Kontoor Brands continues to raise outlook as sales decline softens

Kontoor Brands, parent of apparel labels Wrangler and Lee, has again raised its full-year guidance after reporting “better-than-expected” results for the second quarter.

The company’s revenue outlook remains in the range of US$2.57 to $2.63 billion, but adjusted operating income is now expected to be at the higher end of the $377 to $387 million range, representing an increase of 10-11 per cent.

The retailer also forecasts adjusted gross margin to be 44.8 per cent (44.6 per cent prior), and cash from operations to exceed $350 million ($335 million prior).

“We are raising our full-year outlook driven by better-than-expected second-quarter results and increased confidence in the balance of the year,” said Scott Baxter, president, CEO and chair.

For the quarter ended June 29, revenue decreased 1 per cent year on year to $607 million, compared to a 5 per cent decline in the first quarter.

The revenue decline was driven by retailer inventory management actions in the US, the anticipated decrease in revenue from seasonal products and lower international revenue, partially offset by growth in direct-to-consumer, the company said.

US revenue slid 1 per cent to $496 million, with growth in direct-to-consumer more than offset by a decline in wholesale. International revenue fell 6 per cent to $111 million, including a 5 per cent decline in Europe, a 13 per cent drop in Asia, and a 2 per cent increase in non-US Americas. 

At Wrangler, revenue grew 1 per cent to $429 million, with US sales flat while international sales up 7 per cent. Lee’s revenue slid 7 per cent to $175 million, with US sales down 3 per cent and international sales down 13 per cent.

“To fuel our momentum, we are making incremental investments in both brands starting in the third quarter to support accelerating revenue, expanding distribution and category growth, as well as continued market share gains,” added Baxter.

On the bottom line, adjusted operating income increased 10 per cent to $80 million.

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