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Kontoor Brands, Inc. (KTB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $623M, down 1% YoY (flat in constant currency), with adjusted EPS of $1.20 up 3% YoY; gross margin expanded 200 bps to 47.7% on an adjusted basis .
  • Versus S&P Global consensus, KTB delivered an EPS beat and a slight revenue miss: adjusted EPS $1.20 vs $1.164*; revenue $622.9M vs $626.3M*; gross margin strength was the key upside driver .
  • FY 2025 guidance was raised to reflect Helly Hansen, now revenue $3.06–$3.09B, adjusted EPS $5.40–$5.50, cash from ops >$350M; company introduced tariff headwind of an unmitigated ~$50M for 2025 with actions starting in Q3 to offset over 12–18 months .
  • Brand performance was mixed: Wrangler +3% global revenue with share gains and strong female category; Lee −9% as repositioning progresses; DTC +5% globally with U.S. DTC +11% growth .
  • Near-term catalysts: integration and margin uplift plan for Helly Hansen, Q2 revenue ~$630M and adjusted EPS ~$0.80 including Helly (seasonal losses), tariff mitigation execution, and Project Jeanius scaling .

What Went Well and What Went Wrong

What Went Well

  • Adjusted gross margin rose to 47.7% (+200 bps YoY) on lower product costs, Project Jeanius, supply chain efficiencies, and favorable mix; exceeded plan by ~170 bps per CFO commentary .
  • Wrangler delivered +3% global revenue, 70 bps share gains in men’s and women’s bottoms, and +40% growth in female; U.S. Wrangler +3% with DTC +14% .
  • Strong cash generation and balance sheet: Q1 cash from ops $77.6M; cash $357M; inventory down 12% YoY; no revolver borrowings .

What Went Wrong

  • Revenue −1% YoY and slightly below consensus; International −7% (−3% constant currency), with Non-U.S. Americas −18% and softness in wholesale channels .
  • Lee brand −9% global revenue (U.S. −8%, international −11%); management is mid-repositioning with improvement targeted over time rather than immediate recovery .
  • Tariffs represent a material 2025 headwind (unmitigated ~$50M including Helly) and will require price, sourcing, and supply chain optimization to substantially offset over 12–18 months; Q2 EPS including Helly guided down due to seasonality .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$631.2 $699.3 $622.9
Adjusted Diluted EPS ($)$1.16 $1.38 $1.20
Adjusted Gross Margin (%)45.7% 44.7% 47.7%
Adjusted Operating Margin (%)14.7% 14.5% 15.4%
Adjusted EBITDA ($USD Millions)$99.4 $113.0 $103.6
Adjusted EBITDA Margin (%)15.8% 16.2% 16.6%

Actual vs Consensus (S&P Global):

MetricConsensusActualBeat/Miss
Revenue ($USD Millions)$626.3*$622.9 Miss (−0.5%)
Adjusted EPS ($)$1.164*$1.20 Bold Beat (+3.1%)

Values marked with * were retrieved from S&P Global.

Segment Breakdown

SegmentQ1 2024 Revenue ($MM)Q4 2024 Revenue ($MM)Q1 2025 Revenue ($MM)
Wrangler$409.5 $503.1 $420.2
Lee$219.4 $193.5 $199.9
Other$2.3 $2.6 $2.8

Segment Profit

SegmentQ1 2024 Profit ($MM)Q4 2024 Profit ($MM)Q1 2025 Profit ($MM)
Wrangler$74.7 $105.6 $86.8
Lee$35.1 $17.8 $32.4

KPIs and Balance Sheet

KPIMar 2024Dec 2024Mar 2025
Cash & Equivalents ($MM)$215.1 $334.1 $356.7
Inventory ($MM)$501.3 $390.2 $443.1
Long-Term Debt ($MM)$759.2 $740.3 $735.6
Cash from Ops (Quarter, $MM)$56.5 N/A$77.6

Guidance Changes

MetricPeriodPrevious Guidance (Feb 25, 2025)Current Guidance (May 6, 2025)Change
RevenueFY 2025$2.63–$2.69B (ex-Helly) $3.06–$3.09B incl. Helly (~$425M) Raised (reflects Helly)
Adjusted Gross MarginFY 202545.3–45.5% 45.9–46.1% (incl. ~40 bps benefit from Helly) Raised
Adjusted Operating IncomeFY 2025$400–$408M $437–$445M (incl. ~$37M from Helly) Raised
Adjusted EPSFY 2025$5.20–$5.30 $5.40–$5.50 (incl. ~$0.20 from Helly) Raised
Cash from OperationsFY 2025>$300M >$350M (incl. Helly) Raised
Adjusted SG&AFY 2025Low-single-digit increase (ex-Helly) ~+20% incl. Helly; ex-Helly low-single-digit; includes $9M acquisition-related SBC Raised (incl. Helly)
Interest ExpenseFY 2025~$30M ~$50M Raised
Effective Tax RateFY 2025~20% ~20% Maintained
Other Expense (Adjusted)FY 2025~$11M ~$11M Maintained
Average SharesFY 2025~56M ~56M Maintained
Q2 RevenueQ2 2025N/A~$630M (incl. $20–$25M Helly) New
Q2 Adjusted EPSQ2 2025N/A~$0.80 incl. Helly; $1.08 ex-Helly New
CapexFY 2025~$35M ~$45M (incl. Helly) Raised
Tariffs Impact (unmitigated)FY 2025Not contemplated ~$50M including Helly; begin offset Q3; substantially offset in 12–18 months New risk disclosure
DividendQuarterly$0.52/share declared $0.52 payable June 20, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Project JeaniusQ3: Momentum building; 2024 outlook raised; margin expansion on lower costs and efficiencies . Q4: FY25 benefits to ramp; >$100M run-rate by end of 2026 .Early benefits contributed to GM beat; SKU reduction ~20% in U.S.; run-rate >$100M by 2026 reiterated .Strengthening execution
DTC & WesternQ3: DTC up 9% (Q4 later: DTC up 9%); Western strength .Global DTC +5%; U.S. DTC +11%; Western trends accelerated to mid-teens .Positive mix tailwind
Wrangler FemaleQ3/Q4: Innovation and marketing investments scaling .Female +40%; collaboration momentum; ~10% of global revenue and growing .Rapid growth
Lee RepositioningQ3/Q4: Continuing repositioning; declines in wholesale .−9% global; U.S. digital +12%; equity campaign in H2; inflection targeted over time .Transitional, improving digital
Tariffs/MacroQ4: FY25 did not contemplate tariffs .~$50M unmitigated impact (incl. Helly); Mexico exempt (USMCA); mitigation actions begin Q3 .New headwind with plan
Helly HansenQ4: Expected ~$0.15 accretion in FY25 .Accretion raised to ~$0.20; freight cost savings 10–20% potential; margin lift to mid-teens over time .Accretive, integration upside

Management Commentary

  • “Our strong first quarter results reflect the operational agility that is a cornerstone of our business… the strength of our gross margin drove strong underlying earnings growth, cash generation and further improvement in our returns on capital.” – Scott Baxter, CEO .
  • “We have cleared all required regulatory approvals [for Helly Hansen]… Helly’s freight expenses will decrease between 10% and 20%… clear line of sight to double Helly’s operating margin over time.” – Joe Alkire, CFO .
  • “We do not expect an impact to second quarter operating income as a result of recently enacted changes in tariffs… begin to offset the $50 million unmitigated impact… and expect to substantially offset over a 12 to 18 month period.” – Company statement .
  • “Wrangler delivered another quarter of share gains… Wrangler male and female bottoms gained 70 basis points of market share during the quarter.” – Management .

Q&A Highlights

  • Consumer and POS trends: Management noted resilience with POS improving from a mid-teen decline late February to down ~1% in March and steady in April; early May positive .
  • Guidance assumptions: H2 organic growth implied ~3% driven by 53rd week, new programs, and distribution; POS assumptions moderated to ~flat to slightly down .
  • Lee timeline: Best product in decades, digital up ~8%, large equity campaign in H2; management expects an eventual inflection, highlighting 2026 timing .
  • Gross margin drivers: ~80 bps mix, ~40 bps lower product cost, ~80 bps Jeanius/other; mix moderates later in year while Jeanius benefits continue .
  • Tariffs capacity and mitigation: Mexico exempt under USMCA; limited additional capacity but plants run efficiently; unmitigated impact now $35M ex-Helly vs prior $50M; actions include pricing and sourcing optimization .
  • Helly seasonality: Q2 is smallest quarter with operating losses; Q2 EPS impact of Helly not indicative of full quarter run-rate; accretion raised to ~$0.20 for 2025 .

Estimates Context

  • Q1 2025 actuals vs S&P Global consensus: Adjusted EPS $1.20 vs $1.164* (Beat), Revenue $622.9M vs $626.3M* (Miss). Prior quarters were generally above consensus on both EPS and revenue (Q4 2024: EPS $1.38 vs $1.351*, revenue $699.3M vs $698.1M*; Q1 2024: EPS $1.16 vs $0.907*, revenue $631.2M vs $607.9M*) .
  • Implications: Margin upside and cash generation support EPS beats; International wholesale and Lee repositioning weigh on top-line relative to consensus. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Gross margin strength and early Project Jeanius benefits are driving EPS outperformance; expect mix tailwinds to moderate, but structural margin gains to endure .
  • Wrangler momentum (female +40%, Western mid-teens, share gains) underpins brand health; continued investment in demand creation sustaining DTC growth .
  • Lee is in transition with encouraging digital signals; expect a multi-quarter recovery cadence with H2 brand campaign as a catalyst .
  • Raised FY 2025 guide (revenue/OPI/EPS/CFO) reflects Helly Hansen; near-term seasonality means Q2 EPS dip including Helly, but accretion for full year is higher (~$0.20) .
  • Tariffs introduce a sizable headwind (~$50M unmitigated), but actions begin in Q3 and are expected to substantially offset within 12–18 months; monitoring execution on pricing/sourcing is critical .
  • Balance sheet and liquidity strong (cash $357M; no revolver draws); net leverage expected <3x pro forma and <2x within 12 months post-close, enabling capital allocation flexibility (dividend maintained at $0.52) .
  • Trading view: Near-term volatility (Q2 seasonality/tariffs) vs medium-term upside from Helly integration, margin lift, and Project Jeanius; focus on H2 execution and tariff mitigation milestones .

Additional Q1 2025 Press Releases

  • Quarterly dividend declared: $0.52 per share payable June 20, 2025 .
  • Earnings release and FY 2025 updates: detailed revenue/margin/EPS guidance and Helly Hansen closing expectations .