Kontoor(KTB)2024-10-31 17:26Financial 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 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]