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KMD Brands Limited (NZX/ASX: KMD) has updated its 2026 fiscal year outlook, increasing sales guidance to between $1,040 million and $1,044 million, reflecting a 5% rise at the midpoint compared to the previous year. The company revealed plans to divest its Southeast Asian manufacturing facility, expected to generate net property proceeds of $5 million to $7 million and release around $6 million in working capital. Underlying EBITDA is projected to reach $38 million to $41 million, marking a 123% increase at the midpoint over FY25, driven by robust direct-to-consumer growth.
Key Highlights
- KMD Brands Limited (NZX/ASX: KMD) operates multiple retail and outdoor lifestyle brands across Australia and New Zealand, including Kathmandu, Rip Curl, and Oboz
- FY26 group sales forecasted between $1,040m and $1,044m (5% growth at midpoint), with underlying EBITDA guidance of $38m–$41m (123% growth at midpoint)
- Kathmandu’s direct-to-consumer sales rose 4.8% year-on-year on a constant currency basis during the first 24 full weeks of H2, while Rip Curl sales declined 2.8% amid subdued Australian consumer sentiment
- Planned phased 12-month divestment of Southeast Asian manufacturing facility expected to yield $5m–$7m net property proceeds and free up $6m in working capital
- Net debt anticipated at $63m–$66m by 31 July 2026, up from $52.8m the prior year, influenced by supplier payment timing, inventory investments, and an $8m impact from New Zealand dollar weakness
- Full-year results and business review completion scheduled for 23 September 2026
Kathmandu Shows Strong Direct-to-Consumer Sales Growth in Key Segments
As KMD Brands’ flagship outdoor and adventure gear brand, Kathmandu has seen accelerating momentum in FY26. Direct-to-consumer same-store sales, encompassing both physical and online channels, increased 4.8% year-on-year on a constant currency basis during the first 24 full weeks of H2, from 2 February to 19 July 2026. This marks a notable improvement from FY25’s Q4, driven by strong demand in rainwear, fleece, and base layers that align with seasonal trends and consumer preferences for functional outdoor apparel.
Geographically, Kathmandu’s growth was stronger in New Zealand compared to Australia during this period. However, the insulation category experienced challenges during the winter sale period due to softer consumer demand linked to unseasonably warm weather on Australia’s east coast. Despite this seasonal setback, the insulation category has shown year-to-date growth, indicating the weakness was temporary rather than a shift in consumer behavior.
Rip Curl and Oboz Face Mixed Market Conditions in FY26
Rip Curl, KMD’s surfing and water sports brand, encountered tougher trading conditions in FY26. Its direct-to-consumer same-store sales declined 2.8% year-on-year on a constant currency basis during the first 24 full weeks of H2, reflecting subdued Australian consumer sentiment where the brand has significant exposure. Increased competitor promotions in the water sports apparel segment pressured margins and sales velocity. Additionally, the waning benefit of favorable foreign exchange rates in FY26 Q4 further impacted results, with management noting this currency headwind may continue depending on exchange rate movements.
Oboz, the footwear-focused brand, returned to year-on-year growth in FY26 Q4 as expected. This rebound was driven by strong online sales and successful new product launches. Oboz’s recovery amid a challenging retail environment highlights the effectiveness of its direct-to-consumer strategy and product innovation, with digital marketing and e-commerce playing key roles in capturing demand.
Underlying EBITDA Projected to More Than Double in FY26
KMD Brands forecasts underlying EBITDA for FY26 between $38 million and $41 million, a 123% increase at the midpoint compared to FY25. This reflects significant operational leverage as sales rise and efficiencies improve. The underlying EBITDA figure excludes IFRS 16 lease accounting, software as a service treatments, restructuring costs, and one-off items, offering a clearer picture of operational performance.
The substantial EBITDA growth alongside 5% sales growth indicates margin expansion through scale benefits, enhanced inventory management, improved product mix, and cost discipline. This operational leverage aligns with the company’s Next Level strategy aimed at boosting profitability and returns. Specific initiatives driving this improvement were not detailed in the update.
Net Debt Rises Despite Profitability Gains
Net debt is expected to increase to $63 million–$66 million by 31 July 2026, up from $52.8 million a year earlier. This rise, despite EBITDA growth, stems from changes in supplier payment timing extending the cash operating cycle, additional working capital investments to mitigate supply chain risks amid geopolitical tensions, and an $8 million impact from New Zealand dollar depreciation. Management confirmed compliance with all bank covenants under the new facility, indicating lender confidence despite higher debt.
Divestment of Southeast Asian Manufacturing Facility to Unlock Capital
KMD Brands plans a phased 12-month wind-down and divestment of its Southeast Asian manufacturing facility, expected to generate net property proceeds of $5 million to $7 million and release approximately $6 million in working capital. This strategic move will bolster the balance sheet and reduce net debt.
The divestment is part of a broader business review and will be managed carefully to ensure supply continuity. The total capital benefit, combining property proceeds and working capital release, is anticipated between $11 million and $13 million. The business review is set for completion alongside FY26 results on 23 September 2026.
Business Review and Strategic Focus on Next Level Growth
The manufacturing divestment is a component of KMD Brands’ ongoing business review aimed at portfolio optimization, operational improvements, and capital unlocking from non-core assets. The Next Level strategy guides these efforts, focusing on enhancing returns and concentrating on core direct-to-consumer retail strengths across Kathmandu, Rip Curl, and Oboz. The review’s phased approach allows for comprehensive evaluation and coordinated stakeholder communication with the FY26 results announcement.
Multi-Brand Strategy Targets Diverse Consumer Segments and Regions
KMD Brands operates three main brands serving distinct outdoor, adventure, and lifestyle markets. Kathmandu specializes in outdoor retail and travel gear with strengths in weatherproof apparel. Rip Curl focuses on surfing and water sports lifestyle products, while Oboz centers on footwear innovation and direct-to-consumer growth.
The company’s footprint covers Australia and New Zealand, with the Southeast Asian manufacturing facility slated for divestment. This multi-brand approach provides product and consumer diversification, although Australian consumer sentiment remains softer than New Zealand’s, affecting geographic performance. Direct-to-consumer sales through online and physical stores remain central to the distribution strategy.
FY26 Sales Growth Reflects Market Recovery and Product Innovation
Guidance for FY26 sales between $1,040 million and $1,044 million indicates approximately 5% growth at midpoint over FY25, underscoring ongoing market recovery and expansion. This is notable amid subdued retail demand in some segments, particularly impacting Rip Curl. Growth is driven by Kathmandu’s product momentum in rainwear, fleece, and base layers, which align with seasonal demand and product freshness.
Oboz’s return to growth in FY26 Q4 highlights the impact of product innovation and strong online sales. The company’s use of constant currency metrics for same-store sales isolates true demand trends from currency fluctuations. The combination of 5% sales growth and 123% EBITDA increase demonstrates strong operational leverage and improving unit economics.
Currency and Geopolitical Challenges Influence Financial Outcomes
KMD Brands faces macroeconomic and geopolitical headwinds affecting FY26 operations and finances. The New Zealand dollar’s year-on-year weakening has increased net debt by approximately $8 million due to the company’s New Zealand domicile and international procurement exposure. This currency effect partially offsets operational gains.
Geopolitical tensions have led to higher working capital investments to secure inventory against potential supply chain disruptions. While this elevates net debt temporarily, it aims to safeguard product availability. The manufacturing divestment and inventory strategy signal a shift toward outsourced manufacturing and diversified, just-in-time supply chains.
Seasonal Weather Impacts Create Volatility in Category Performance
Seasonal and weather variations significantly affect KMD Brands’ results, with Kathmandu’s insulation category particularly sensitive. Unseasonably warm weather on Australia’s east coast during the winter sale period dampened thermal product demand, causing short-term weakness. However, year-to-date insulation sales remain positive, indicating the impact was temporary.
This weather sensitivity introduces quarterly volatility and risk for investors monitoring performance. Strength in rainwear, fleece, and base layers reflects demand for versatile, weather-resistant products less dependent on temperature extremes. The company did not quantify insulation’s overall impact on Kathmandu sales, limiting insight into the materiality of this weather-related challenge for FY26.
