KMD’s Deep Discount Equity Raise Signals Balance Sheet Reset Amid Transformation

Strong Sales Momentum and Strategic Progress

KMD Brands Limited (ASX/NZX: KMD) has delivered a robust first half for fiscal 2026, with group sales rising 7.3% year-on-year to NZ$505.4 million. This growth was driven by solid performances across both direct-to-consumer and wholesale channels, with Kathmandu leading the charge, posting a 12.3% sales increase despite a net reduction in store numbers.

While gross margin dipped slightly by 1.2 percentage points to 56.8%, reflecting a promotional marketplace and inventory optimisation efforts, the company achieved a remarkable 196.6% jump in underlying EBITDA to NZ$11.5 million. Operating expenses rose modestly by 2.4%, but on a constant currency basis, they were lower than the previous year, aided by a strategic cost reset under the Next Level transformation program.

Capital Raising and Debt Refinancing to Strengthen Balance Sheet

To underpin its ongoing transformation, KMD announced a fully underwritten equity raising of approximately NZ$65.3 million. The raising comprises a placement to institutional investors and a 1-for-0.73 pro-rata accelerated renounceable entitlement offer to existing shareholders, priced at NZ$0.06 per share. This price represents a 47.1% discount to the theoretical ex-rights price and a 69.2% discount to the last traded price, reflecting current market conditions and the company’s strategic priorities.

Alongside the equity raise, KMD has refinanced its debt facilities, securing a new multi-year revolving credit facility with a capacity of around NZ$205 million and a term extending to October 2028. This refinancing removes near-term refinancing pressures and provides a stable capital structure to support the Next Level strategy execution. The company targets reducing its leverage ratio to below 0.5x Net Debt to EBITDA by the end of fiscal 2027.

Brand Performance and Operational Highlights

Kathmandu’s strong sales momentum continued into the second half, with direct-to-consumer same store sales up 11.1% in the first six weeks. Rip Curl and Oboz maintained steady wholesale order books, with anticipated gross margin expansion in the coming months as tariff impacts are managed and inventory clearance cycles complete.

KMD’s strategic initiatives include ongoing store network optimisation, digital platform enhancements, and disciplined cost management. The company is on track to deliver $27.5 million in cost savings for fiscal 2026 and aims to keep capital expenditure at the lower end of its guided range, approximately $25 million.

Leadership and Governance Update

Reflecting confidence in the company’s prospects, all directors who are shareholders have committed to participate pro-rata in the equity raise, with Chairman David Kirk and Non-Executive Director Philip Bowman applying for at least twice their entitlement. Mr Kirk also announced his intention to step down as Chairman in the coming months, with an orderly succession process underway.

CEO Brent Scrimshaw highlighted the accelerated pace of execution since launching the Next Level strategy, noting the return to growth across all brands and improved operational capabilities. The company remains focused on delivering sustainable, profitable growth despite a challenging global consumer environment.