KMD Brands Introduces New Growth Strategy ‘Next Level’
KMD Brands, the parent company of Kathmandu and Rip Curl, is embarking on a fresh growth initiative dubbed ‘Next Level’ that entails a strategic cost adjustment of at least $25 million. As detailed in a recent market announcement, this cost adjustment is part of a broader “organizational restructure” that aligns with the new strategy, which also includes a review of its store network. The restructuring will see more than ten senior leadership roles transitioning in 2025, with the overarching goal of fully realizing KMD’s brand potential while ensuring sustainable and profitable growth.
Vision for Brand-Centric Growth
Brent Scrimshaw, the group CEO of KMD Brands, expressed that his time spent across various offices and discussions with teams and retail partners has revealed significant untapped potential within the company’s brands. “The potential of our brands is far greater than what we’re delivering today,” he stated. To address this, the ‘Next Level’ strategy aims to unify the organization around a customer-focused growth plan that emphasizes brand and product alignment with consumer needs and store formats across different regions.
Enhancing Product Innovation and Store Formats
In conjunction with the cost reset, KMD Brands is shifting its focus toward product innovation, ensuring high technical performance while also enhancing speed-to-market, design, and style. This initiative includes the establishment of product ‘Centres of Excellence’ at Rip Curl’s headquarters in Torquay, aimed at improving the efficiency and output of global product teams and refining the organizational structure. Additionally, the company is revamping its store portfolio, planning to close 21 stores while introducing a new store format for Kathmandu, with three new locations set to open in Australia and New Zealand within the current year.
Revamping Digital Strategies for Future Growth
KMD is also reworking its digital and data intelligence strategies to achieve long-term objectives. This plan encompasses new tools and initiatives that enhance data-driven decision-making and optimize supply chain performance. The company is accelerating the rollout of its e-commerce platform across its brands while investing in more effective digital marketing strategies to revise its approach to international markets.
Market Valuation and Financial Ambitions
KMD Brands’ chairman, David Kirk, emphasized that he and his team feel the group is undervalued by the market. Over the past 18 months, the company has strategically altered its executive team to bolster the core capabilities of the group. Kirk noted that the board is fully supportive of the ‘Next Level’ strategy and is optimistic about the organization’s capacity to self-fund key initiatives, thereby increasing shareholder value. Along with the $25 million cost reset, KMD has also earmarked approximately $15 million for growth investments. The financial objectives include targeting a gross margin of around 60 percent across the group within three years, maintaining operating expenses at less than 50 percent of sales, achieving over a 10 percent EBITDA margin, and reducing working capital to below 16 percent of sales.
Sales Performance and Market Challenges
These financial targets are anticipated to be met through a reduction in style and SKU counts, improved demand and supply planning, and a shift towards higher-margin digital sales channels, along with an immediate cost-out and reallocation strategy to mitigate legacy costs. This strategic direction follows a challenging fiscal year 2025 for KMD Brands, where sales dipped by 0.5 percent across its three brands, including Oboz Footwear. Notably, Kathmandu significantly impacted overall group sales, primarily due to unusually warm weather in Australia, which adversely affected the sales of insulation products. Despite this, sales for other key categories such as rainwear and footwear saw year-on-year growth.
Recent Sales Momentum and Future Prospects
A recent shift to cooler weather in both New Zealand and Australia has sparked renewed sales momentum, with a reported 13.2 percent year-on-year sales growth in the first 17 days of June. KMD Brands anticipates that the upcoming school holidays and the onset of the ski season will further boost sales for the remainder of the fiscal year. Total sales for Kathmandu in the latter half leading to May 25 decreased by 6.4 percent, while Rip Curl experienced a slight increase of 0.9 percent during the same timeframe. Oboz Footwear, KMD’s smaller subsidiary, saw a 1.1 percent decline in sales. The decline in Kathmandu’s sales during the second half followed a 3 percent increase in the first half of FY25. Scrimshaw acknowledged the volatility in Kathmandu’s sales, attributing it to the unseasonable warm weather in Australia. However, he expressed confidence in the brand’s health and growth potential, particularly given the recent strong online sales momentum.
