Covid dents profit for brands

KMD, which owns the Kathmandu and Rip Curl brands, warned its full-year profit will fall after the Covid-19 pandemic disrupted retail trading.

The company expects to post underlying earnings before interest and tax (ebit) of $53 million to $59m in the year to the end of July. That’s down as much as 37% from underlying ebit of $83.8m last year. It didn’t provide a forecast for net profit.

The retailer reported a net loss of $5.5m in the first-half after Covid closed stores, cut foot traffic and hit supply chains. The lost revenue and lower government support dented first-half earnings before interest, tax, depreciation and amortisation by $35m, and the virus has continued to impact the second half.

‘‘Trading conditions have improved in the second half, however Covid continued to impact footfall, particularly in the third quarter, and caused sporadic store closures due to staff availability,’’ the company said in a statement to the NZX.

KMD expects full-year sales of $955m to $965m, up from $922.8m last year.

Managing director Michael Daly said Kathmandu had a record winter promotional period in Australia and second-half gross margins were ‘‘well above’’ last year, due to a favourable currency and better promotional activity.

Trading in New Zealand was weaker than Australia, reflecting lower growth in foot traffic and revenues, although that was offset by improved gross margins as the company moderated its ‘‘highlow’’ pricing model, he said.

While the third quarter was impacted by ongoing Covid outbreaks in both countries, profitability in the fourth quarter was expected to be above preCovid levels so long as there were no new government restrictions, he said.

The company’s Oboz footwear business was recovering from Covid-related factory closures and wholesale demand was ‘‘significantly above’’ pre-Covid levels, he said.

KMD was the biggest stock traded by volume on the NZX at midday. The shares were unchanged at $1.10, having dropped 26% so far this year.