Supply chain woes have offset Kathmandu Holdings' strong sales rebound, resulting in a drop in its share prices.
The retailer reported strong online sales for Rip Curl and Kathmandu, increasing 12.1 percent and 48.6 percent, respectively. Online sales now account for 17 percent of the Group’s direct-to-consumer sales.
Furthermore, wholesale remains a strong category for the business, with Rip Curl increasing by 18.2 percent, averaging at a 3.4 percent increase for the Group.
This ongoing growth was offset by the large disruptions facing footwear brand, Oboz, which has failed to fulfil approximately 50 percent of its orders. Its product suppliers in Vietnam faced significant setbacks due to first-quarter factory shutdowns, which heavily impacted the supply chain.
However, the business has assured that these setbacks will improve, and expects a gradual recovery from the transitory supply constraints in the third quarter.
“COVID continues to cause ongoing disruptions to our customers, employees and suppliers globally, most recently from the Omicron variant,” said Group CEO, Michael Daly. “The disruptions have resulted in reduced retail footfall, temporary store closures and staffing restraints in many locations.”
Kathmandu reported 15.1 percent growth for its same-store sales, 2.8 percent above the same period last year, but remain 20.1 percent below pre-COVID levels (FY20). “It was pleasing to see a strong rebound in Kathmandu sales over the second quarter of FY22 following the first quarter’s lockdowns,” said Daly. “Kathmandu is well placed with appropriate inventory levels and new product introductions for the second half.”
COVID restrictions and supply chain challenges have impacted the Group’s results. Roughly 11,696 trading days were lost as a result of pandemic-related store closures, the company shared, which is an increase of 65 percent on H1 FY21. Net debt is expected to be approximately $48 million, with liquidity of approximately $252 million.
Underlying EBITDA is expected to reach the range of $9 to $11 million, the business reported, which is in line with the previous guidance of a $35 million COVID impact on the first quarter EBIDTA. Group sales are forecast to be approximately $405 million for H1 FY22. Its gross margin will likely be lower due to COVID-related heightened international freight costs, and an increased clearance mix for the Kathmandu brand.
“Even though ongoing supply chain challenges remain, forward wholesale demand for our products remain at record levels,” Daly explained. “In addition, the Group remains well capitalised, investing in the long-term international expansion of our global house brands.”
At the time of writing, Kathamndu Holdings’ shares have dropped 0.77 percent to $1.30 a share.
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