Key Highlights

• FY26 group sales expected in the range of NZ$1,040 million to NZ$1,044 million, up approximately 5% at the midpoint on FY25.

• Group underlying EBITDA expected in the range of NZ$38 million to NZ$41 million, representing approximately 123% growth at the midpoint on FY25.

• KMD Brands is divesting its Southeast Asian Manufacturing Facility in a phased wind-down over 12 months, expected to Yield net property proceeds of NZ$5 million to NZ$7 million and unlock NZ$6 million in working capital.

• Rip Curl same-store sales declined 2.8% in the second half, affected by subdued consumer sentiment and competitor promotional activity.

KMD Brands Limited (ASX:KMD) issued a trading update on 22 July 2026 covering the financial year ended in July 2026, providing both an Earnings range and progress on the company's Next Level strategy. The group, which operates the Kathmandu, Rip Curl, and Oboz brands across outdoor apparel, surf and lifestyle wear, and footwear respectively, recorded a divergent set of trading outcomes across its portfolio during the first 24 full weeks of the second half of FY26, from 2 February to 19 July 2026. All amounts are in New Zealand dollars unless otherwise stated.

Group sales for FY26 are expected to be in the range of NZ$1,040 million to NZ$1,044 million, representing growth of approximately 5% at the midpoint compared to FY25. While the headline sales figure reflects improvement, the composition of performance across the three brands is meaningfully varied. Group underlying EBITDA — which excludes the impact of IFRS 16, software-as-a-service accounting, restructuring, and one-off items — is expected in the range of NZ$38 million to NZ$41 million, implying approximately 123% growth at the midpoint over the prior year, though off a comparatively low FY25 base.

Kathmandu Gains Momentum but Faces Weather and Market Challenges

Kathmandu recorded direct-to-consumer same-store sales growth (including online) of 4.8% on a constant currency basis during the second half trading period. The performance was led by strength in the rainwear, fleece, and base layer categories. However, the insulation category experienced headwinds during the winter sale period, with weaker consumer Demand attributed to unseasonally warm weather on the east coast of Australia. The company noted that New Zealand trading continued to outperform Australia across the Kathmandu brand.

Rip Curl Faces Headwinds on Multiple Fronts

Rip Curl's direct-to-consumer same-store sales declined 2.8% on a constant currency basis during the same period. The performance was attributed to subdued consumer sentiment in Australia and competitor promotional activity that weighed on the brand's market positioning. An additional Factor was the reduction in the benefit from favourable foreign exchange rates that had assisted performance earlier in the year, with Q4 FY26 experiencing an adverse FX impact. The combination of softer consumer demand, intensified competitive dynamics, and FX headwinds presents near-term challenges for the surf lifestyle brand.

Oboz Returns to Growth in Q4 FY26

The Oboz footwear brand, which had experienced weaker trading through parts of FY26, returned to year-on-year sales growth in Q4 FY26. KMD attributed the recovery to continued strong online performance and the flow-through of new product launches. Oboz remains the smallest of the three divisions by contribution but is regarded as a growth-oriented Brand within the group's portfolio.

Manufacturing Facility Divestment Announced

A notable strategic announcement accompanying the trading update was KMD Brands' decision to divest its Southeast Asian manufacturing facility, with a phased production wind-down expected to occur over the next 12 months. The divestment is expected to yield net property proceeds in the range of NZ$5 million to NZ$7 million. Additionally, the transaction is anticipated to unlock approximately NZ$6 million in working capital, further supporting the group's balance sheet. The company framed the exit from owned manufacturing as a continuation of its broader Business review, the findings of which are expected to be disclosed at the FY26 Annual Results on 23 September 2026.

Net Debt and Covenant Compliance

The group's net debt at the end of July 2026 is expected to be in the range of approximately NZ$63 million to NZ$66 million, up from NZ$52.8 million a year earlier. The increase in net debt is attributed to a change in payment timing with selected suppliers, additional Working Capital Investment to secure inventory ahead of potential Supply chain disruptions linked to global geopolitical tensions, and the weakening of the New Zealand dollar relative to the prior year, which accounts for approximately NZ$8 million of the increase. KMD confirmed it will be compliant with all bank covenants under its new bank facility at 31 July 2026 despite the elevated net debt position.

Conclusion

KMD Brands' FY26 trading update presents a mixed picture across a multi-brand retail group that is navigating divergent consumer conditions and executing a strategic rationalisation of its operating model. The notable EBITDA improvement is encouraging in absolute terms but should be contextualised against the prior year's low base. The manufacturing divestment reflects a shift toward a leaner asset structure. Rip Curl's performance and the net debt increase are areas that Warrant continued scrutiny as the company approaches its full-year annual results in September 2026.