Kontoor Brands, Inc. Q1 FY2025 earnings call

• Acquisition of Helly Hansen: Cleared regulatory approval, expect to close in weeks. Focus on accelerating Helly Hansen's growth, doubling its operating margin, increasing capital allocation optionality, and establishing Kontoor as the employer of choice. - Current environment: Consumer resilient, managed business prudently, Project Jeanius ramping up for supply chain agility. - Wrangler: Female business successful, Western growing, and gaining market share. - Lee: Repositioning tracking to plan, digital traffic, brand equity, and purchase intent increased.

Wrangler: Global revenues increased 3%. Female business grew 40%, Western drove mid-teens growth, and gained 70 basis points of market share in men's and women's bottom business. Lee: Global revenue declined 8%, U.S. revenue decreased 8% but digital grew 12%, and international revenue decreased 8% but DTC grew. Wrangler contributed 3% to global revenue, Lee contributed the remaining portion.

• Full year revenue expected $3.06 billion to $3.09 billion (17%-19% growth), with Helly Hansen contributing $425 million. - Organic revenue growth expected 1%-2%. - Adjusted gross margin expected 45.9%-46.1%. - SG&A increase ~20% due to Helly Hansen. - EPS expected $5.40 to $5.50. - Cash from operations expected to exceed $350 million. - Tariff mitigation plans to start in Q3, expecting to offset tariff impact within 12-18 months.

• Macro volatility affecting consumer behavior. - Tariff uncertainties, though mitigating actions are in place. - Past supply chain shocks, but proven resilience to recover and maintain profitability.

Q: High level state of U.S. consumer and retail partners' trend?

A: Scott Baxter stated consumer is resilient, with March and April bouncing back, and retail partners managing inventory conservatively.

Q: Guidance for 2Q and 2026 algo commentary?

A: Joe Alkire said second half expected 3% growth driven by 53rd week, new programs, etc. On 2026, organic business expected to grow, tariff impact to be offset, Project Jeanius savings to mature, and Helly Hansen to add capital allocation optionality.

Q: Lee transition progress?

A: Scott Baxter mentioned great product, digital growth (8% increase), and upcoming equity campaign in fall with strong testing.

Q: Drivers of gross margin outperformance and sustainability?

A: Joe Alkire said mix, lower product costs, and Project Jeanius contributed, with mix benefit moderating but Jeanius benefits intact.

Q: Tariff impact and Mexico capacity?

A: Joe Alkire discussed tariff impact changes with Mexico exempt, and Scott Baxter said Mexico plants are efficient with limited capacity left.

Q: Helly Hansen annual run rate contribution and working capital?

A: Joe Alkire said Helly Hansen has strong workwear component, and working capital for Helly will contribute to cash flows with inventory in line with revenue growth.

Q: Confidence in 2H organic revenue growth?

A: Scott Baxter and Joe Alkire cited product strength, team, resilient consumer, Helly Hansen acquisition, and visibility into new programs and 53rd week as reasons for confidence.

Q: 53rd week contribution and Helly Hansen 2Q guide?

A: Scott Baxter said 53rd week has minimal impact on KTB organic, and Joe Alkire explained Helly Hansen's Q2 seasonality with stub period noise not reflective of full quarter performance.