Kontoor Brands’ strong Q4 was driven by 9% and 4% growth in global direct-to-consumer and wholesale business respectively.
“Our better than expected fourth quarter was driven by stronger revenue, earnings, and cash generation. I want to thank our colleagues around the globe, who continue to execute at a high level,” stated Scott Baxter, president and chief executive officer of Kontoor Brands.
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Net revenues for full year 2024 was $2.60bn, mirroring the performance of the previous year.
The company’s growth in the US and direct-to-consumer global sales balanced out a dip in international wholesale figures.
During the fiscal ended 31 December 2024, the company’s US market saw a modest revenue increase of 1%, reaching $2.09bn, while international revenue experienced a 5% drop to $521m compared to the prior year.
Wrangler brand witnessed a global decline of 3% to $1.81bn in FY24, with US revenue for Wrangler climbing by 3%, spurred by direct-to-consumer and wholesale growth.
However, international revenue for Wrangler dipped by 1%, attributed to a 3% fall in wholesale which was somewhat mitigated by a robust 14% rise in direct-to-consumer sales.
Lee brand faced headwinds as well, with global revenue falling by 6% to $791m. In the US, Lee’s revenue was down by 5%, hampered by wholesale and physical retail setbacks, although this was partially offset by digital growth.
Internationally, Lee’s revenue decreased by 7%, again due to wholesale and brick-and-mortar retail challenges, with digital growth providing some compensation.
Kontoor Brand’s Q4 performance
Operating income was $84m and adjusted operating income was $101m, up by 17% when excluding the duty charge from comparisons.
Kontoor Brands saw its net income drop by 7% to $63.97m during the quarter, which translate to earnings of $1.14 per diluted share.
Gross margin rose by 200 basis points to 43.7% on a reported basis, and by 160 basis points to 44.7% on an adjusted basis, compared to the previous year.
Kontoor Brands’ key financial metrics for FY24
Kontoor Brands registered operating income of $342.28m over the fiscal, marking a 7% increase from $319.26m in the previous fiscal year.
Net income rose by 6% to $245.80m, translating to diluted earnings per share of $4.36 compared to $4.06 a year ago. Its adjusted EPS saw a notable increase of 10% to $4.89 when excluding an out-of-period duty charge.
Reported gross margin stood at 44.5%, with an adjusted gross margin of 45.1% reflecting a substantial improvement of 260 basis points from the prior year, again excluding the duty charge impact.
Its Selling, General & Administrative (SG&A) expenses were reported at $819m or 31.4% of revenue in FY24.
Scott Baxter added: “2024 was a landmark year for Kontoor driven by continued market share gains, accelerating business fundamentals, increasing capital allocation optionality, and strong returns for our shareholders.”
Kontoor Brands’ fiscal 2025 outlook
Kontoor Brands anticipates revenue to be between $2.63bn and $2.69bn, an uptick of 1% to 3% over FY24.
Adjusted gross margin is expected to range from 45.3% to 45.5%, and adjusted operating income is projected between $400m and $408m.
The company also forecasted its adjusted EPS to land between $5.20 and $5.30, marking an increase of 6% to 8% over the prior year on an adjusted basis.
This outlook does not take into account potential benefits from share repurchases due to the acquisition of Helly Hansen, noted the company.
Last week, Kontoor Brands agreed to take over full ownership of Helly Hansen for a purchase price of around $900m.
