For its first quarter Kontoor Brands revenue was 631 million dollars, a decrease of 5 percent or 6 percent in constant currency compared to the prior year.
The company said in a release that revenue decline was primarily driven by retailer inventory management actions in the US, a decrease in revenue from seasonal products, and lower international revenue, primarily in Europe.
However the sales decline was below analysts expectations. The parent of the Wrangler and Lee jeans brands also beat the first quarter profit expectations and raised its outlook for the year ahead.
“Our first quarter results were stronger than expected, driven by higher revenue, gross margin, and cash flow. As a result of our strong start to the year and increased visibility into gross margin expansion, we are raising our full year earnings outlook,” said Scott Baxter, president, CEO and chair of Kontoor Brands.
Kontoor Brands reports revenue drop across markets
US revenue of 492 million dollars decreased 5 percent, while wholesale revenue decreased 6 percent. International revenue was 139 million dollars, a 7 percent or 8 percent decrease in constant currency compared to the prior year.
Europe decreased 9 or 11 percent in constant currency, with 13 or 10 percent constant currency growth in direct-to-consumer more than offset by a 13 percent or 16 percent constant currency decline in wholesale.
Revenues in Asia decreased 7 percent or 3 percent in constant currency, with a 5 percent or 1 percent constant currency decrease in wholesale and a 9 percent or 5 percent constant currency decrease in direct-to-consumer.
Non-US Americas decreased 2 or 7 percent in constant currency driven by a decline in wholesale. International direct-to-consumer was flat or increased 1 percent in constant currency, with 10 percent or 12 percent constant currency growth in digital offset by a 5 percent decrease in company-owned brick-and-mortar stores.
Performance of Kontoor Brands brand portfolio
The company added that Wrangler brand global revenue was 409 million dollars, a 3 percent or 4 percent decrease in constant currency compared to the prior year. Wrangler US revenue decreased 2 percent and international revenue decreased 10 or 13 percent in constant currency, with 25 percent or 21 percent constant currency growth in direct-to-consumer more than offset by a decline in wholesale.
Lee brand global revenue was 219 million dollars, a 9 percent decrease compared to the prior year. Lee US revenue decreased 12 percent driven by reduced shipments to the wholesale channel and a decline in direct-to-consumer. Lee international revenue decreased 4 or 5 percent in constant currency.
Gross margin increased 220 basis points to 45.2 percent on a reported basis and increased 270 basis points to 45.7 percent on an adjusted basis. Operating income was 84 million dollars on a reported basis, and 93 million dollars on an adjusted basis, down 2 percent compared to the prior year. Adjusted operating margin of 14.7 percent increased 50 basis points compared to the prior year.
Earnings per share (EPS) was 1.05 dollars on a reported basis and 1.16 dollars on an adjusted basis compared to 1.16 dollars in the prior year.
Kontoor Brands updates outlook
The company’s 2024 revenue is now expected to be in the range of 2.57 to 2.63 billion dollars, reflecting a decrease of 1 percent to an increase of 1 percent compared to the prior year, consistent with the prior outlook. The company continues to expect 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 percent, representing an increase of 210 basis points compared to the prior gross margin outlook of 44.2 to 44.4 percent.
Adjusted operating income is now expected to be in the range of 377 to 387 million dollars, reflecting an increase of between 8 and 11 percent compared to the prior outlook of 372 to 382 million dollars.
Adjusted EPS is now expected to be in the range of 4.70 dollars to 4.80 dollars compared to the prior outlook of 4.65 dollars to 4.75 dollars, an increase between 6 and 8 percent compared to the prior outlook of 4 to 7 percent. The company now anticipates first half adjusted EPS to increase at a mid-single-digit rate and 85 cents in the second quarter.