-19 restrictions and lockdowns. The management announced at the end of March the closure of its 175 stores, including Rip Curl outlets, in the wake of the coronavirus pandemic. It continued e-commerce operations in Australia, Europe and the U.S. Online distribution in New Zealand was temporarily suspended. The company also closed down its offices and sent employees to work from home.
Most stores have now reopened, but Covid-19 has continued to impact some key markets during the first seven weeks of the full financial year 2021, with Melbourne, Auckland, Hawaii, Bali and airport store closures. However, the management said that, based on the post-lockdown retail store performance in 2020, demand is expected to return in these markets when stores reopen.
The group took decisive action early to reduce costs, adjust the operating structure of the business, and raised NZ$ 207 million (€116.7m-$136.0m) of equity. The management said its omni-channel strategy and infrastructure capacity allowed it to scale up to meet the surge in online demand from March. Following the easing of lockdown restrictions, retail sales for Rip Curl and Kathmandu performed strongly in the core markets of Australasia, Europe and California, as consumers trended toward outdoor and recreation activities. Both Rip Curl and Kathmandu also enjoyed strong post-lockdown performance in their winter sales in Australia and New Zealand.
Looking ahead, the company believes that the business remains strong financially and operationally, as the balance sheet was significantly strengthened by the recent equity raise, while its brands are well-positioned to capitalize on increased participation in outdoor, beach and surfing activities following the end of the lockdowns in the southern hemisphere.
You can check The Outdoor Industry Compass for additional information on the Kathmandu and Oboz brands.