The company reported an operating income of $342 million, with adjusted operating income of $381 million, an increase of 9 per cent year-over-year (YoY), earnings per share (EPS) of $4.36, adjusted EPS of $4.89 increased 10 per cent compared to prior year on an adjusted basis, excluding the out-of-period duty charge in that period, Kontoor said in a press release.
Kontoor Brands has reported a revenue of $2.61 billion in FY24, with a 44.5 per cent gross margin.
Adjusted operating income rose 9 per cent to $381 million, and adjusted EPS increased 10 per cent to $4.89.
US revenue grew 1 per cent, while international declined 5 per cent.
FY25 revenue is expected at $2.63-$2.69 billion, with 1-3 per cent growth, driven by market share gains and expansion.
The growth in the US and global direct-to-consumer (DTC) was offset by a decline in international wholesale revenue. US revenue reached $2.09 billion in FY24, an increase of 1 per cent compared to the prior year. US wholesale revenue increased 1 per cent driven by expanded distribution, market share gains and strength in point-of-sale, partially offset by retailer inventory management actions. DTC increased 5 per cent driven by 8 per cent growth in digital partially offset by a 1 per cent decrease in brick-and-mortar retail.
The international revenue was $521 million, a decrease of 5 per cent compared to prior year. International wholesale decreased 7 per cent and DTC increased 3 per cent, with a 15 per cent increase in digital partially offset by a 6 per cent decrease in owned brick-and-mortar retail. Europe saw a decline in revenue of 5 per cent, with a 7 per cent increase in DTC more than offset by an 8 per cent decrease in wholesale. Asia’s revenue decreased 5 per cent driven by a 1 per cent decrease in DTC and a 7 per cent decrease in wholesale. Non-US Americas revenue decreased 4 per cent YoY.
Brand-wise, Wrangler’s global revenue was $1.81 billion, an increase of 3 per cent YoY. Its US revenue increased 3 per cent, driven by growth in direct-to-consumer and wholesale and the international revenue decreased 1 per cent, driven by a 3 per cent decrease in wholesale partially offset by a 14 per cent increase in DTC.
Lee brand’s global revenue was $791 million, a decrease of 6 per cent YoY. Its US revenue decreased 5 per cent driven by a decline in wholesale and brick-and-mortar retail, partially offset by growth in digital. Lee’s international revenue decreased 7 per cent driven by declines in wholesale and brick-and-mortar retail, partially offset by growth in digital.
Selling, general and administrative (SG&A) expenses were $819 million. On an adjusted basis, SG&A expenses were $796 million, representing an increase of 5 per cent YoY driven by an increase in demand creation and investments in DTC and technology platforms, partially offset by lower distribution expenses.
Fourth quarter financial performance
In the fourth quarter (Q4) of FY24, the company’s revenue reached $699 million, an increase of 4 per cent YoY. The increase was driven by 9 per cent growth in global DTC and 4 per cent growth in wholesale. US revenue was $569 million and increased 6 per cent YoY. US wholesale revenue increased 5 per cent YoY. DTC for Q4 increased 11 per cent YoY driven by a 16 per cent increase in digital and a 1 per cent increase in brick-and-mortar retail.
International revenue in Q4 was $130 million, a decrease of 1 per cent YoY. International wholesale decreased 4 per cent and DTC increased 5 per cent, with a 15 per cent increase in digital partially offset by a 3 per cent decrease in owned brick-and-mortar retail. The revenue in Europe increased 1 per cent, with a 5 per cent increase in DTC partially offset by a 1 per cent decrease in wholesale. Asia decreased 2 per cent, with a 4 per cent increase in DTC more than offset by an 8 per cent decrease in wholesale. Non-US Americas revenue decreased 4 per cent YoY.
“Our outlook reflects continued revenue growth, market share gains, gross margin expansion, strong operating earnings and cash generation. The scaling benefits of Project Jeanius will support increased investment in our brands and platforms and further enhance our best-in-class return on invested capital,” said Scott Baxter, president, chief executive officer (CEO) and chairman of the board of directors. “The fundamentals of our business remain strong and the acquisition of Helly Hansen will further enhance our total shareholder return (TSR) model and provide the opportunity for even stronger value creation moving forward. We are mindful of the uncertain environment and will continue to manage the business conservatively, but we are confident in our ability to drive strong shareholder returns in 2025 and beyond.”
Outlook
In FY25, Kontoor expects revenue in the range of $2.63-$2.69 billion, reflecting growth of 1 per cent to 3 per cent YoY. The company’s revenue outlook includes an approximate 1 per cent negative impact from unfavourable foreign currency exchange rates. The revenue outlook also includes the impact of a 53rd week, which is not expected to meaningfully benefit 2025 revenue on a full year basis.
The company predicts revenue growth to be driven by market share gains, channel and category expansion, expanded distribution, and the benefit from increased demand creation and other brand investments. The company expects these growth drivers to be partially offset by conservative retailer inventory management and more tempered consumer spending around the globe.
Adjusted gross margin is expected to be in the range of 45.3-45.5 per cent, representing an increase of 20 to 40 bps compared to adjusted gross margin in prior year. Gross margin expansion is driven by the benefits of project Jeanius, favourable mix and other supply chain efficiencies, partially offset by higher product costs.
Adjusted SG&A is expected to increase at a low-single digit rate compared to adjusted SG&A in prior year. The company will continue to invest in its brands and capabilities in support of long-term profitable growth, including demand creation, product development, direct-to-consumer and international expansion, partially offset by the benefits of Project Jeanius.
Adjusted operating income is expected to be in the range of $400 million to $408 million, representing an increase of 5 per cent to 7 per cent compared to prior year on an adjusted basis. Adjusted EPS is expected to be in the range of $5.20-$5.30, representing an increase of 6 per cent to 8 per cent YoY on an adjusted basis and includes the negative impact from unfavourable foreign currency exchange rates.
Fibre2Fashion News Desk (SG)
