Kontoor Brands, Inc., the denim brand spin-off from VF Corporation primarily comprised of the Wrangler and Lee brands, posted revenue of $699 million in the 2024 fourth quarter, a 4 percent increase in reported terms or a 5 percent on a constant-currency (cc). A 9 percent growth in global direct-to-consumer and 4 percent growth in wholesale drove the increase.

Last week, Kontoor announced it would acquire the Helly Hansen outdoor, marine, and sportswear brand, which it will include in reports after the transaction with Canadian Tire closes.

U.S. revenue was $569 million and increased 6 percent compared to the prior-year Q4 period. U.S. Wholesale revenue increased 5 percent. Direct-to-consumer (DTC) increased 11 percent in Q4, driven by a 16 percent increase in digital and a 1 percent increase in brick-and-mortar retail.

The company reported International revenue at $130 million and decreased 1 percent (+1 percent cc) compared to the prior-year fourth quarter. International Wholesale decreased 4 percent (-1 percent cc), and DTC increased 5 percent, with a 15 percent increase in digital partially offset by a 3 percent decrease in owned brick-and-mortar retail.

  • Europe increased 1 percent in Q4, with a 5 percent increase in DTC partially offset by a 1 percent decrease in Wholesale.
  • Asia decreased 2 percent in Q4, with a 4 percent increase in DTC, more than offset by an 8 percent decrease in wholesale.
  • Non-U.S. Americas decreased 4 percent year-over-year in the fourth quarter.

Wrangler Brand global revenue was $503 million in Q4, an increase of 9 percent compared to Q4 2023.

  • Wrangler U.S. revenue increased 9 percent, driven by a 9 percent increase in both DTC and Wholesale.
  • Wrangler international revenue increased 7 percent (+9 percent cc), driven by a 7 percent increase (+9 percent cc) in Wholesale and an 8 percent increase in DTC.

Lee Brand global revenue was $194 million and decreased 6 percent compared to the 2023 fourth quarter.

  • Lee U.S. revenue decreased 6 percent year-over-year, driven by a 10 percent decrease in Wholesale, partially offset by an 18 percent increase in DTC.
  • Lee international revenue decreased 6 percent (-4 percent cc), said to be driven by an 11 percent decrease (-8 percent cc) in Wholesale partially offset by a 5 percent increase in DTC.

Income Statement Summary
Gross margin increased 200 basis points to 43.7 percent of revenue on a reported basis and increased 160 basis points to 44.7 percent on an adjusted basis compared to prior year adjusted results, excluding the out-of-period duty charge in that period. Adjusted gross margin expansion was driven by the benefits from lower product costs, supply chain efficiencies and DTC mix, partially offset by targeted pricing actions included in our plan.

Selling, General & Administrative (SG&A) expenses were $221 million, or 31.6 percent of revenue on a reported basis. On an adjusted basis, SG&A expenses were $211 million, representing an increase of 5 percent compared to the prior year on an adjusted basis, driven by the rise in demand creation investments and volume-related variable expenses, partially offset by lower distribution expenses.

Operating income was $84 million on a reported basis. On an adjusted basis, operating income was $101 million and increased 17 percent compared to the prior year on an adjusted basis, excluding the out-of-period duty charge in that period. Adjusted operating margin of 14.5 percent increased 160 basis points compared to prior year on an adjusted basis, excluding the out-of-period duty charge in that period.

Earnings per share (EPS) was $1.14 on a reported basis. On an adjusted basis, EPS was $1.38 compared to adjusted EPS of $1.35 in the prior year, excluding the out-of-period duty charge in that period, representing an increase of 2 percent. Adjusted EPS in the prior year was positively impacted by a discrete tax benefit. Excluding these impacts, adjusted EPS increased approximately 23 percent.

Balance Sheet and Liquidity Review
The company ended fiscal 2024 with $334 million in cash and cash equivalents and $740 million in long-term debt.

Inventory at the end of fiscal 2024 was $390 million, representing a 22 percent decrease compared to the prior year.

At the end of fiscal 2024, the company had no outstanding borrowings under the Revolving Credit Facility and $494 million available for borrowing against this facility.

As previously announced, the company’s Board of Directors declared a regular quarterly cash dividend of 52 cents per share, payable on March 20, 2025, to shareholders of record at the close of business on March 10, 2025.

The company returned $198 million to shareholders through share repurchases and dividends during 2024. In addition, the company made a $25 million voluntary early-term loan repayment during 2024. The company has $215 million remaining under its authorized share repurchase program.

Full Year 2024 Highlights

  • Revenue of $2.61 billion was consistent with the prior year.
  • Reported gross margin was 44.5 percent. Adjusted gross margin of 45.1 percent increased 260 basis points compared to the prior year on an adjusted basis, excluding the out-of-period duty charge in that period.
  • Reported operating income was $342 million. Adjusted operating income of $381 million increased 9 percent compared to the prior year on an adjusted basis, excluding the out-of-period duty charge in that period.
  • Reported EPS was $4.36 per share. Adjusted EPS of $4.89 increased 10 percent compared to the prior year on an adjusted basis, excluding the out-of-period duty charge in that period.
  • Adjusted return on invested capital of 32 percent increased by 550 basis points compared to the prior year.
  • Returned a total of $198 million to shareholders through a combination of share repurchases and dividends.

“2024 was a landmark year for Kontoor driven by continued market share gains, accelerating business fundamentals, increasing capital allocation optionality, and strong returns for our shareholders,” said Scott Baxter, president, CEO and chairman of Kontoor Brands, Inc. “Our better than expected fourth quarter was driven by stronger revenue, earnings, and cash generation. I want to thank our colleagues around the globe, who continue to execute at a high level. We enter 2025 from a position of strength, and I am confident we are well positioned to deliver another year of strong value creation.”

Full Year 2025 Outlook
Outlook excludes the expected revenue, earnings and cash flow contributions from Helly Hansen.

  • Revenue for 2025 is expected to be in the range of $2.63 billion to $2.69 billion, representing an increase of 1 percent to 3 percent compared to the prior year.
  • Adjusted gross margin is expected to be in the range of 45.3 percent to 45.5 percent, representing an increase of 20 to 40 basis points compared to the prior year on an adjusted basis.
  • Adjusted operating income is expected to be in the range of $400 million to $408 million, representing an increase of 5 percent to 7 percent compared to the prior year on an adjusted basis.
  • Adjusted EPS is expected to be in the range of $5.20 to $5.30, representing an increase of 6 percent to 8 percent compared to the prior year on an adjusted basis. Full-year adjusted EPS does not contemplate the benefit of share repurchases as a result of the previously announced acquisition of Helly Hansen.
  • Cash from operations is expected to exceed $300 million.

The company’s outlook does not yet include the expected revenue, earnings and cash flow contribution from the acquisition of Helly Hansen. Based on an anticipated close in the second quarter of 2025, the company expects the acquisition of Helly Hansen to contribute approximately 15 cents to full-year adjusted EPS, with expected accretion in 2026 to materially increase. The expected contribution from Helly Hansen does not include the benefit from anticipated synergies.

“Our outlook reflects continued revenue growth, market share gains, gross margin expansion, strong operating earnings and cash generation,” added Baxter. “The scaling benefits of Project Jeanius will support increased investment in our brands and platforms, and further enhance our best-in-class return on invested capital.”

Baxter continued, “The fundamentals of our business remain strong and the acquisition of Helly Hansen will further enhance our TSR model and provide the opportunity for even stronger value creation moving forward. We are mindful of the uncertain environment and will continue to manage the business conservatively, but we are confident in our ability to drive strong shareholder returns in 2025 and beyond.”

Image courtesy Wrangler/Kontoor Brands