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Kathmandu (ASX:KMD) , the flagship outdoor brand of KMD Brands, is undergoing one of its most significant transformations in years, announcing the closure of multiple stores as part of a sweeping turnaround plan. The decision reflects deep-rooted financial pressures, shifting consumer behavior, and a need to reset the company’s retail strategy in the post-pandemic era.
Financial Strain and Sales Declines
KMD Brands reported an 11.2% decrease in group sales for the year ending July 2024, with Kathmandu’s sales falling 14.5% in key markets. The company’s underlying earnings roughly halved, tipping it into a substantial loss (The Nightly). The first half of FY24 saw projected EBITDA fall to NZ$50 million, less than half of the prior period, underscoring the sustained pressure on margins (Sharecafe). These results highlight a prolonged revenue slump that necessitated decisive restructuring measures.
Market and Consumer Headwinds
Kathmandu faced a double hit from macroeconomic and environmental factors. The cost-of-living squeeze significantly impacted discretionary spending, with consumers cutting back on outdoor gear purchases (The New Daily). Compounding this challenge was unseasonably warm autumn weather in Australia, which dampened demand for Kathmandu’s insulated winter apparel (Ragtrader). Although a cooler June temporarily boosted sales by 13.2% in early winter, it failed to offset steep earlier declines (Ragtrader).
Post-COVID Recovery Challenges
Pandemic-era store closures cost Kathmandu approximately AU$13 million in lost earnings and disrupted operations across its footprint (Inside Retail Australia, SmartCompany). While later quarters showed improvement, a full recovery remained out of reach as supply chain and staffing challenges persisted (RNZ, The Nightly). These factors prolonged the company’s path back to profitability and weighed heavily on its financial results.
Strategic Response: Store Closures & Transformation
In response, KMD Brands launched its “Next Level” initiative, which includes the closure of 21 underperforming stores across Kathmandu, Rip Curl, and Oboz (News.com.au, retailbiz). This restructuring aims to generate A$25 million in cost savings, reduce headcount, and cut operational expenditures (The Nightly). The move reflects a shift toward a leaner, more sustainable retail footprint.
Digital and Format Innovation
Kathmandu is also pivoting toward innovation. The company plans to debut “stores of the future” in Australia and New Zealand ahead of Christmas, offering modernized layouts and improved customer engagement (News.com.au, retailbiz). Simultaneously, KMD is ramping up its e-commerce platforms, data analytics, and supply chain intelligence to support digital growth and improve decision-making (Ragtrader, retailbiz).
Leadership Vision & Investor Confidence
CEO Brent Scrimshaw emphasized that the restructuring is designed to unlock brand value and realign operations for customer-centric growth (News.com.au, retailbiz). Chairman David Kirk reinforced investor confidence, stating the group remains “materially undervalued” and supports the transformation plan as a pathway to future profitability (News.com.au).
Summary Overview
Kathmandu’s store closures reflect a multi-faceted turnaround strategy driven by declining sales, cost pressures, and post-pandemic operational challenges. The company aims to right-size its retail footprint, improve profitability through cost savings, and modernize its approach with digital investments and new concept stores. Leadership maintains confidence in the brand’s long-term potential and is seeking to rebuild investor trust through transformation initiatives.
