A fashion novel about what happens when American budget jeans brands Lee and Wrangler team up with Norwegian outdoor specialist Helly Hansen might leave one struggling to see just where the plot was headed. The brands come from two different worlds and the age of the big houses of brands has dimmed in the U.S. as VF Corp. shrank, Tapestry Inc.’s deal to buy Capri Holdings fell apart and producers like PVH Corp. focused in on their biggest brands. More from WWD But Scott Baxter, president, chief executive ...

Core Viewpoint - Kontoor Brands (KTB) is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ended June 2025, with the actual results being a significant factor influencing its near-term stock price [1][2]. Earnings Expectations - The upcoming earnings report is expected to be released on August 7, with a consensus EPS estimate of $0.86, reflecting a year-over-year decrease of 12.2%. Revenues are projected to be $627.5 million, which is a 3.4% increase from the previous year [3][2]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not significantly altered their initial estimates during this period [4]. Earnings Surprise Prediction - The Zacks Earnings ESP (Expected Surprise Prediction) model compares the Most Accurate Estimate to the Zacks Consensus Estimate, suggesting that recent analyst revisions may provide more accurate predictions for earnings [8][7]. Earnings ESP and Zacks Rank - For Kontoor, the Most Accurate Estimate aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%. The stock currently holds a Zacks Rank of 4, making it challenging to predict an earnings beat [12]. Historical Performance - In the last reported quarter, Kontoor exceeded the expected earnings of $1.16 per share by delivering $1.20, resulting in a surprise of +3.45%. The company has beaten consensus EPS estimates in the last four quarters [13][14]. Market Reaction Factors - An earnings beat or miss may not solely dictate stock price movements, as other factors can influence investor sentiment. Stocks may decline despite an earnings beat or rise despite a miss due to unforeseen catalysts [15]. Investment Considerations - While Kontoor does not appear to be a strong candidate for an earnings beat, investors should consider additional factors before making investment decisions related to this stock ahead of its earnings release [17].

Economic Overview - Inflation is showing signs of cooling, with the personal consumption expenditure (PCE) index rising only 0.1% month-over-month in April and 2.1% year-over-year, down from 2.3% in March [4][5] - Core PCE, excluding food and energy, also rose 0.1% month-over-month and 2.5% year-over-year, marking the smallest advance since March 2021 [5] - Consumer spending increased by 0.2% month-over-month, while personal income rose by 0.8% in April, indicating economic resilience [5][11] Trade and Tariffs - President Trump's tariffs announced in early April have been put on hold as trade negotiations are ongoing, alleviating concerns about inflation and recession [2][6] - The temporary pause in tariffs and the initiation of trade talks, including a deal with the UK, have boosted market optimism [7] Consumer Discretionary Stocks - Positive sentiment in the economy suggests investing in consumer discretionary stocks is prudent [2][8] - Selected stocks include: - **Interface, Inc. (TILE)**: Expected earnings growth rate of 8.2%, with a Zacks Consensus Estimate improvement of 2.6% over the past 60 days [9] - **Kontoor Brands, Inc. (KTB)**: Expected earnings growth rate of 9.6%, with a Zacks Consensus Estimate improvement of 2.9% over the past 60 days [12] - **GDEV Inc. (GDEV)**: Expected earnings growth rate of 58%, with a Zacks Consensus Estimate improvement of 21.8% over the past 60 days [13] - **Netflix, Inc. (NFLX)**: Expected earnings growth rate of 27.7%, with a Zacks Consensus Estimate improvement of 3% over the past 60 days [15]

Core Viewpoint - Growth investors are increasingly focused on stocks with above-average financial growth, but identifying stocks that can sustain this growth is challenging [1] Group 1: Company Overview - Kontoor Brands (KTB) is highlighted as a recommended stock with a favorable Growth Score and a top Zacks Rank [2] - The company is known for its Wrangler and Lee apparel brands [3] 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 0.4% [5] Group 3: Asset Utilization - Kontoor has an asset utilization ratio (sales-to-total-assets ratio) of 1.58, indicating it generates $1.58 in sales for every dollar in assets, compared to the industry average of 1.19 [6] Group 4: Sales Growth - The company's sales are expected to grow by 1.1% this year, while the industry average is stagnant at 0% [7] Group 5: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for Kontoor, with the Zacks Consensus Estimate for the current year increasing by 2.9% over the past month [9] Group 6: Investment Potential - Kontoor has achieved a Growth Score of B and a Zacks Rank of 2, indicating it is a solid choice for growth investors and a potential outperformer [11]

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]

Financial Data and Key Metrics Changes - The company reported flat global revenue compared to the prior year, consistent with expectations, with adjusted gross margin expanding by 200 basis points to 47.7% due to lower input costs and favorable mix [29][34] - Adjusted earnings per share (EPS) was $1.20, including an $0.11 impact from acquisition-related stock-based compensation, while excluding this expense, adjusted EPS was $1.31, a 13% increase compared to the prior year [37][49] - Inventory decreased by 12% to $443 million, with a strong focus on managing working capital prudently [38] Business Line Data and Key Metrics Changes - Wrangler's global revenue increased by 3%, with a notable 40% growth in the female segment, while Lee's global revenue decreased by 8% as brand repositioning continues [15][18][32] - The female business of Wrangler, now at 10% of global revenue, is expected to drive long-term growth opportunities [16] - Lee's U.S. revenue decreased by 8%, but digital sales grew by 12%, indicating a shift towards online engagement [33][19] Market Data and Key Metrics Changes - The U.S. market remains the largest outdoor apparel and footwear market, with significant growth opportunities identified for Helly Hansen, expected to contribute approximately $425 million to full-year revenue [6][24] - International revenue for Wrangler increased by 4%, driven by a 6% growth in wholesale [31] Company Strategy and Development Direction - The acquisition of Helly Hansen is expected to enhance growth, cash flow, and capital allocation options, with a focus on increasing operating margins and leveraging global supply chain efficiencies [5][9][27] - The company aims to establish itself as an employer of choice in the industry, emphasizing talent retention and cultural fit with Helly Hansen [10] Management's Comments on Operating Environment and Future Outlook - Management noted an increase in macro volatility but expressed confidence in the company's operational agility and ability to navigate challenges [12][41] - Recent trends in POS (point of sale) have shown improvement, with March and April indicating a positive shift after a slowdown in February [30][41] Other Important Information - The company expects full-year revenue to be in the range of $3.06 billion to $3.09 billion, representing growth of 17% to 19%, with organic revenue growth expected at 1% to 2% [43][44] - The adjusted gross margin outlook for the full year is now expected to be between 45.9% and 46.1%, reflecting an increase compared to the previous year [47] Q&A Session Summary Question: State of U.S. Consumer - Management characterized the U.S. consumer as resilient, with positive trends observed in March and April, indicating a recovery from earlier volatility [60][63] Question: Guidance for 2Q and 2026 Outlook - The company expects 2Q revenue growth of approximately 4%, with organic growth driven by new programs and distribution expansion [45][66] Question: Lee Brand Transition - Management expressed confidence in the Lee brand's transition, highlighting improvements in product quality and digital engagement, with expectations for growth in 2026 [76] Question: Gross Margin Drivers - The significant gross margin outperformance was attributed to a favorable mix, lower product costs, and benefits from Project Genius, with expectations for continued positive contributions [77][79] Question: Tariff Impact and Mitigation - The unmitigated tariff impact for 2025 is now estimated at $50 million, with proactive measures being implemented to offset potential costs [51][84]

Financial Data and Key Metrics Changes - The company reported flat global revenue compared to the prior year, consistent with expectations, with adjusted gross margin expanding by 200 basis points to 47.7% driven by lower input costs and favorable mix [29][34][42] - Adjusted earnings per share (EPS) was $1.31, a 13% increase compared to the prior year, exceeding previous expectations [36][47] - Net debt was reported at $379 million, with a net leverage ratio of 0.9 times trailing twelve-month adjusted EBITDA, below the targeted range ahead of the Helly Hansen acquisition [38][39] Business Line Data and Key Metrics Changes - Wrangler's global revenue increased by 3%, with a notable 40% growth in the female segment, while Lee's global revenue decreased by 8% [15][31][32] - The company gained 70 basis points of market share in the men's and women's bottoms category during the first quarter [18][31] - The Lee brand is undergoing a repositioning strategy, with expectations for sequential improvement in revenue [18][19] Market Data and Key Metrics Changes - The U.S. market remains the largest outdoor apparel and footwear market, with significant growth opportunities identified for Helly Hansen [6][7] - International revenue for Wrangler increased by 4%, driven by a 6% growth in wholesale [31] - The company noted a resilient consumer environment, with improvements in point-of-sale (POS) trends observed in March and April [13][30] Company Strategy and Development Direction - The acquisition of Helly Hansen is expected to enhance revenue growth, earnings, and cash flow, with a focus on accelerating the brand's growth and improving operating margins [5][6][9] - The company aims to establish itself as an employer of choice in the industry, emphasizing talent retention and cultural fit with Helly Hansen [10][11] - Project Genius is expected to contribute to significant cost savings and operational efficiencies, with a full run rate anticipated by 2026 [14][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic volatility, highlighting operational agility and a strong supply chain as competitive advantages [12][41] - The outlook for 2025 includes expected revenue growth of 17% to 19%, with Helly Hansen contributing approximately $425 million [42][44] - Management remains cautious about retail inventory levels and consumer behavior, planning conservatively for the year [43][49] Other Important Information - The company has established a value creation framework with four pillars to drive growth and improve profitability [6][9] - Tariff impacts are being actively managed, with expectations to mitigate the effects within a 12 to 18-month period [49][52] - The company plans to continue its share repurchase program once acquisition-related debt is reduced [38][39] Q&A Session Summary Question: State of U.S. Consumer - Management described the U.S. consumer as resilient, with positive trends observed in March and April following a strong start to the year [56][58] Question: Guidance for 2Q and 2026 - The company expects organic revenue growth of 1% to 2% for the full year, with second-half growth driven by new programs and distribution expansion [61][62] Question: Lee Brand Transition - Management expressed confidence in the Lee brand's product quality and digital performance, anticipating a positive inflection in growth by 2026 [68][73] Question: Gross Margin Drivers - The significant gross margin outperformance was attributed to favorable product mix, lower product costs, and benefits from Project Genius [74][76] Question: Tariff Impact and Mitigation - The unmitigated tariff impact has been revised to approximately $50 million, with Mexico's tariff exemption contributing to the reduction [80][81] Question: Helly Hansen Contribution - Helly Hansen is expected to contribute approximately $425 million in revenue for the full year, with double-digit growth anticipated in the second half [24][87]

Core Insights - Kontoor Brands (KTB) reported quarterly earnings of $1.20 per share, exceeding the Zacks Consensus Estimate of $1.16 per share, and showing an increase from $1.16 per share a year ago, representing an earnings surprise of 3.45% [1] - The company posted revenues of $622.9 million for the quarter ended March 2025, which was below the Zacks Consensus Estimate by 0.35% and a decrease from $631.2 million year-over-year [2] - Kontoor shares have declined approximately 25.7% since the beginning of the year, contrasting with the S&P 500's decline of 3.9% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.05 on revenues of $625.6 million, while for the current fiscal year, the estimate is $5.21 on revenues of $2.67 billion [7] - The estimate revisions trend for Kontoor is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Textile - Apparel industry, to which Kontoor belongs, is currently ranked in the bottom 24% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - The company reported flat global revenue compared to the prior year, consistent with expectations, with adjusted gross margin expanding by 200 basis points to 47.7% due to lower input costs and favorable mix [28][33][41] - Adjusted earnings per share (EPS) was $1.20, including an $0.11 impact from acquisition-related stock-based compensation, while excluding this expense, adjusted EPS was $1.31, a 13% increase compared to the prior year [35][41] Business Line Data and Key Metrics Changes - Wrangler's global revenue increased by 3%, with a notable 40% growth in the female segment, while Lee's global revenue decreased by 8%, aligning with expectations [30][31][17] - The company gained 70 basis points of market share in the men's and women's bottoms business during the first quarter [17][30] Market Data and Key Metrics Changes - The U.S. market showed resilience, with revenue growth of 3% driven by a 2% increase in wholesale and a 14% increase in direct-to-consumer (DTC) sales [30][31] - International revenue for Wrangler increased by 4%, supported by a 6% growth in wholesale [31] Company Strategy and Development Direction - The acquisition of Helly Hansen is expected to enhance revenue growth, earnings, and cash flow, with a target contribution of approximately $425 million to full-year revenue [4][23] - The company aims to double Helly Hansen's operating margin from high single digits to mid-teens through gross margin expansion and SG&A benefits [7][25] Management's Comments on Operating Environment and Future Outlook - Management noted an increase in macro volatility but expressed confidence in the company's operational agility and supply chain strength to navigate challenges [11][12] - The outlook for 2025 includes expected revenue growth of 17% to 19%, with organic revenue growth projected at 1% to 2% excluding Helly Hansen [41][42] Other Important Information - The company has reduced SKUs by approximately 20% in the U.S. over the past twelve months, contributing to improved inventory health [34] - The net leverage ratio was reported at 0.9 times, below the targeted range, with expectations to return to under two times net leverage within twelve months post-acquisition [37] Q&A Session Summary Question: State of U.S. Consumer - Management characterized the U.S. consumer as resilient, noting a strong bounce back in March and April, with positive trends continuing into May [56][58] Question: Guidance for 2Q and 2026 - The company expects second half growth of approximately 3%, driven by new programs and distribution expansion, while organic growth for 2026 is anticipated to be positive [61][63] Question: Lee Brand Transition - Management expressed confidence in the Lee brand's product quality and digital engagement, with expectations for a positive inflection in growth by 2026 [70][73] Question: Gross Margin Drivers - The significant gross margin outperformance was attributed to a favorable mix, lower product costs, and benefits from Project Genius, with expectations for sustainability in the second half [74][76] Question: Tariff Impact - The unmitigated tariff impact for 2025 is estimated at $50 million, with mitigating actions expected to reduce this significantly [49][51] Question: Helly Hansen Contribution - Helly Hansen is expected to contribute approximately $425 million in revenue for the full year, with double-digit growth anticipated in the second half [23][87]

Financial Data and Key Metrics Changes - In 2024, global revenue increased by 5%, with Wrangler's revenue growing by 9% and Lee's revenue declining by 5% [24][26][20] - Adjusted gross margin expanded by 160 basis points to 44.7%, driven by lower input costs and mix [30] - Adjusted earnings per share (EPS) was $1.38, representing a 2% increase compared to the prior year [31] Business Line Data and Key Metrics Changes - Wrangler's global revenue grew 9% in the fourth quarter, with notable growth in outdoor (29%) and female segments (19%) [17][25] - Lee's direct-to-consumer (DTC) revenue grew double digits, while wholesale revenue declined significantly [20][27] - Non-denim categories accounted for approximately one-third of global revenue, with outdoor business growing at a mid-teens rate [9] Market Data and Key Metrics Changes - The U.S. market saw a 9% growth in Wrangler revenue, while Lee's U.S. revenue decreased by 6% [24][26] - In Asia, revenue performance was better than expected, while Europe performed as anticipated [24][29] - Point of Sale (POS) trends showed a decline in February after a strong start to the year, reflecting consumer conservatism [42][101] Company Strategy and Development Direction - The company is focused on Project Genius, aiming for $100 million in savings, with benefits expected to flow through in 2025 [11][34] - Plans to explore shop-in-shop concepts in key retailers to enhance consumer experience [9] - The addition of Helly Hansen is expected to drive growth and enhance the brand portfolio [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current uncertain environment, emphasizing operational strength and brand investments [6][23] - The company anticipates a transition year for Lee in 2025, focusing on repositioning for growth [20][21] - Management noted that consumer sentiment is currently cautious due to various macroeconomic factors [101] Other Important Information - The company returned $198 million to shareholders through dividends and share repurchases in 2024 [33] - Inventory decreased by 22% to $390 million, achieving an annual turnover target of approximately 3.5 times [32] - The company expects cash from operations to exceed $300 million in 2025 [47] Q&A Session Summary Question: Details on Lee's performance and DTC vs. wholesale dynamics - Management explained that DTC growth reflects successful new product introductions, while wholesale performance lags due to pipeline filling [50][53] 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 [51][52] Question: Insights on consumer segmentation for Lee - Management indicated a shift towards targeting a more fashion-conscious consumer, moving away from overly aspirational segments [91][92] Question: Impact of potential tariffs on operations - Management discussed that tariffs would begin to impact the P&L in late Q2, with mitigating actions expected to show results in late 2025 and early 2026 [94][95]