Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. But finding a growth stock that can live up to its true potential can be a tough task.In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.However, the Zacks Growth Style Score (part of the Zacks Style S ...

Kontoor Brands (KTB) closed the last trading session at $69.62, gaining 13.3% over the past four weeks, but there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $87.83 indicates a 26.2% upside potential.The mean estimate comprises six short-term price targets with a standard deviation of $9.22. While the lowest estimate of $72 indicates a 3.4% increase from the current price level, the most optimistic analyst expect ...

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying those that can fulfill their potential is challenging [1] Group 1: Company Overview - Kontoor Brands (KTB) is currently recommended as a growth stock by the Zacks Growth Style Score system, which evaluates a company's real growth prospects beyond traditional metrics [2] - The company has a favorable Growth Score and a top Zacks Rank, indicating strong potential for growth investors [2] Group 2: Earnings Growth - Kontoor's historical EPS growth rate is 13.6%, with projected EPS growth of 9.5% this year, significantly outperforming the industry average of 1.8% [4] Group 3: Asset Utilization - Kontoor has an asset utilization ratio (sales-to-total-assets ratio) of 1.58, indicating that the company generates $1.58 in sales for every dollar in assets, compared to the industry average of 1.19 [5] Group 4: Sales Growth - The company's sales are expected to grow by 1.1% this year, surpassing the industry average growth of 0.8% [6] Group 5: Earnings Estimate Revisions - The current-year earnings estimates for Kontoor have increased by 2.9% over the past month, reflecting a positive trend in earnings estimate revisions [7] Group 6: Investment Potential - Kontoor has achieved a Zacks Rank of 2 and a Growth Score of B, suggesting it is a potential outperformer and a solid choice for growth investors [9]

Kontoor Brands (KTB) Q1 2025 Earnings Call May 06, 2025 08:30 AM ET Company Participants Michael Karapetian - Vice President of Corporate Development, Strategy, and Investor RelationsScott Baxter - President, Chief Executive Officer and Chair of the BoardJoe Alkire - EVP & CFOBrooke Roach - Vice President - Equity ResearchPaul Kearney - VP - Equity ResearchPeter McGoldrick - Equity Research Associate Conference Call Participants Ike Boruchow - Managing Director: Senior Analyst - Retailing, Specialty Softlin ...

Kontoor Brands (KTB) Q1 2025 Earnings Call May 06, 2025 08:30 AM ET Company Participants Michael Karapetian - Vice President of Corporate Development, Strategy, and Investor RelationsScott Baxter - President, Chief Executive Officer and Chair of the BoardJoe Alkire - EVP & CFOBrooke Roach - Vice President - Equity ResearchPaul Kearney - VP - Equity ResearchPeter McGoldrick - Equity Research Associate Conference Call Participants Ike Boruchow - Managing Director: Senior Analyst - Retailing, Specialty Softlin ...

Kontoor Brands (KTB) Q1 2025 Earnings Call May 06, 2025 08:30 AM ET Speaker0 Good morning, ladies and gentlemen, and welcome to the Kontoor Brands First Quarter twenty twenty five Earnings Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. I would now like to turn the conference call over to Michael Karapitian, Vice President of Corporate Development, Enterprise Strategy and Investor Relations. Please go ahead. Speak ...

[First Quarter 2025 Highlights](index=1&type=section&id=First%20Quarter%202025%20Highlights) In the first quarter of 2025, Kontoor Brands reported a slight 1% revenue decrease to $623 million, but demonstrated strong operational performance with a 200 basis point increase in adjusted gross margin to 47.7% and a 3% rise in adjusted EPS to $1.20 Q1 2025 Key Financial Metrics (vs. Prior Year) | Metric | Q1 2025 Value | Change vs. Prior Year | | :--- | :--- | :--- | | Revenue | $623 million | -1% | | Adjusted Gross Margin | 47.7% | +200 bps | | Adjusted Operating Income | $96 million | +4% | | Adjusted EPS | $1.20 | +3% | | Inventory | - | -12% | - The Board of Directors declared a regular quarterly cash dividend of **$0.52 per share**[4](index=4&type=chunk) [First Quarter 2025 Detailed Performance](index=2&type=section&id=First%20Quarter%202025%20Detailed%20Performance) The company's revenue of $623 million reflected a 1% decline, with a 2% decrease in global wholesale partially offset by 5% growth in direct-to-consumer (DTC), while profitability improved with adjusted gross margin expanding 200 basis points to 47.7% and adjusted operating income growing 4% to $96 million [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Total revenue for Q1 2025 was $623 million, a 1% decrease year-over-year (flat on a constant currency basis), driven by a decline in global wholesale partially offset by growth in the global direct-to-consumer channel Q1 2025 Revenue Performance by Channel and Geography | Category | Revenue | YoY Change (Reported) | YoY Change (Constant Currency) | | :--- | :--- | :--- | :--- | | **By Channel** | | | | | Global Wholesale | - | -2% | - | | Global Direct-to-Consumer | - | +5% | - | | **By Geography** | | | | | U.S. Revenue | $493 million | 0% | 0% | | International Revenue | $130 million | -7% | -3% | - In the U.S., direct-to-consumer revenue increased by **11%**, driven by a **17%** rise in digital sales, which partially offset a **4%** decrease in brick-and-mortar retail[6](index=6&type=chunk) [Brand Performance](index=2&type=section&id=Brand%20Performance) The company's two main brands showed divergent performance in Q1 2025, with Wrangler's global revenue increasing by 3% to $420 million, while Lee's global revenue decreased by 9% to $200 million Q1 2025 Global Revenue by Brand | Brand | Global Revenue | YoY Change (Reported) | | :--- | :--- | :--- | | Wrangler | $420 million | +3% | | Lee | $200 million | -9% | - Wrangler's U.S. revenue grew **3%**, with a notable **14%** increase in direct-to-consumer sales[8](index=8&type=chunk) - Lee's U.S. revenue fell **8%**, driven by a **9%** decrease in wholesale[9](index=9&type=chunk) [Profitability and Expenses](index=2&type=section&id=Profitability%20and%20Expenses) Adjusted gross margin expanded by 200 basis points to 47.7% due to lower product costs and operational efficiencies, leading to a 4% increase in adjusted operating income to $96 million and a 3% rise in adjusted EPS to $1.20 - Adjusted gross margin expansion was driven by benefits from lower product costs, Project Jeanius, supply chain efficiencies, and direct-to-consumer and product mix[10](index=10&type=chunk)[11](index=11&type=chunk) Q1 2025 Profitability Metrics | Metric | Reported Value | Adjusted Value | YoY Change (Adjusted) | | :--- | :--- | :--- | :--- | | Gross Margin | 47.5% | 47.7% | +200 bps | | Operating Income | $73 million | $96 million | +4% | | Operating Margin | 11.8% | 15.4% | +70 bps | | EPS | $0.76 | $1.20 | +3% | - Reported and adjusted SG&A and operating income figures for the quarter include **$8 million** of incremental acquisition-related stock-based compensation expense[12](index=12&type=chunk)[13](index=13&type=chunk) [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity) The company maintained a solid financial position, ending the first quarter with $357 million in cash and $736 million in long-term debt, highlighted by a 12% year-over-year reduction in inventory to $443 million Key Balance Sheet Items (End of Q1 2025) | Item | Value | YoY Change | | :--- | :--- | :--- | | Cash and cash equivalents | $357 million | +66% | | Long-term debt | $736 million | -3% | | Inventory | $443 million | -12% | - The company declared a regular quarterly cash dividend of **$0.52 per share** and has **$215 million** remaining under its share repurchase program[16](index=16&type=chunk) [Helly Hansen Acquisition Update](index=3&type=section&id=Helly%20Hansen%20Acquisition%20Update) The acquisition of Helly Hansen has received all required regulatory approvals and is expected to close at the end of May 2025, anticipated to contribute approximately $425 million to revenue, $37 million to adjusted operating income, and $0.20 to adjusted EPS for the full year 2025 Expected 2025 Financial Contribution from Helly Hansen | Metric | Expected Contribution | | :--- | :--- | | Revenue | ~$425 million | | Adjusted Operating Income | ~$37 million | | Adjusted EPS | ~$0.20 | | Cash Flow from Operations | ~$50 million | - The acquisition is expected to close at the end of May 2025, subject to customary closing conditions[17](index=17&type=chunk) - The company entered into a Second Amended and Restated Credit Agreement to fund the acquisition and has also entered into interest rate swap agreements to mitigate interest rate volatility[18](index=18&type=chunk) [Updated Full Year 2025 Outlook](index=4&type=section&id=Updated%20Full%20Year%202025%20Outlook) Kontoor Brands has updated its full-year 2025 guidance to incorporate the pending Helly Hansen acquisition, projecting revenue to increase by 17-19% to a range of $3.06 to $3.09 billion and adjusted EPS to grow 10-12% to a range of $5.40 to $5.50 Updated Full Year 2025 Outlook | Metric | Updated FY2025 Range | YoY Growth | Helly Hansen Contribution | | :--- | :--- | :--- | :--- | | Revenue | $3.06 - $3.09 billion | 17% to 19% | ~16% benefit (~$425M) | | Adjusted Gross Margin | 45.9% - 46.1% | +80 to 100 bps | ~40 bps benefit | | Adjusted Operating Income | $437 - $445 million | 15% to 17% | ~$37 million benefit | | Adjusted EPS | $5.40 - $5.50 | 10% to 12% | ~$0.20 benefit | | Cash from Operations | > $350 million | - | Included | - The outlook does not include an estimated **$50 million** unmitigated impact from recently enacted tariff policy changes, which the company expects to begin offsetting in Q3 2025 and substantially offset over a 12 to 18-month period[20](index=20&type=chunk) - For Q2 2025, the company expects revenue of approximately **$630 million** and adjusted EPS of approximately **$0.80**, including the impact of Helly Hansen[22](index=22&type=chunk)[24](index=24&type=chunk) [Financial Statements](index=10&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the first quarter ended March 29, 2025, including the Statement of Operations, Balance Sheet, and Statement of Cash Flows [Condensed Consolidated Statements of Operations](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the first quarter of 2025, net revenues were $622.9 million, a 1% decrease from the prior-year period, while operating income fell 13% to $73.3 million and net income declined 28% to $42.9 million Q1 2025 vs. Q1 2024 Statement of Operations Highlights (in thousands) | (In thousands) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net revenues | $622,901 | $631,202 | -1% | | Operating income | $73,299 | $84,430 | -13% | | Net income | $42,882 | $59,507 | -28% | | Diluted EPS | $0.76 | $1.05 | -28% | [Condensed Consolidated Balance Sheets](index=11&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 29, 2025, Kontoor Brands reported total assets of $1.68 billion, with a significant increase in cash and cash equivalents to $356.7 million and a 12% decrease in inventories to $443.1 million Balance Sheet Highlights (As of March 2025 vs. March 2024) (in thousands) | (In thousands) | March 2025 | March 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $356,710 | $215,059 | | Inventories | $443,070 | $501,341 | | Total assets | $1,675,679 | $1,661,437 | | Long-term debt | $735,640 | $759,246 | | Total equity | $426,672 | $387,193 | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 29, 2025, the company generated $77.6 million in cash from operating activities, a significant improvement from $56.5 million in the prior-year period, resulting in a net increase in cash of $22.6 million Cash Flow Summary (Three Months Ended March) (in thousands) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $77,625 | $56,468 | | Cash used by investing activities | ($4,762) | ($6,432) | | Cash used by financing activities | ($37,876) | ($54,614) | | Net change in cash | $22,644 | $9 | [Supplemental Financial Information](index=13&type=section&id=Supplemental%20Financial%20Information) This section provides additional financial details beyond standard GAAP reporting, including segment performance, constant currency comparisons, reconciliations of non-GAAP adjusted measures, disaggregation of revenue, and adjusted Return on Invested Capital (ROIC) [Business Segment Information](index=13&type=section&id=Business%20Segment%20Information) In Q1 2025, the Wrangler segment posted a 3% revenue increase to $420.2 million and a 16% rise in segment profit to $86.8 million, while the Lee segment experienced a 9% revenue decline to $199.9 million and an 8% decrease in segment profit to $32.4 million Q1 2025 Segment Performance (in thousands) | Segment | Revenues (in thousands) | % Change | Segment Profit (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Wrangler | $420,246 | 3% | $86,848 | 16% | | Lee | $199,900 | -9% | $32,447 | -8% | [Reconciliation of Adjusted Financial Measures](index=15&type=section&id=Reconciliation%20of%20Adjusted%20Financial%20Measures) The company provides reconciliations from GAAP to non-GAAP figures to exclude specific items, with Q1 2025 GAAP operating income of $73.3 million adjusted to $96.1 million and GAAP diluted EPS of $0.76 adjusted to $1.20 Q1 2025 GAAP to Adjusted Reconciliation Highlights (in thousands) | (In thousands) | GAAP | Adjustments | Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Operating Income | $73,299 | $22,830 | $96,129 | | Diluted EPS | $0.76 | $0.43 | $1.20 | - Adjustments for Q1 2025 primarily consist of **$12.5 million** in restructuring and transformation costs and **$19.2 million** in acquisition-related costs for the Helly Hansen deal[53](index=53&type=chunk) [Disaggregation of Revenue](index=17&type=section&id=Disaggregation%20of%20Revenue) In Q1 2025, U.S. Wholesale remained the largest revenue channel at $446.9 million, while Direct-to-Consumer revenue grew to $77.0 million, and geographically, U.S. revenue was flat at $493.4 million as International revenue declined 7% to $129.5 million Q1 2025 Revenue by Channel and Geography (in thousands) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Channel** | | | | U.S. Wholesale | $446,877 | $449,964 | | Non-U.S. Wholesale | $99,059 | $108,056 | | Direct-to-Consumer | $76,965 | $73,182 | | **Geography** | | | | U.S. | $493,360 | $492,011 | | International | $129,541 | $139,191 | [Adjusted Return on Invested Capital (ROIC)](index=19&type=section&id=Adjusted%20Return%20on%20Invested%20Capital%20(ROIC)) The company's adjusted Return on Invested Capital (ROIC) significantly improved for the trailing twelve months ending March 2025, increasing to 32.2% compared to 25.1% in the prior-year period - For the trailing twelve months ended March 2025, the adjusted ROIC was **32.2%**, a substantial increase from **25.1%** in the comparable prior-year period[62](index=62&type=chunk)

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].

Financial Data and Key Metrics Changes - Kontoor Brands reported a 5% increase in global revenue for Q4 2024, with adjusted gross margin expanding by 160 basis points to 44.7% driven by lower input costs and mix [38][46] - Adjusted earnings per share (EPS) increased by 2% year-over-year to $1.38, and excluding a discrete tax benefit from the prior year, adjusted EPS increased by 23% [46][47] - Cash from operations reached approximately $370 million, allowing the company to return nearly $200 million to shareholders through dividends and share repurchases [13][50] Business Line Data and Key Metrics Changes - Wrangler's global revenue increased by 9% in Q4 2024, with notable growth across all channels, including 19% growth in the female segment and 29% in outdoor products [39][26] - Lee's global revenue decreased by 5% in Q4, with a 6% decline in U.S. revenue primarily due to challenges in the wholesale channel, although D2C showed double-digit growth [41][31] - Non-denim categories, including tops and t-shirts, grew mid-single digits, contributing to approximately one-third of global revenue [11] Market Data and Key Metrics Changes - The U.S. market saw a 9% growth in Wrangler's revenue, while Lee's performance was impacted by a decline in wholesale, which was partially offset by strong D2C growth [39][41] - In Europe, revenue declined by 1%, with growth in D2C offset by wholesale declines, while APAC revenue decreased by 4% but showed modest improvement compared to expectations [44] Company Strategy and Development Direction - Kontoor Brands is focused on executing Project Jeanius, which aims to enhance operational efficiencies and create investment capacity for growth, with expected savings of over $100 million [14][51] - The company is exploring shop-in-shop concepts in key retailers to elevate brand presence and enhance consumer experience [11] - The addition of Helly Hansen is anticipated to further strengthen the company's multi-brand platform and drive value creation [18][100] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current uncertain environment, highlighting the strength of their operational model and the benefits of Project Jeanius [18][72] - The consumer environment is described as cautious, with concerns over economic conditions impacting spending behavior [142] - For 2025, the company expects revenue growth of 1% to 3%, with a focus on managing inventory levels and adapting to market conditions [60][64] Other Important Information - The company achieved a net leverage ratio of 1.0 times, indicating a strong balance sheet position [48] - Inventory decreased by 22% to $390 million, achieving an annual turnover target of approximately 3.5 times [47] - The board approved a quarterly cash dividend of $0.52 per share, reflecting a commitment to returning capital to shareholders [50] Q&A Session Summary Question: Details on Lee's performance and D2C growth - Management explained that Lee's D2C growth reflects new product introductions resonating with consumers, while wholesale challenges are being addressed through strategic changes [75][80] Question: Gross margin expectations and seasonal dynamics - Management clarified that gross margin is expected to increase by 30 basis points in Q1, with a moderation in Q2 due to seasonal dynamics and product cost inflation [76][78] Question: Insights on consumer segmentation for Lee - Management indicated a shift towards targeting a more fashion-conscious consumer, moving away from overly aspirational segments that did not resonate with the core audience [131] Question: Impact of potential tariffs on operations - Management discussed the potential $50 million unmitigated impact from tariffs, with plans in place to mitigate this through supply chain adjustments and pricing strategies [58][120]

Kontoor Brands (KTB) Q4 2024 Earnings Call February 25, 2025 08:30 AM ET Company Participants Michael Karapetian - Vice President of Corporate Development, Strategy, and Investor RelationsScott Baxter - President, CEO & Chair of the BoardTom Waldron - COOJoe Alkire - EVP & CFOJames Duffy - Managing DirectorBrooke Roach - Vice President, Equity ResearchPaul Kearney - VP - Equity ResearchMauricio Serna - Executive Director Conference Call Participants Ike Boruchow - Managing Director: Senior Analyst - Retaili ...