Retailer Kathmandu cuts jobs as it prepares to reopen

Tuesday, 5 May 2020

Last year Kathmandu launched a 'Buy NZ Made' line of t-shirts made out of merino wool.

Listed outdoor clothing firm Kathmandu has made 34 of its New Zealand workers redundant as it cuts costs and prepares a staggered opening of its physical stores.

The company said that Covid-19 and the subsequent closure of its global store network had prompted a restructuring programme across its Kathmandu brand, surfware business Ripcurl and US footwear business Oboz.

Kathmandu said it was using Government wage subsidies to 'support its employees for as long as possible'.

No further redundancies were planned.

* Kathmandu's Rip Curl stores locked down in Europe

Kathmandu, which has headquarters in Christchurch and Melbourne, has secured more than $3.6 million in wage subsidies for 601 staff.

Merino wool was sourced in South Island's high country for Kathmandu's Buy NZ tees but it had to be sent overseas to be processed.

It also approached shareholders to raise $207m in capital in April.

Chief executive Xavier Simonet told the NZX on Tuesday that the store closures were expected to have a significant adverse impact on earnings this year, but the company was well capitalised and would continue looking for cost cuts.

Its head offices restructure was expected to save $15m annually and the group would continue to access government subsidies, negotiate on rents, and delay or cancel existing inventory where possible, to cater for what was expected to be subdued consumer demand in the medium-term.

The company, meanwhile, is planning to open its physical stores in stages, starting with Australia.

Most Kathmandu and Rip Curl stores in New South Wales and Queensland have reopened on a trial basis, with safety protocols in place, and the majority of its Australian stores will reopen by the end of this week.

All but two of its 327 stores internationally were closed by April 1.

Store openings in New Zealand, North America, Europe, Brazil and Japan would reopen as soon as Government directives in each jurisdiction allowed, Simonet said.

In the meantime, shoppers had been on its websites and Kathmandu and Ripcurl had enjoyed a surge of online sales, although it was only able to sell essential items in New Zealand during the month.

Online sales across the group were up 2.5 to three times higher than the same period last year.

Simonet said investments into digital channels and supply chains had paid off, allowing it to ''rapidly ramp up online trading capabilities and distribution capacity in the face of unprecedented online demand''.

Before the outbreak, Kathmandu posted a net profit of $8.1 million for the six months to January 31, down $14m from a year earlier, although sales were on the rise.

In addition to April's capital raise, the group raised A$350m (NZ$368m) last year to buy Rip Curl and paid close to $100m for Oboz in 2018.

One shareholder which declined to participate in the most recent capital raising is Kiwi retailer Briscoe Group, which has been selling down its stake.

Briscoe tried unsuccessfully to buy Kathmandu in 2015, but kept a cornerstone shareholding until recently, cutting its shareholding from 16.29 per cent to 6.771 per cent last month.