Kontoor Brands, Inc. Q1 FY2026 earnings call

First, rationale to divest Lee as it allows focus on Wrangler and Helly Hansen with greater growth potential. Second, in the competitive sale process of Lee, confident it will accelerate value creation. Third, highlights of first quarter results and update to 2026 outlook. Divested Lee to sharpen focus on Wrangler and Helly Hansen. Wrangler has growth in various segments like female, Western, international. Helly Hansen has significant global growth opportunities with plans to invest in talent, D2C, wholesale expansion, etc. Streamlined brand portfolio to focus on Wrangler and Helly Hansen, reducing operational complexity.

Wrangler: Global revenue increased 2%, driven by 9% growth in DTC and 2% growth in wholesale. US revenue increased 1%, driven by 6% growth in DTC and 1% growth in wholesale. International revenue increased 9%, driven by 24% growth in D2C and 7% growth in wholesale. Helly Hansen: Global revenue of $176 million increased 16% compared to prior year on a pro forma basis. Including the China JV, Helly Hansen global revenue increased by more than 20% on a pro forma basis. Adjusted gross margin expanded 470 basis points to 50.6%, driven by Project Genius, Helly Hansen contribution, and ChannelMix. Adjusted SG&A was $224 million, increased 60% compared to prior year. Adjusted EPS was $1.06, increasing 67% compared to prior year. Helly Hansen contributed 26 cents per share. Lee: Now reported in discontinued operations, expected revenue approximate $750 million in full year, $370 million in first half.

Full year revenue including discontinued operations expected to be $3.41 - $3.46 billion. Continuing operations revenue expected $2.66 - $2.71 billion. Adjusted gross margin from continuing operations full year 48.3% - 48.5%, first half 50.3% - 50.5%. Adjusted SG&A from continuing operations expected to increase ~18%. Adjusted operating income from continuing operations $411 - $418 million. Adjusted EPS from continuing operations full year $5.70 - $5.80 before unmitigated expenses, $5.15 - $5.25 including. Anticipate cash from operations ~$450 million. Priority of proceeds from Lee divestiture to accelerated share repurchases under $750 million authorization, also to solidify balance sheet and reduce net interest expense.

Q: Mike Borchow from Wells Fargo asked about Lee divestiture rationale and impact on street's $7 for next fiscal year.

A: Scott said divestiture allows focus on Wrangler and Helly Hansen, confident in future, no worry on cost mitigation.

Q: Bob Durble from BTIG asked about Heli order book, distribution expansion, and $750 million share repurchase.

A: Erin talked about Heli distribution with Dick's Sporting Goods and store expansions, Joe said priority of proceeds from Lee divestiture is share repurchase and debt payback.

Q: Adrian Yee from Barclays asked about Heli seasonality and global macro impact.

A: Scott talked about Heli's sailing and workwear business reducing seasonality, Joe said POS solid, supply chain and input costs monitored.

Q: Brooke Roach from Goldman Sachs asked about Wrangler growth acceleration, women's business expansion.

A: Scott talked about Wrangler's women's business growth, new full-price stores, and focus on denim brand.

Q: Mauricio Serna from UBS asked about Heli growth in constant currency, channel growth, and continuing ops adjusted EPS.

A: Scott said Heli's 16% growth in Q1 was reported basis with constant currency in high single digits, Joe said will provide restated quarters.

Q: Blake Anderson from Jefferies asked about margin upside and Wrangler segment performance.

A: Scott said margin expansion embedded in guide, Wrangler strong across all segments.

Q: Peter McGoldrick from Stiefel asked about Wrangler's $5 billion target in 2030s.

A: Scott said focus on growing Wrangler in female, international, digital, and stores.