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Kathmandu looks to reduce costs amid health crisis

Negotiating rental costs with landlords, standing down staff and reducing senior management pay are just some of the cost saving measures Kathmandu has implemented or plans to implement in the coming weeks to survive the escalating COVID-19 pandemic.

The retailer announced on Friday that it was closing stores and standing down staff in Australia for the next four weeks. Stores in New Zealand have been closed since March 24, and Rip Curl stores in Europe have been closed since mid-March.

Staff in Australia will be able to access leave entitlements and government assistance, while in New Zealand, the retailer is working to access the government wage subsidy for employees.

During the lockdown in France, Rip Curl employers have been able to temporarily release staff while the government funds the majority of employee salaries.

Employment in North America, where its footwear chain Oboz is located, is largely on an “at will” basis.

The use of casual staff in retail networks and warehouses has ceased in all regions in response to reduced demand in recent weeks.

All of the group’s major head offices are closed with some staff working from home. Senior management across all brands have agreed to a 20 per cent salary reduction until further notice.

Kathmandu said the store closures are the result of social distancing measures imposed by governments worldwide. The retailer will continue to run its online retail business in Australia, Europe and the US but online distribution has been suspended in New Zealand.

“Our total focus is to protect the health and wellbeing of our teams and customers and ensure business continuity,” said group CEO Xavier Simonet. “I am so grateful to all our teams around the world for their resilience in this situation of uncertainty and challenges.”

As part of its aggressive cost saving initiatives, Kathmandu is engaging in negotiation with its landlord partners to achieve a fair rental outcome that will see the group’s rental costs aligned to sales performance.

The Shopping Centre Association of Australia has called on its members to empathise with its tenants during these trying times.

Other measures the company has taken or plans to take include reviewing existing inventory orders and cancelling those based on reduced demand levels, aggressively challenging operating expenses for potential savings and cancelling or deferring planned capital expenditure.

The company said it is consulting with employees around options for team members to continue on a reduced hours and salary basis.

Kathmandu announced that while the COVID-19 pandemic outbreak had minimal impact on earnings for the six months ending January 31, 2020, there is likely to be a material adverse impact to earnings in the second half of this fiscal year.

The company also said it has taken the prudent decision to suspend dividend payments until after such time as more normal trading conditions resume.

In reliance on a waiver issued by NZX, the group’s half year results announcement (including preliminary financial statements) for the six months ending January 31, 2020 is now expected to be released by no later than April 3, 2020 instead of today as previously advised.

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