Financial Performance - Net revenues for the year ended December 2024 were $2.6 billion, flat compared to the year ended December 2023[185]. - U.S. Wholesale revenues increased by 1% and represented 73% of total revenues, while Non-U.S. Wholesale revenues decreased by 7%[185]. - Direct-to-Consumer revenues increased by 4%, accounting for 12% of total revenues[185]. - Gross margin improved by 280 basis points to 44.5% compared to the previous year[185]. - Operating income rose by 7% to $342.3 million, while net income increased by 6% to $245.8 million[185]. - Total reportable segment profit increased by 12.4% to $456.0 million in 2024[201]. - Cash provided by operating activities was $368.2 million, up from $356.5 million in 2023[220]. Segment Performance - Wrangler segment revenues increased by 3% to $1.8 billion, with segment profit rising by 19.1% to $366.3 million[194]. - Wrangler brand global revenues increased by 3%, driven by growth in U.S. Wholesale and Direct-to-Consumer channels[195]. - Operating margin for Wrangler improved to 20.3% from 17.5% in 2023, mainly due to lower product costs and reduced distribution expenses[195]. - Lee brand global revenues decreased by 6%, with declines across all regions and channels[197]. - Operating margin for Lee decreased to 11.3% from 11.6% in 2023, impacted by lower pricing and higher incentive compensation[197]. - Revenues in the Americas region decreased by 6%, primarily due to declines in wholesale and direct-to-consumer businesses[199]. Expenses and Charges - The Company incurred total restructuring and transformation charges of $38.3 million during 2024, with $25.2 million related to Project Jeanius[180]. - Selling, general and administrative expenses as a percentage of revenues increased to 31.4% from 29.5% in the previous year[185]. Tax and Valuation - The effective income tax rate for 2024 was 18.5%, up from 15.0% in 2023[190]. - The company has $65.5 million in gross deferred income tax assets related to income tax credit carryforwards and $33.3 million related to operating loss carryforwards[244]. - Valuation allowances of $61.1 million for income tax credit carryforwards and $17.4 million for operating loss carryforwards have been recorded, indicating a likelihood of more than 50% that some deferred tax assets will not be realized[244]. Acquisitions and Investments - The Company entered into an agreement to acquire Helly Hansen for approximately $900 million, expected to close in the second fiscal quarter of 2025[177][178]. - Capital expenditures are expected to be approximately $35.0 million in 2025, focusing on manufacturing and technology[217]. - The company intends to continue paying cash dividends, having paid $112.1 million in 2024[214]. - The company reported $334.1 million in cash and cash equivalents at the end of 2024[252]. - The company repurchased 1.2 million shares for $85.0 million under the 2023 Repurchase Program[212]. Risk Management - A hypothetical 1% increase in interest rates would decrease reported net income by approximately $2.6 million[254]. - Approximately 20% of the company's net revenues in 2024 were generated in international markets, exposing it to foreign currency fluctuations[255]. - A hypothetical 10% change in foreign currency exchange rates could result in a change in fair value of cash flow hedging contracts of approximately $20.8 million[258]. - The company uses derivative financial instruments to mitigate exposure to interest rate volatility[254]. - The company actively manages its net foreign currency market exposures and may enter into derivative contracts to hedge foreign currency transactions[256]. - The company is exposed to credit-related losses due to nonperformance by counterparties to derivative hedging instruments[259]. - Counterparty credit guidelines are established, only engaging with financial institutions that have 'A minus/A3' investment grade credit ratings or better[259]. - The company monitors the credit rating of counterparties and limits the amount hedged with each[259]. - The company negotiates prices in advance to manage risks associated with commodity price changes[260]. - Historically, the company has not used derivative instruments to manage commodity price exposures[260]. Asset Management - The company performs impairment testing for long-lived assets at least annually, with potential impairment charges recorded if carrying values exceed estimated fair values[232]. - Goodwill is evaluated for impairment annually, with quantitative testing required if qualitative assessments indicate potential impairment[236].

Kontoor Brands, Inc. (NYSE:KTB) Q4 2024 Earnings Call February 25, 2025 8:30 AM ET Company Participants Michael Karapetian - VP, Corporate Development, Strategy, and IR Scott Baxter - President, CEO, and Chairman Tom Waldron - COO Joe Alkire - EVP and CFO Conference Call Participants Ike Boruchow - Wells Fargo Jim Duffy - Stifel Brooke Roach - Goldman Sachs Paul Kearney - Barclays Mauricio Serna - UBS Operator Greetings and welcome to Kontoor Brands Q4 2024 Earnings Call. At this time, all participants are ...

Financial Performance - Fourth quarter 2024 revenue was approximately $699 million, representing a 4% increase compared to the prior year (5% on a constant currency basis) [5] - Fourth quarter 2024 reported gross margin was approximately 43.7%, with an adjusted gross margin of approximately 44.7%, an increase of 160 basis points compared to the prior year [5] - Fourth quarter 2024 reported EPS was approximately $1.14, while adjusted EPS was approximately $1.38, reflecting a 2% increase compared to the prior year on an adjusted basis [5] - Full year 2024 cash flow from operations was approximately $368 million [5] - The company reported preliminary net revenues of $699 million, which adjusted for foreign currency exchange would be $702 million [17] Inventory and Costs - Year-end 2024 inventory was approximately $390 million, a decrease of 22% compared to the prior year [5] - Preliminary restructuring and transformation costs for the fourth quarter included approximately $10 million related to business optimization activities [15] Strategic Initiatives - The acquisition of Helly Hansen was announced, which is expected to contribute to future growth and value creation [2] - Project Jeanius is anticipated to support continued brand investments and operational efficiencies [2] - The company expects to deliver strong returns and value creation in 2025 based on current positioning and strategic initiatives [2]

Core Insights - Kontoor Brands is acquiring Helly Hansen for approximately $900 million, aiming to leverage growth potential in the outdoor and workwear segments, which are expanding faster than the denim business [1][2] - The acquisition is expected to generate over $680 million in revenue by the end of 2025 [1] Group 1: Acquisition Details - Kontoor Brands, known for Wrangler and Lee, is expanding its offerings by purchasing Helly Hansen, a brand that fits into the outdoor and workwear categories [1][2] - The outdoor market is identified as the largest globally, presenting significant growth opportunities for Kontoor Brands [1] Group 2: Market Potential - Helly Hansen has a strong presence in Europe and Canada, with potential for growth in the U.S. market as well [2] - The merchandise from Helly Hansen will be distributed through wholesalers, retail stores, and online platforms [2] Group 3: Risk Management - Kontoor Brands is prepared for potential challenges posed by tariffs, with a strong operational plan in place [3][4] - The company expresses confidence in its current consumer relationships and overall business strategy, regardless of external economic pressures [4]

Core Insights - Kontoor Brands, Inc. (KTB) reported strong preliminary results for Q4 fiscal 2024, with revenues, earnings, and cash flow exceeding expectations, indicating positive momentum heading into 2025 [1][2][14] Financial Performance - Total revenues for Q4 reached approximately $699 million, a 4% increase from $670 million in Q4 fiscal 2023, and a 5% increase on a constant-currency basis [6] - Preliminary adjusted gross profit was $313 million, up from $283 million the previous year, with an adjusted gross margin of 44.7%, reflecting a 160-basis-point improvement [7] - Adjusted earnings per share (EPS) were $1.38, a 2% increase from the previous year, with robust growth of around 23% when excluding certain factors [8] - Cash flow from operations totaled $368 million for fiscal 2024, and year-end inventory decreased by 22% to $390 million [9][10] Strategic Initiatives - The company attributes its strong performance to strategic investments, operational efficiencies, and brand strength, particularly through Project Jeanius and the acquisition of Helly Hansen [2][11] - Kontoor Brands is focused on product innovation, market expansion, and supply-chain optimization to drive growth [11] - Investments in Project Jeanius aim to enhance operational efficiency and unlock $100 million in cost savings [11] - The company is also expanding its direct-to-consumer channels and leveraging data analytics to enhance customer engagement [12] Brand and Market Position - Kontoor Brands' portfolio includes iconic brands like Wrangler and Lee, which continue to gain market share through collaborations and refreshed brand positioning [13] - The acquisition of Helly Hansen aligns with the company's long-term vision to expand into high-performance apparel [13] - The company is investing in global supply-chain transformation to improve efficiency and speed to market [13] Stock Performance - Shares of Kontoor Brands rose 4.1% during the recent trading session, with a 23.7% increase over the past six months, outperforming the industry growth of 22.8% [3]

Group 1 - Kontoor Brands (NYSE: KTB) is the owner of well-known brands such as Wrangler [1] - February 19th was a significant day for shareholders of Kontoor Brands [1] Group 2 - Crude Value Insights provides an investing service focused on oil and natural gas, emphasizing cash flow and growth prospects [1] - Subscribers have access to a stock model account, cash flow analyses of E&P firms, and live discussions about the sector [2]

Core Insights - Kontoor Brands, Inc. (KTB) reported third-quarter 2024 results with revenues of $670.2 million and adjusted earnings of $1.37 per share, both exceeding Zacks Consensus Estimates [1][3][4] - The stock surged 11.9% on October 31 due to better-than-expected results and a positive earnings forecast for 2024 [1][2] - Management anticipates continued stabilization in the industry for the remainder of the year [1] Financial Performance - Adjusted earnings per share of $1.37 surpassed the Zacks Consensus Estimate of $1.25, while GAAP earnings were $1.26, up from $1.05 year-over-year [3] - Net revenues increased by 2% from $654.5 million in the prior year quarter, exceeding the Zacks Consensus Estimate of $660 million [4] - Adjusted gross margin improved by 150 basis points year-over-year to 45% [4] Operating Expenses - Adjusted SG&A expenses rose by 5% year-over-year to $194.8 million due to investments in demand creation, product development, and distribution [5] - Adjusted operating income increased by 8% year-over-year to $107 million, with an adjusted operating margin of 15.9%, up 80 basis points [5] Segment Performance - U.S. revenues of $530 million improved by 5% year-over-year, driven by expanded distribution and market share gains [6] - International revenues fell by 5% to $141 million, primarily due to a 7% drop in international wholesale [7] - Wrangler brand revenues increased by 3% year-over-year to $464 million, while Lee brand revenues declined by 3% to $202 million [8][9] Future Guidance - Kontoor Brands updated its 2024 revenue forecast to $2.60 billion, with an expected 4% year-over-year increase in Q4 revenues [12] - Adjusted gross margin is anticipated to expand to 45.1%, reflecting a 260 basis point increase from the prior year [12] - Adjusted earnings per share are now expected to be $4.83, up from the previous forecast of $4.80, indicating a 9% improvement year-over-year [14]

Financial Data and Key Metrics Changes - The third quarter results exceeded expectations with global revenue increasing by 2% and adjusted earnings per share rising by 12% to $1.37 compared to the prior year [26][37][48] - Adjusted gross margin expanded by 150 basis points to 45% due to lower input costs and supply chain efficiencies [37][44] - Net debt decreased to $476 million with a net leverage ratio of 1.2 times, trending toward the low end of the targeted range [39][40] Business Line Data and Key Metrics Changes - Wrangler revenue grew by 4%, with a notable 10% growth in global direct-to-consumer (D2C) sales [10][28] - Lee's global revenue decreased by 3%, but the U.S. business showed signs of improvement with a 1% growth driven by a 2% increase in wholesale [31][32] - The female segment of both Wrangler and Lee experienced double-digit growth, indicating strong demand in this category [14][19] Market Data and Key Metrics Changes - In the U.S., Wrangler revenue increased by 5%, supported by a 10% increase in D2C and a 5% increase in wholesale [29][30] - Internationally, Wrangler's revenue decreased by 2%, with high single-digit growth in D2C offset by declines in wholesale [30] - Lee's international revenue decreased by 7%, with a 10% decline in Europe, while APAC saw a modest 1% increase [33][34] Company Strategy and Development Direction - The company is focused on product innovation and demand creation to drive market share gains and future growth [9][24] - Project Genius aims to deliver $100 million in combined gross margin and SG&A savings, enhancing operational efficiency and profitability [21][23][75] - The company plans to continue investing in demand creation, product development, and international expansion while maintaining a prudent approach to discretionary spending [53][95] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's momentum, anticipating a 4% revenue growth in the first half of 2025 [15][51] - The operating environment remains uncertain, with conservative inventory management among retail partners [43][64] - Management highlighted the importance of consumer preferences and strong POS performance as key drivers for future growth [60][64] Other Important Information - The company returned $168 million to shareholders year-to-date through share repurchases and dividends, with a recent 4% increase in the quarterly dividend [24][40] - The company launched a global Wrangler campaign, marking a significant marketing effort as a public company [100][102] Q&A Session Summary Question: What are the drivers of revenue growth for 2025? - Management highlighted strong consumer demand, ongoing market share gains, and new product launches as key drivers for the anticipated 4% growth in the first half of 2025 [58][60] Question: Can you elaborate on Project Genius and its impact? - Project Genius is focused on global supply chain transformation, back-end efficiencies, and commercial optimization, with expected savings of $100 million [67][75] Question: What improvements are being seen at Lee? - Leadership changes and a focus on female segments have led to significant early wins, with new product lines expected to drive further growth [78][80] Question: What is the outlook for product cost inflation? - Management expects a neutral product cost environment overall, with some modest inflation anticipated in the second half of 2025 [82][83] Question: How will the savings from Project Genius be allocated? - Savings will be gradually realized, with SG&A savings expected in the first half of 2025 and gross margin benefits in the second half [91][92]

Core Viewpoint - Kontoor Brands (KTB) reported quarterly earnings of $1.37 per share, exceeding the Zacks Consensus Estimate of $1.25 per share, and showing an increase from $1.22 per share a year ago, indicating a 9.60% earnings surprise [1][2] Financial Performance - The company achieved revenues of $670.19 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.50% and up from $654.54 million year-over-year [2] - Over the last four quarters, Kontoor has exceeded consensus EPS estimates three times and has topped consensus revenue estimates three times as well [2] Stock Performance - Kontoor shares have increased approximately 22.7% since the beginning of the year, compared to a 21.9% gain in the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $1.41 on revenues of $712 million, and for the current fiscal year, it is $4.80 on revenues of $2.61 billion [7] Industry Outlook - The Textile - Apparel industry, to which Kontoor belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5][6]

Revenue Performance - Revenue for Q3 2024 was $670 million, a 2% increase compared to the prior year[1] - U.S. revenue was $530 million, a 5% increase driven by expanded distribution and market share gains[5] - International revenue decreased by 5% to $141 million, with a 7% decline in international wholesale[6] - Total net revenues for the three months ended September 2024 were $670,194, a 2% increase from $654,540 in 2023[40] - For the nine months ended September 2024, total net revenues were $1,908,294, a 2% decrease from $1,937,672 in 2023[40] - Wrangler segment revenues increased by 4% to $464,107, while Lee segment revenues decreased by 3% to $202,343[40] - U.S. wholesale revenues for Wrangler were $373,643, contributing significantly to total revenues[49] - U.S. wholesale revenues increased by 5% to $529,654 from $505,827 year-over-year[51] - International revenues decreased by 5% to $140,540 compared to $148,713 in the previous year[51] Profitability Metrics - Adjusted gross margin is expected to be 45.1%, an increase of 260 basis points compared to the prior year[2] - Adjusted EPS is now expected to be $4.83, representing a 9% increase compared to the prior year[2] - Adjusted operating income is expected to be $385 million, reflecting an 11% increase compared to the prior year[19] - Operating income increased by 15% to $98,321 in Q3 2024, compared to $85,482 in Q3 2023[37] - Total reportable segment profit rose by 18% to $121,108, with Wrangler profit increasing by 20% to $97,753[40] - Adjusted diluted earnings per share for the three months ended September 2024 was $1.26, compared to $1.05 in 2023[48] - Net income for the nine months ended September 2024 was $181,824, a 12% increase from $162,223 in the same period of 2023[39] - Net income for the trailing twelve months ended September 2024 was $250,595, an increase from $213,828 in the prior year[52] Cash Flow and Capital Management - Cash flow from operations is now expected to exceed $360 million, driven by accelerated earnings growth[22] - Cash provided by operating activities for the nine months ended September 2024 was $286,258, significantly up from $147,526 in 2023[39] - The Company repurchased $40 million of shares during Q3 2024[1] - The Company declared a quarterly cash dividend of $0.52 per share, a 4% increase compared to Q2 2024[14] - Cash and cash equivalents rose to $269,427 in September 2024, up from $77,828 in September 2023[38] - Total current assets increased to $1,066,227 as of September 2024, compared to $1,033,064 in September 2023[38] - Total liabilities stood at $1,296,196 as of September 2024, compared to $1,278,306 in September 2023[38] Expenses and Taxation - Selling, general and administrative expenses increased by 8% to $201,189 in Q3 2024 from $185,983 in Q3 2023[37] - Interest income surged by 208% to $2,965 in Q3 2024, compared to $964 in Q3 2023[37] - The company reported a 28% increase in income taxes for Q3 2024, totaling $16,225 compared to $12,697 in Q3 2023[37] - Interest expense increased by 7% to $11,178[40] - Restructuring and transformation costs for the trailing twelve months totaled $26.8 million, impacting net income with a corresponding tax effect of $6.6 million[54] - The effective income tax rate adjusted for restructuring costs was 15% for the trailing twelve months ended September 2024, down from 24% in the previous year[52] Investment and Returns - Adjusted return on invested capital (ROIC) improved to 29.7% in September 2024, up from 23.1% in September 2023[52] - The average invested capital for the trailing twelve months was $1,004,161, down from $1,078,393 in the previous year[52] - Other revenues surged by 90% to $3,744 from $1,974 year-over-year[51] - The gross margin for the three months ended September 2024 was 44.7%, up from 41.5% in 2023[48] - Corporate and other expenses increased by 31% to $26,307 for the three months ended September 2024[40]