KMD Brands, the retail group behind Kathmandu, Rip Curl, and footwear brand Oboz, saw its shares drop 5.1% on Friday after posting a 8.4% decline in sales across its brands between February 24 and May 24.

The company has indicated it will undertake cost-cutting actions as it looks to optimise preliminary results for the year ending July 31, 2024, which saw a decrease in sales for all brands.

Rip Curl experienced a 9.2% decrease in the first half of FY24 and a 5.9% decrease in the second half to date. Kathmandu saw a more significant drop, with sales down 21.5% in the first half and 8.4% in the second half to date. Oboz also reported a decrease, with sales down 20.0% in the first half and 21.8% in the second half to date.

KMD described Kathmandu as having had a "slower than expected start to the key winter promotional period", with the first three weeks of the Winter Sale being 11.5% below last year. Meanwhile, Rip Curl has begun its peak summer trade in the Northern Hemisphere, with direct-to-consumer sales for the USA and Europe showing positive single-digit growth above last year. Oboz online sales continue to deliver strong year-on-year growth, up 28.9% for the ten months to May 2024.

Group CEO & Managing Director Michael Daly said, “With six weeks of peak trade still to come, we remain focused on optimising our Kathmandu winter and Rip Curl Northern Hemisphere summer results in a challenging consumer environment. We are seeing a prolonged impact of cost-of-living pressures on consumer sentiment globally but particularly in New Zealand, and we continue to respond tactically to competitive market dynamics.”

“Alongside immediate trading priorities, our focus remains on tightly controlling operating costs, moderating working capital, and maximising cash flows," said Daly.

Despite the challenging sales environment, the Group now expects underlying EBITDA to be approximately $50 million for the full year, based on the most recent sales trends across all brands. The Group has also taken pre-emptive action with the support of its banking group to lower the FCCR covenant ratio for the next three measurement points. Funding headroom at July 31, 2024, is expected to be approximately $200 million.