For the first quarter (Q1) ended 30 March 2024, Kontoor Brands reported a 5% decrease in revenue of $631m compared to the prior year, however it believes this was primarily due to retailer inventory management actions in the US, a decrease in revenue from seasonal product, and lower international revenue, primarily in Europe.
Operating income was $84.43m, which is a 11% decrease from the same period last year of $94,95m. Net income was $59.51m, down 10% from $66.30m last year.
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Wrangler brand global revenue was $409m, a 3% decrease compared to the prior year. Lee brand global revenue was $219m, a 9% decrease compared to the prior year.
Kontoor Brands president and CEO Scott Baxter explained the company’s first quarter results were “stronger than expected, driven by higher revenue, gross margin, and cash flow.”
He continued: “We are pleased with another quarter of market share gains and the improvement we saw in POS and retailer inventories over the course of the first quarter.”
Regional Kontoor Brands Q1 results
US revenue was $492m and decreased 5% compared to the prior year and US wholesale revenue decreased 6%. Growth in owned brick-and-mortar stores was more than offset by reduced wholesale shipments as retailers tightly managed inventory levels.
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By GlobalDataInternational revenue was $139m, a 7% decrease compared to the prior year and revenue in Europe decreased 9%, with 13% growth in direct-to-consumer – more than offset by a 13% decline in wholesale.
Asia revenue decreased 7%, with a 5% decrease in wholesale and a 9% decrease in direct-to-consumer. Non-US Americas decreased 2% driven by a decline in wholesale.
International direct-to-consumer revenue was flat, with 10% growth in digital offset by a 5% decrease in owned brick-and-mortar stores.
Kontoor Brands Q1 results
- Revenue decreased 5% to $631m compared to the same period last year.
- Operating income was $84m on a reported basis and $93m on an adjusted basis and decreased 2% compared to the prior year.
- Net income was down 10% to $59.51m from $66.30m in the same period last year.
Kontoor Brands raises full year financial outlook
As a result of the strong start to the year, and increased visibility into gross margin expansion, the company is raising its full year earnings outlook.
Baxter said: “We are raising our full year earnings outlook driven by better-than-expected first quarter results and stronger gross margin expansion for the balance of the year.”
He added: “We continue to plan the business conservatively in light of the environment but are confident our brand investments and organisational efficiency will support accelerated earnings growth and free cash flow generation for the remainder of the year while maintaining significant capital allocation optionality.”
The company’s updated 2024 outlook means revenue is expected to be in the range of $2.57bn to $2.63bn, reflecting a decrease of 1% to an increase of 1% percent compared to the prior year, consistent with the prior outlook.
Kontoor Brands still expects first half revenue to decline at a mid-single digit rate compared to the prior year, consistent with the prior outlook.
Adjusted gross margin is now expected to approximate 44.6%, representing an increase of 210 basis points compared to adjusted gross margin in the prior year, excluding the out-of-period duty expense. This compares to the prior gross margin outlook of 44.2% to 44.4%.
Adjusted operating income is now expected to be in the range of $377m to $387m, reflecting an increase of between 8% and 11% compared to adjusted operating income in the prior year, excluding the out-of-period duty expense.
