- Recently, Kathmandu Holdings released its first quarter financial report during the Annual Meeting 2020.
- The Group said Rip Curl acquisition in October last year was transformational, as diversity provided much needed anchor during rough waves.
- The report said its response to COVID-19 was swift and strong, but sales and profit results reflected its impact.
Outdoor equipment retailer Kathmandu Holdings Limited (NZX:KMD) took a hit from travel restrictions and store closures, but benefited from its last year acquisition of surf brand Rip Curl. The purchase had proven a wise move as it helped Kathmandu lift sales when many of the stores were closed due to COVID-19.
The retail Group released a report for the first quarter of its financial year to October 31, 2020 in which KMD posted a 72 per cent increase in total sales across its Kathmandu, Rip Curl and Oboz businesses.
The Company mentioned the acquisition of Rip Curl attributed to the gain. The sales were primarily pushed due to the wholesale sales at Rip Curl. The Company did not provide an amount for the sales though. Kathmandu also owns a footwear company Oboz.
Moreover, Kathmandu Holdings paid $368 million to purchase Rip Curl last year, which gave the combined Group more than $1 billion of revenue.
Rip Curl distributes summer and beach focused products in thousands of stores in North America and Europe regions, where Kathmandu wanted to expand its footprint. It provides a rich diversity to the Group's products where it balances Kathmandu's winter and outdoor focus.
Kathmandu Holdings’ wholesale sales for the first quarter period ended on October 31 fell 14.4 per cent for the same corresponding period. Notably, the Group’s online sales increased by 37 per cent in an extended period of 16 weeks to November 15 on pcp.
The Group's 60 stores in Melbourne were closed most of the time because of the lockdown and in Auckland 14 stores were closed for more than two weeks. Its stores in Australia airports and, also, Rip Curl stores in Hawaii and Europe were severely battered by the coronavirus related travel restrictions or the lockdown and closures by the governments.
Direct sales decreased 7.6 per cent for the entire Group; however, the Rip Curl led the trade, which saw adjusted sales increased by 26.8 per cent.
Rip Curl propelled Kathmandu Holdings first quarter earnings:
Group CEO Xavier Simonet commented on the trading performance that Kathmandu Holdings realised the importance of a diversified company as they saw the benefit in this unprecedented year.
The Company saw Rip Curl's strong performance in summer focused products in its key regions, which followed by a successful winter trade for Kathmandu. He further said that the robust sales in the critical geographies of Australia, Europe and North America by Rip Curl were delightful to see.
The performance highlighted Rip Curl's global brand image and the innovative product lines they offer to people who surf. Overall, at pre-COVID-19 levels, Rip Curl's wholesale sell-in for the second half-year also motivated the Group.
Group CEO Xavier Simonet added, the camping and footwear categories over-performed for Kathmandu as well; however, it has not been able to compensate for the impact of the pandemic.
He continued saying that the lower footfall in CBD and tourist locations along with travel-related purchases lowered as well, which impacted Kathmandu sales. Its footwear arm Oboz's sales performance was strong to key accounts. The forward order book tracking was above pre-COVID-19 levels.
Simonet said that for the Group its half-year result would now depend on the critical Christmas holiday season. However, he emphasised that the coronavirus pandemic impact remains on the consumers' sentiments, which is still a risk for the Company.
At the time of writing, Kathmandu Holdings shares were trading at $1.33, down 1.48 per cent, as on November 26, 2020.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)