The increased cost of freight and raw materials are driving up prices at Rip Curl and Oboz, where consumers in some markets could soon pay more for items such as wetsuits and hiking boots than they did a few months ago. “All companies are facing margin pressure at the moment, and we’re certainly not immune from some of those pressures, whether they be freight or input costs,” Michael Daly, chief executive of KMD Brands, which owns Rip Curl and Oboz along with Kathmandu, said at an in
investor briefing on Wednesday. While Daly expects the group to benefit from more favourable hedge positions in the coming six months compared to the prior corresponding period, and its shift towards direct-to-consumer sales, he is concerned about margin pressure in FY23. “We believe with our technical innovation base that we have got the potential to raise prices where we need to,” he said. “And certainly we’ve already done that from a Rip Curl and Oboz perspective with our wholesale prices in the last season or two. And we’ll maintain that flexibility to increase prices if we need to.” Changing swing tags, trim However, those increases will not be evenly distributed around the world. A slightly better Australian and New Zealand dollar relative to the US dollar will make it easier to absorb cost increases in those markets. “I don’t think that the price rises will be as evident in say, Australia and New Zealand, as they will be in a market like North America, where obviously we buy our products in US dollars and we sell our products in US dollars. There’s not a lot of space to hide in that respect,” Daly told Inside Retail after the briefing. “Inflation rates are running pretty high in the US, so I would say we’re definitely looking at a price rise in some categories, typically categories that are heavier weight or more bulky, and therefore come with more freight.” At the same time, he said there are other levers KMD Brands could pull to deal with inflation beyond simply raising prices. “I’d like to think that we’ll work with our suppliers to share the impacts of inflation. It’s not necessarily just about all of our suppliers passing on inflation to us,” he said. “Or even just changing the makeup of our garments. Little things like changing swing tags or trims, you can take some costs out of garments that may not be necessary without changing the overall quality.” Ramping up global expansion Daly addressed the issue of inflation and price hikes following his announcement of KMD Brands’ first-half results for FY22, which included a 125 per cent drop in statutory net profit after tax to a loss of NZ$5.5 million. Sales were virtually flat at NZ$407.3 million compared to NZ$410.7 million the previous year. The group suffered from store and factory closures, as well as shortages of raw materials needed to make wetsuits in the half, but it remains committed to its strategic objectives of global expansion, digital investment and ESG (environmental, social and corporate governance). KMD Brands’ flagship outdoor brand Kathmandu is in the process of launching online in Canada and Europe, and planning to enter the US, where Daly says it will differentiate itself from established players by focusing on a general love of the outdoors, rather than technical specialty in areas such as mountain climbing or snowboarding. “We’ve done a lot of work in terms of getting the positioning right, and we feel that the positioning does give us a little bit of whitespace away from some of the incumbents in the broader global market,” he said. “Obviously, in the US market, we’re going right up against some direct competitors, whether it be North Face, Patagonia, Colombia and others who are very well entrenched.” In addition to its branding, Daly believes Kathmandu’s status as a B Corp will help set it apart. “We’ve got good sustainability credentials, which we think increasingly resonate with the US consumer, and we’ll do it carefully,” he said. “It’s not going to be an aggressive retail rollout, it’s very much a wholesale and online strategy.” Earlier this month, the group rebranded to KMD Brands to better reflect its portfolio of global outdoor brands.