Kontoor Brands, Inc. Q4 FY2025 earnings call

2025 was a transformational year for Contour. Completed acquisition of Helly Hansen. Wrangler had healthy growth and market share gains. Made progress repositioning Lee and executing Project Genius. Helly Hansen is a growth asset, with integration and growth parallel. Wrangler expected to continue momentum. Lee's turnaround progressing. Project Genius delivering strong profit improvement and investment capacity.

Helly Hansen: Fourth quarter global revenue was $251 million, up 10% compared to prior year reported results. On a full-year pro forma basis, revenue of over $700 million increased 7%. In the fourth quarter, earnings exceeded the outlook by more than 50%. Wrangler: Global revenue increased 3% in the fourth quarter, with 10% growth in DTC and 2% growth in wholesale. Full-year global revenue increased 4%, driven by double-digit growth in female, western, and DTC. Lee: Global revenue decreased 6% in the fourth quarter. U.S. revenue increased 1% driven by 8% growth in digital and 1% growth in wholesale. Full-year Lee International revenue decreased 15%, while U.S. digital business increased 11%.

Full-year revenue expected to be in the range of $3.40 to $3.45 billion, growth of approximately 9%. First half of 2026 revenue expected to be in the range of $1.56 to $1.57 billion, growth of 22% to 23%. Adjusted gross margin expected to be in the range of 47.2 to 47.4%, increase of 60 to 80 basis points. Adjusted EPS expected to be in the range of $6.40 to $6.50, increase of 15% to 16%.

Trade policy is rapidly evolving, with tariffs remaining uncertain and difficult to predict. Tariffs represent a headwind to gross margin, and the level and structure of tariffs moving forward are uncertain.

Q: Did you specifically give an organic growth rate for Heli this year? And thought process around 2027 being a much bigger year for the brand?

A: From a Heli standpoint, making significant investment in team. 26 first half not greatly invested in marketing, but will see significant way in second half to build momentum into 27. For Heli, mid-single-digit growth expected for 2026, and expect to accelerate growth beyond that.

Q: Any color on what the China business for Heli should be doing this year in 2026? And optionality to take that business in-house?

A: Very pleased with China JV performance. Expect another year of strong revenue and earnings growth for the JV north of 50%. Part of integration strategy is connecting Heli China business more closely with Oslo brand.

Q: On the Heli integration, any surprises, any disappointments?

A: This has been the best integration ever. Execution from both teams, collaboration is great. Culturally meshed from beginning.

Q: Can you talk about the overall spending level that you're thinking about for 26, maybe by brand?

A: Driving double-digit increases in investment behind all brands in demand creation, product, consumer insights, D2C, funded in large part by Project Genius.

Q: Expanding distribution in both sport and workwear, thoughts on opportunities?

A: Opportunity in North America D2C expansion and wholesale with right partners. Will have significant rollouts in second half.

Q: Helly Hansen's margins, how thinking about 2026?

A: Expect strong earnings growth from Heli in 2026, driven by gross and operating margin expansion. Growth more back half weighted.

Q: Quantify the benefit from tariffs?

A: Gross margin expected to expand 60 - 80 basis points for 2026. Tariffs represent 160 - 180 basis points pressure, offset by other actions.

Q: U.S. consumer and demand trends in core U.S. denim business?

A: Feel good about North American market, consumer resilient. Pricing balanced, mid-tier retailers have new leadership.

Q: Project Genius achievements to date and future margin improvement?

A: Delivered over $50 million gross savings in 2025, approach $100 million in 2026. Savings allow reinvestment.

Q: Tariffs gross headwind and mitigating levers?

A: Gross tariff impact over $100 million in 2026. Mitigating levers include pricing, cost savings, sourcing. Confident in mitigating over 12 - 18 months.

Q: Key drivers of Lee's inflection in second half?

A: National ad campaign, upgraded product, strong marketing, good product offering.

Q: Helly Hansen's new distribution reception and remaining integration milestones?

A: Key retailers like new option. Remaining integration milestones include reaching full run rate of over $40 million synergies by 2027.