Rip Curl’s Financial Struggles and Discounting Strategies

Surfwear giant Rip Curl, owned by KMD Brands, is facing significant financial headwinds, marked by declining profit margins and a reliance on discounting to maintain sales volume. A recent downturn in the company’s performance has raised concerns among investors, impacting KMD Brands’ overall share price.

Financial Performance and Key Challenges

KMD Brands’ share price has roughly halved, falling from around NZ$0.38–0.45 to NZ$0.20–0.23 as of March 2026. This decline reflects investor worries about the company’s profitability and future prospects. Rip Curl accounts for over half of KMD’s total sales, reporting approximately NZ$550 million in sales for the financial year ending July 2025 (FY25), a slight increase of 2.1% from the previous year.

Despite modest sales growth, particularly in direct-to-consumer channels in Australia, North America, Europe, and Hawaii, Rip Curl’s underlying Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) dropped 27% to NZ$30.6 million. This resulted in a significantly reduced EBITDA margin of 5.6%, a concerning figure for a premium brand.

The Impact of Discounting

The primary driver of this profitability squeeze is the increased use of discounting and promotional activities. To remain competitive and clear existing inventory, Rip Curl has been offering substantial sales and markdowns, lowering the average price per item sold. While this strategy has helped maintain sales volume, it has negatively impacted profit margins. The gross margin has also been affected by these discounts and the clearance of end-of-line inventory.

Looking Ahead: The “Next Level” Plan

KMD Brands is implementing a plan called “Next Level” to address these challenges. This plan focuses on improving stock control, reducing reliance on deep discounts, introducing fresh products, and prioritizing higher-margin sales. The aim is to improve margins over time.

Despite these efforts, the reliance on discounting highlights the difficulties faced by brands like Rip Curl in a highly competitive market. Maintaining strong prices while sustaining sales remains a significant challenge for the company.

Past Ownership and Financial History

Interestingly, KMD Brands acquired Rip Curl for NZ$368 million when KMD itself was valued at approximately NZ$700 million. As of March 2026, KMD Brands is worth around NZ$150 million.