KMD Brands (ASX:KMD), the owner of Rip Curl, Kathmandu and Oboz, has opened discussions with a limited number of parties after receiving indicative, non-binding approaches. The move follows a Business review and comes after the group recorded a FY26 statutory loss driven by a large non-cash impairment, even as sales and underlying Earnings improved.

Business Review Opens the Door to Discussions

KMD reported its full-year result for the 12 months to July on 22 September 2026. Statutory loss after tax was NZD 414.4mn, driven by a NZD 462.7mn non-cash Impairment against intangible assets and Goodwill across its three brands.

The discussions with interested parties follow a business review launched in May to assess the portfolio, Capital requirements and Options for the group. The review has also led to a decision to divest KMD's South-East Asian Manufacturing facility, which is classified as held for sale. The approaches remain indicative, non-binding and incomplete, with no certainty that a transaction will occur.

Underlying Trading Improves Across the Group

Group sales increased 6.5% to NZD 1.053bn, or 1.7% in constant currency. Underlying EBITDA rose to NZD 42.0mn from NZD 17.7mn, while underlying EBIT moved to a NZD 7.5mn profit from a NZD 18.0mn loss. Gross Margin increased 120 basis points to 57.7%.

Rip Curl sales rose 3.8% to NZD 571.2mn, although constant-currency sales declined 1.2%. Kathmandu sales increased 11.1% to NZD 402.3mn, with same-store sales up 8.2%. Oboz sales increased 3.8% to NZD 79.5mn and returned to positive underlying EBITDA of NZD 2.5mn.

Debt and Costs Move Lower

Net Debt declined to NZD 48.1mn from NZD 52.8mn, while the Leverage Ratio improved to 1.2 times from 3.3 times. KMD delivered NZD 27.5mn in cost savings, ahead of its NZD 25mn target.

For FY27, the group guided to sales of NZD 1.055bn to NZD 1.075bn and EBITDA of NZD 52mn to NZD 55mn. It is targeting a further NZD 10mn in annualised cost savings and Capital Expenditure of NZD 15mn to NZD 16mn.

What to Watch Next

KMD plans a further 15 store closures in FY27 after ending FY26 with 318 owned stores, ten fewer than the prior year. Its three-year targets to July 2028 include gross margin of about 60%, operating expenses below 50% of sales, an EBITDA margin of at least 10% and net Working Capital below 16% of sales.

The next developments include any update on discussions with interested parties and progress on the sale of the manufacturing facility. Consumer spending and currency movements across Australia, New Zealand and North America also remain relevant to group performance.