Sales down 14.5% drove KMD to a $10.4m loss; dividend cut to zero

Reported EBITDA dropped 29.1% to NZD 64.4m, while the company's underlying EBITDA was disclosed at NZD 15.1m, down 66.8%.

The board declared no interim dividend, versus 3.0 cents in HY23. Operating cash flow rose 41.0% to NZD 42.2m, but the closing cash balance fell 60.3% to NZD 34.0m and gross borrowings of NZD 130.2m left net debt at NZD 96.2m, lifting net debt to EBITDA to 1.49x from 0.93x.

By segment, Kathmandu swung to a NZD 8.3m loss (HY23: NZD 5.9m profit) on revenue down 21.5%; Oboz turned slightly negative; Rip Curl remained the dominant earner at NZD 27.4m on 59.4% of group revenue.

Kathmandu revenue fell 21.5% to NZD 152.3m and the segment result deteriorated by NZD 14.2m, more than the entire group EBIT decline. Rip Curl earnings held up reasonably (NZD 27.4m vs NZD 30.5m), so the read is that group profitability is now hostage to a single brand's recovery rather than a uniform consumer slowdown.

Leverage is rising even though cash flow looks better. OCF/EBITDA improved to 65.5% from 32.9%, but cash fell NZD 51.6m year on year and net debt rose to NZD 96.2m. Net debt to EBITDA at 1.49x is still moderate, but the trajectory matters because the board has chosen to suspend the dividend rather than draw on the balance sheet — a signal that management is prioritising headroom over shareholder distributions.

Gross margin held, costs did not flex. Gross margin was essentially flat at 58.8% (+10bps), so the earnings collapse is an operating-leverage story on a fixed cost base rather than a pricing or sourcing problem. That frames the recovery question as a sales-volume question.

The historical shape is meaningful: in FY23, the second half delivered roughly 50.3% of full-year revenue, 54.6% of EBITDA, and 62.6% of NPAT, so the group is structurally second-half weighted. Annualising current run-rate revenue gives NZD 937.3m, around 15% below FY23's NZD 1.1bn record, but that simple extrapolation overstates the likely full-year miss if Kathmandu's winter trading recovers.

The release does not quantify trading into the second half or commit to a cost-out target, so the gap between current run-rate and any plausible FY24 outcome is unresolved on the materials provided. The dividend suspension signals the board is not yet confident on the second-half shape.

The underlying figure is the cleaner read on operating economics, and at NZD 15.1m down 66.8% it is consistent with the swing to a statutory loss.

Operating cash flow of NZD 42.2m looks strong against reported EBITDA but is partly a working-capital release: trade debtors fell NZD 9.0m and inventory came down NZD 5.2m versus HY23. That said, inventory days extended to 121.8 from 105.9, meaning the dollar reduction in inventory has been more than offset by the sales decline — stock is moving more slowly through the channel.

• Free cash flow pre-lease: NZD 29.6m (HY23: NZD 18.6m), against an NZD 10.4m net loss — so reported FCF/NPAT of -283.8% reflects a working-capital tailwind, not earnings durability.

This briefing cannot assess current trading momentum into the second half, the FY24 cost programme, or covenant headroom, because none of those are quantified in the supplied materials.