Kontoor Brands, Inc., owner of the Helly Hansen, Musto and Wrangler brands, reported that revenue for the 2026 second quarter  increased 19 percent year-over-year (y/y) to $584 million, including the contribution from the acquisition of Helly Hansen completed in the second quarter of 2025.

Wrangler brand global revenue was $469 million in Q2 and increased 2 percent y/y. Wrangler U.S. revenue increased 1 percent y/y, driven by a 9 percent y/y increase in direct-to-consumer (DTC). U.S. Wholesale was said to be flat compared to the prior-year Q2 period. Wrangler International revenue increased 10 percent compared to the prior-year Q2 period, driven by a 31 percent increase in DTC and a 7 percent increase in Wholesale.

Helly Hansen global revenue was $114 million in the second quarter. Sport revenue was $70 million and Workwear revenue amounted to $37 million in the quarter. Musto brand revenue was $7 million.

Profitability & Expenses Summary
Gross margin on a reported basis increased 970 basis points y/y to 56.2 percent of revenue. On an adjusted basis, gross margin increased 710 basis points y/y to 53.8 percent compared to the prior-year Q2 period, reportedly driven by the benefits of Project Jeanius, the acquisition of Helly Hansen, and the impact of favorable channel mix, product mix and pricing.

Selling, General & Administrative (SG&A) expenses were $238 million, or 40.7 percent of revenue on a reported basis in Q2. On an adjusted basis, SG&A expenses increased to $221 million, or 37.8 percent of revenue. The increase in SG&A expenses was reportedly driven by the impact of a full quarter of Helly Hansen expenses compared to the prior-year Q2 period, and increased investments in direct-to-consumer, demand creation and technology, partially offset by the benefits from Project Jeanius.

Operating income was $91 million on a reported basis. On an adjusted basis, operating income was $94 million and increased 19 percent compared to the prior-year Q2 period. Adjusted operating margin was 16 percent, reflecting a 10 basis point increase compared to the prior-year Q2 period.

Diluted earnings per share (EPS) was $1.03 on a reported basis. On an adjusted basis, EPS was $1.06, a 13 percent increase compared to the prior-year Q2 period. This includes a  6 cents loss per share from Helly Hansen, which significantly exceeded expectations.

Balance Sheet and Liquidity from Continuing Operations Review
The company ended the second quarter with $58 million in cash and cash equivalents, and $1.1 billion in long-term debt. At the end of the second quarter, the company had no outstanding borrowings under the Revolving Credit Facility and $493 million available for borrowing against this facility.

Inventory at the end of the second quarter was $526 million, down 3 percent compared to the end of the prior-year Q2 period, said to be driven primarily by a reduction in inventory in the Helly Hansen business.

As previously announced, the company’s Board of Directors declared a regular quarterly cash dividend of 53 cents per share, payable on September 18, 2026, to shareholders of record at the close of business on September 8, 2026.

The company returned $80 million to shareholders through dividends and share repurchases during the second quarter, including the repurchase of $50 million of common stock at an average price per share of $74. Year-to-date, the company repurchased $75 million of common stock at an average price per share of $75. At the end of the quarter, the company had $700 million remaining under its existing share repurchase authorization.

Tariff Update
Following the U.S. Supreme Court’s ruling that the International Emergency Economic Powers Act (IEEPA) does not authorize tariffs, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to refund all IEEPA duties previously paid. During the first quarter of 2026, the company recognized a net receivable of $54 million based on the probability of the recovery of IEEPA tariffs previously paid. In July 2026, the company began to receive IEEPA refunds and has received $23 million thus far in the third quarter of 2026. The company expects to receive the remaining IEEPA refunds by the end of fiscal 2026.

In May 2026, the U.S. Court of International Trade ruled that Section 122 tariffs were also invalid and these tariffs expired on July 24, 2026. The company’s year-to-date financial results include the previously paid and expensed tariffs under Section 122. The company has not recorded a receivable related to Section 122 tariffs and continues to monitor ongoing litigation related to the potential recovery of these tariffs.

In July 2026, the Office of the U.S. Trade Representative implemented new Section 301 tariff rates of between 10 percent and 12.5 percent on products imported from the majority of the company’s current trading partners. Based on currently available information, the company’s imports from Mexico to the U.S. remain exempt under USMCA.

The company’s outlook continues to assume a 15 percent reciprocal tariff rate for the second half of 2026. On an adjusted basis, the company has excluded any impacts of the 2025-related IEEPA tariffs in its 2026 outlook.

The company continues to evaluate the potential impact of the reciprocal trade framework between the United States and Bangladesh. The company utilizes U.S. grown cotton in more than 80 percent of products sourced from Bangladesh which may qualify for a duty exemption under the trade framework.

Updated Full Year 2026 Outlook from Continuing Operations

The company continues to expect the divestiture of Lee to be immaterial to earnings per share over a 12- to 18-month period. The earnings contribution of the Lee business will be offset through capital deployment of expected proceeds from the divestiture, and mitigation of overhead and other expenses that were previously allocated to the Lee business, through restructuring and other cost actions.

The company’s full year 2026 outlook also includes the following assumptions:

  • Full-year revenue is expected to be in the range of $2.66 to $2.71 billion, representing growth of approximately 12 to 13 percent compared to prior year.  Second-half revenue is expected to increase in the mid-single digit range for both Wrangler and Helly Hansen, excluding the impact of the 53rd week in 2025. In the fourth quarter of 2025, the 53rd week benefited Wrangler revenue growth by 8 percentage points and Helly Hansen revenue by $3 million.
  • Adjusted gross margin is now expected to be in the range of 49.8 to 50.0 percent, representing an increase of 330 to 350 basis points compared to prior year. The updated outlook compares to the prior outlook of 48.3 to 48.5 percent and primarily reflects stronger-than-expected year-to-date results and contribution from Helly Hansen.
  • Adjusted SG&A expenses are now expected to increase approximately 23 percent compared to prior year, including the impact of a full year of Helly Hansen expenses. The company’s updated outlook includes approximately $25 million of incremental brand-building and other growth-enabling investments as compared to the prior outlook.
  • Adjusted operating income is now expected to be in the range of $413 to $420 million, including $25 million of incremental investments, representing an increase of 15 to 17 percent compared to prior year.
  • Adjusted EPS is now expected to be in the range of $5.25 to $5.35, including the impact of approximately 55 cents of unmitigated overhead and other expenses that were previously allocated to the Lee business. This compares to the prior outlook of $5.15 to $5.25. The company’s updated outlook includes approximately 36 cents per share of incremental investments as compared to the prior outlook. The company’s updated outlook does not include the impact of any future share repurchases, including those from the expected proceeds of the planned divestiture of the Lee business.
  • Capital expenditures are now expected to be approximately $30 million.
  • The company expects an effective tax rate of approximately 20 percent on adjusted pre-tax earnings, including the benefit of tax synergies from Helly Hansen.
  • Interest expense is now expected to be approximately $56 million. The outlook for interest expense does not include the impact of additional voluntary debt payments with a portion of the expected proceeds from the planned divestiture of the Lee business.
  • Other expense is now expected to be approximately $14 million.
  • Average shares outstanding are now expected to be approximately 55.5 million. The outlook for average shares outstanding does not include the impact of any future share repurchases, including those from the expected proceeds of the planned divestiture of the Lee business.
  • The company continues to expect total cash from operations of approximately $450 million, including the expected contribution from the Lee business which is reported in discontinued operations.
  • The company expects to make voluntary term loan payments of $225 million, excluding the impact of additional debt payments with a portion of the expected proceeds from the planned divestiture of the Lee business. The company expects to achieve a net leverage ratio below 1.5 times by year-end.

Image courtesy Helly Hansen