Kontoor(US:KTB)2025-05-06 13:32Financial 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]