The KMD Brands Ltd (ASX: KMD) share price has dropped around 11% after reporting a slow start to winter trading.
KMD is the company that owns brands including Oboz, Rip Curl and Kathmandu. It’s focused on outdoor apparel and footwear.
FY23 update
The retailer has provided a sales and profitability update for the year to 31 July 2023.
Sales for FY23 are expected to be approximately $1.1 billion, which compares to group sales of $979.8 million in FY22. The FY23 sales are expected to be a full-year record, thanks to “strong sales growth” from all brands in the first three quarters of FY23.
The gross profit margin remains “resilient”, which is expected to be in line with last year.
Underlying EBITDA (EBITDA explained) for FY23 is expected to be in the range of $105 million to $110 million. Profitability is a key measure which helps investors evaluate the KMD share price.
Slowdown
The company admitted that recent trading in the fourth quarter “has been more challenging” because of “increased cost-of-living pressures softening consumer sentiment.”
It warned that it has experienced a slower start to the winter trading period, while also cycling “against its best ever winter season performance last year”. Year on year comparisons for July and FY24 could be tough.
KMD said that sales and retail foot traffic have been impacted by warmer winter weather in Australia.
Management comments
The KMD CEO and Managing Director Michael Daly said:
With three weeks of trade still to come, we remain focused on delivering our key Kathmandu winter and Rip Curl Northern Hemisphere summer results while continuing to moderate our cost base for the year ahead. We’re looking forward to delivering over $1 billion in sales at year-end – a first for KMD Brands.
Final thoughts on the KMD share price
It’s gone through a lot of share price pain since the start of COVID (it’s down 65%) and from October 2021 (down over 40%).
Retailers like this seem cyclical with the economic conditions, so this could be a good period of time to look at this company if it’s able to rebound over the next two or three years from this low.
However, with it being a NZ-based business, I’d rather go for a beaten-up Australian ASX retail share that pays franking credits with its dividends.
