KMD Brands Reports $28.3M Underlying Loss, Sees 7.9% Sales Growth in Early FY26
KMD Brands reported a challenging FY25 with a net loss but has launched a transformative ‘Next Level’ strategy focused on cost reset, product innovation, and digital growth. Early FY26 trading shows promising sales momentum, signaling potential turnaround.
- FY25 revenue grew modestly by 1.0% but underlying net loss reached $28.3 million
- Gross margin declined due to increased promotions and inventory clearance
- ‘Next Level’ three-year transformation strategy launched to reset costs and accelerate growth
- New CEO Brent Scrimshaw leads strategic shifts across Rip Curl, Kathmandu, and Oboz brands
- Early FY26 sales up 7.9%, with cost savings on track to deliver $25 million annually
A Challenging Year for KMD Brands
KMD Brands Limited, the parent company of iconic outdoor and lifestyle brands Rip Curl, Kathmandu, and Oboz, faced a tough operating environment in FY25. Despite a modest 1.0% increase in group sales to $989 million, the company grappled with declining gross margins and rising cost pressures. Increased promotional activity to defend market share and clear aged inventory weighed heavily on profitability, resulting in an underlying net loss of $28.3 million and a statutory net loss of $93.6 million after a one-off impairment.
Strategic Reset Under New Leadership
In response to these challenges, KMD Brands appointed Brent Scrimshaw as Group CEO in the final quarter of FY25. Scrimshaw, who brings extensive global brand-building experience from Nike, has spearheaded the launch of the ‘Next Level’ transformation strategy. This ambitious three-year plan aims to sharpen focus, enhance agility, and unlock growth by resetting the cost base by $25 million annually while reinvesting $15 million into product innovation, marketing, and digital capabilities.
Brand-Specific Strategic Shifts
The ‘Next Level’ strategy involves bold repositioning across KMD’s brands. Rip Curl is pivoting towards a younger, broader beach lifestyle audience beyond core surfers, while Kathmandu is focusing on product distinction and a digitally-led international approach, reducing costs in traditional channels. Oboz is accelerating product development to capitalize on the booming trail footwear category and expand into new consumer segments and channels. These shifts are supported by a refreshed executive team, including new leaders for Rip Curl and the Group’s finance and operations functions.
Early Signs of Momentum in FY26
Trading in the first quarter of FY26 shows encouraging signs, with group sales up 7.9% year-on-year. Kathmandu led growth with a 13.9% increase, while Rip Curl grew 6.6%. The company continues to manage working capital tightly, reducing inventory by $8 million compared to the previous year. Gross margins remain under pressure but have improved relative to the second half of FY25. The cost reset initiatives are progressing on schedule, underpinning confidence in delivering sustainable profitability.
Sustainability and Innovation at the Core
KMD Brands continues to embed sustainability into its product development and operations, with all brands maintaining B Corp certification and pioneering responsible materials. Product innovation remains a key growth driver, highlighted by award-winning launches such as the Kathmandu Feather Flight carry-on luggage and the Trailhead Pack. The company is also investing in integrated marketplace strategies, including new flagship stores and enhanced ecommerce platforms, to deepen consumer engagement.
Looking Ahead
While the company is cautiously optimistic about FY26, much depends on the upcoming Black Friday and Christmas trading periods. Forward wholesale orders are stable and slightly ahead of last year, but execution risks remain as the ‘Next Level’ strategy unfolds. Investors will be watching closely for evidence that KMD Brands can translate its strategic reset into sustained profitability and growth.
Bottom Line?
KMD Brands’ ‘Next Level’ strategy marks a decisive pivot from loss to growth, but the path to recovery hinges on execution and key retail seasons ahead.
Questions in the middle?
- Can KMD Brands sustain gross margin improvements while clearing aged inventory?
- How will the new leadership team drive execution across diverse brands and markets?
- Will the ‘Next Level’ cost reset and reinvestment deliver the promised profitability gains?
