KMD Brands (ASX: KMD) has reported KMD Brands Kathmandu sales growth of +12.9% year-to-date in its first-half trading update, with the outdoor retail brand emerging as the standout performer across the Group’s portfolio. The results cover the critical Black Friday and Christmas trading periods, providing evidence that the company’s “Next Level” transformation strategy is translating into register sales.
Kathmandu delivered consistent momentum across both quarters, recording +13.9% growth in Q1 and +12.1% in Q2 to date. Same store sales for Kathmandu increased +12.7% year-on-year for the 23 weeks ended 4 January 2026, with strength across both Australian and New Zealand markets.
Overall Group sales grew +7.9% year-to-date for the five months ending December 2025.
The sales performance is primarily driven by growth in the direct-to-consumer channel, particularly for Kathmandu during the peak retail trading periods. This DTC strength suggests consumers are actively seeking out the brand rather than discovering it through third-party retailers, a leading indicator of brand health and margin potential.
All three brands contributing to group sales growth
While Kathmandu leads the charge, all three brands within the KMD Brands portfolio contributed to Group sales momentum during the first five months of FY26. Rip Curl recorded +5.6% year-to-date growth, delivering steady performance with same store sales up +1.7% year-on-year. North American same store sales for Rip Curl were particularly strong.
Oboz showed significant acceleration in Q2 after a soft start to the year. Following a -1.3% decline in Q1, the footwear brand surged +21.0% in Q2 to date, bringing year-to-date growth to +4.5%.
| Brand | Q1 Growth | Q2 to Date | YTD Growth |
|---|---|---|---|
| Kathmandu | +13.9% | +12.1% | +12.9% |
| Rip Curl | +6.6% | +4.4% | +5.6% |
| Oboz | -1.3% | +21.0% | +4.5% |
| Group | +7.9% | +8.0% | +7.9% |
The wholesale channel also contributed meaningfully to the result, with Group wholesale sales +9.4% above last year for the five-month period. Forward wholesale order books remain stable and slightly above prior year levels, while in-season buying from key accounts has been positive.
What direct-to-consumer growth signals about brand health
For retail investors assessing KMD Brands, the strength in the direct-to-consumer channel carries particular significance. DTC sales typically deliver higher gross margins than wholesale channels because they eliminate third-party retailer markups. They also provide companies with direct customer relationships, enabling better data collection and marketing effectiveness.
When consumers actively seek out brands through company-owned stores and websites rather than discovering them at third-party retailers, it indicates stronger brand equity and pricing power. KMD Brands’ DTC success, especially during the competitive Black Friday and Christmas periods when promotional pressure is highest, suggests the brands are resonating with consumers despite intense market conditions.
This channel mix shift toward DTC can support margin expansion over time, even as wholesale relationships remain important for distribution reach and brand exposure.
EBITDA guidance points to significant profit recovery
KMD Brands expects first-half FY26 underlying EBITDA in the range of $8-11 million, compared to $3.9 million in the prior corresponding period. This represents a potential increase of 105-182%, demonstrating significant operating leverage as sales growth flows through to profitability.
The profit recovery comes despite gross margin compression. Group gross margin year-to-date stands at 56.7%, approximately 100 basis points lower year-on-year. Management attributes the margin pressure to elevated promotional activity in the broader retail marketplace and continued focus across all brands to optimise product mix and clear aged inventory.
However, the year-to-date gross margin sits above second-half FY25 levels, indicating the trajectory is improving. The margin compression appears tactical rather than structural:
- Current YTD gross margin: 56.7%
- Year-on-year movement: -100 basis points
- Reason: Elevated promotional activity and aged inventory clearance
- Key context: Above 2H FY25 gross margin (improving trend)
The ability to deliver materially higher EBITDA despite margin headwinds points to the Group’s cost discipline and the benefits of scale as sales volumes increase. Management continues to focus on optimising the balance between sales and gross margin while actively managing inventory investment.
Balance sheet and debt refinancing update
As part of a longer-term refinancing plan, KMD Brands has extended its existing debt facility term to April 2027 and adjusted the fixed cover charge ratio for July 2026 and January 2027 measurement periods, with no restrictions in place. The Group has also reduced its total syndicated bank facilities to approximately NZ$283 million.
The company expects to comply with all amended covenants at the January 2026 measurement point and is in discussions with lenders regarding refinancing of its long-term debt facilities. Net debt at 31 January 2026 is expected to be in the range of $85-90 million, compared to $76.2 million in the prior year. The increase is impacted by the weakening of the New Zealand dollar year-on-year.
The covenant flexibility secured removes near-term balance sheet concerns, while ongoing refinancing discussions indicate management is proactively addressing the capital structure. The modest increase in net debt remains manageable given the improving EBITDA trajectory.
CEO commentary on transformation progress
Management Perspective
“We are pleased with the Group’s early progress in the execution of its Next Level transformation strategy, in particular trading over the critical Black Friday and Christmas periods. Whilst we are still at the early stages of our transformation, we are encouraged by the improved performance of Kathmandu, with an adjusted flow of fresh innovation planned in the second half which we believe will strengthen our ability to expand gross margin over time,” said Brent Scrimshaw, Group CEO and Managing Director, KMD Brands.
The forward-looking element of management’s commentary is notable. The reference to fresh innovation planned for the second half provides a potential catalyst for further gross margin expansion, particularly for Kathmandu. Product innovation can command higher initial pricing and reduce reliance on promotional activity, both positive for profitability.
Catalysts and key dates ahead
Several near-term events provide reasons for investors to monitor KMD Brands:
- 1H FY26 results release: Wednesday 25 March 2026
- Second half product innovation launches: Timing to be confirmed, but fresh product flow planned for Kathmandu
- Long-term debt refinancing completion: Currently in progress with lenders
The March results will confirm whether sales momentum sustained through the full first half and provide detailed insights into the Group’s margin trajectory. The innovation pipeline offers potential positive surprises if new product launches resonate with consumers and support higher full-price sell-through rates.
KMD Brands Kathmandu sales growth of nearly 13% year-to-date positions the outdoor brand as the clear engine driving the Group’s turnaround. With EBITDA potentially tripling year-on-year, balance sheet refinancing progressing, and second-half product innovation in the pipeline, the trading update suggests the transformation strategy is gaining traction. The March results will be the key test of whether this momentum can be sustained.
Don’t miss the next Consumer Discretionary breakout
Investors tracking ASX-listed retailers and consumer brands can access FREE breaking news and comprehensive analysis through the Big News Blasts service from StockWire X. Covering Tech, Biotech, Healthcare, Finance, and Industrials—alongside Consumer Discretionary developments like the KMD Brands trading update—the service delivers market-moving announcements with detailed sector context, trusted by 20,000+ active subscribers.
To receive instant alerts on ASX companies outside the resources sector, click the ‘Free Alerts’ button in the menu at StockWire X and join investors who get breaking news and analysis delivered directly to their inbox—at no cost.