NZ adventure-wear group, KMD Brands (ASX:KMD), is heading for a significant loss for the year to 31 July, despite a sales update showing a gradual improvement from the retailer's mid-year slump.

In an update on Tuesday, just 11 days before the balance date, the company revealed it expects underlying EBITDA to be between NZ$49 million and NZ$51 million for 2023-24. This represents approximately half of the NZ$105.9 million reported for 2022-23.

After a 14.5 per cent decline at the end of the first half, the company reports a slight improvement in sales and margins, resulting in an estimated 11.1 per cent decrease in group sales for the year ending 31 July.

Encouragingly, KMD has maintained strict control over inventory, with stock expected to be around NZ$25 million lower than a year ago, a substantial improvement from the NZ$5 million figure at the end of January.

"Kathmandu sales trends, relative to FY23, continued to improve in a challenging consumer environment, with enhanced in-store execution and new products," the company stated. "Australia (-4.5 per cent) performed significantly better than New Zealand (-16.5 per cent) during the crucial fourth quarter winter trading period."

The company reported a gross margin decline of approximately 30 basis points (-0.3 per cent of sales) to 58.8 per cent for FY24, attributed to increased promotional activity in the fourth quarter.

"Operating costs were tightly controlled, benefiting from restructuring implemented last year and lower variable costs associated with lower sales, with significant funding headroom of approximately NZ$230 million," the company added.