Kontoor Brands Reports 2023 First Quarter Results; Reaffirms 2023 Outlook

May 04, 2023 Press Release

First Quarter 2023 Highlights

  • Q1’23 revenue of $667 million decreased 2 percent (1 percent in constant currency) compared to Q1'22, consistent with prior outlook of flat to down low-single digits
  • Q1’23 gross margin of 43.0 percent decreased 180 basis points compared to Q1’22, consistent with prior commentary indicating that impacts from geographic mix, production downtime and inflationary pressures on product costs would weigh on first quarter gross margin
  • Q1’23 EPS of $1.16 compared to Q1'22 EPS of $1.40

Full Year 2023 Financial Outlook

  • FY’23 revenue is expected to increase at a low-single digit percentage compared to FY’22, consistent with prior outlook
  • FY’23 gross margin is expected to be in the range of 43.5 percent to 44.0 percent, consistent with prior outlook
  • FY’23 EPS is expected to be in the range of $4.55 to $4.75, consistent with prior outlook
  • Inventory growth is anticipated to be in line with revenue growth by quarter-end Q3'23

GREENSBORO, N.C.--(BUSINESS WIRE)-- Kontoor Brands, Inc. (NYSE: KTB), a global lifestyle apparel company, with a portfolio led by two of the world’s most iconic consumer brands, Wrangler® and Lee®, today reported financial results for its first quarter ended April 1, 2023.

“We delivered first quarter results consistent with our expectations and commentary provided on the fourth quarter earnings call. As anticipated, our brands continued to gain share in the U.S. where POS outpaced shipments in the quarter. Increases domestically were muted by expected softness in International markets. In addition to share gains and positive sell through, robust performance in our own DTC during the quarter further validates that our brands are connecting with consumers and winning in a challenging marketplace,” said Scott Baxter, President, Chief Executive Officer and Chair of Kontoor Brands.

“We continue to assume macroeconomic pressures will weigh on consumer demand in the second half of 2023, particularly in the U.S. However, we believe that our increasingly diversified growth across channels, categories and geographies, enabled by strategic investments in DTC, demand creation and data analytics will generate more sustained, profitable growth over time. This gives us confidence in reaffirming our 2023 outlook, despite the uneven backdrop. These resilient fundamentals should, when coupled with our solid balance sheet and capital allocation optionality, uniquely position us to yield superior returns for all KTB stakeholders going forward,” added Baxter.

This release refers to “constant currency” amounts, which are further described in the Non-GAAP Financial Measures section below. All per share amounts are presented on a diluted basis. Unless otherwise noted, “reported” and “constant currency” amounts are the same.

First Quarter 2023 Income Statement Review

Revenue was $667 million, a 2 percent decrease (1 percent decrease in constant currency) over the same period in the prior year. Revenue increases, primarily driven by strength in domestic wholesale and DTC, were more than offset by decreases in International wholesale, primarily driven by the continued impacts of COVID-policy changes in China.

U.S. revenue was $518 million, increasing 2 percent over the same period in the prior year. U.S. wholesale increased 1 percent compared to the first quarter 2022, including strength in digital wholesale which increased 11 percent compared to last year. These gains were augmented by continued strength in DTC, with U.S. own.com revenue increasing 15 percent compared to the same period last year.

International revenue was $149 million, a 14 percent decrease (9 percent decrease in constant currency) over the same period in the prior year driven by softness in wholesale, which was somewhat offset by strong DTC performance. International DTC increased 10 percent (17 percent increase in constant currency) compared to the same period last year. As expected, China decreased 36 percent (31 percent decrease in constant currency) compared to the first quarter 2022, driven by impacts in the wholesale channel from the COVID-policy changes. China DTC increased 3 percent (11 percent in constant currency) compared to the same period last year. Europe decreased 7 percent (1 percent decrease in constant currency) over the same period last year, with wholesale pressures more than offsetting gains in DTC. Europe DTC increased 15 percent (22 percent increase in constant currency) compared to the same period last year.

Wrangler brand global revenue was $423 million, a 3 percent increase from the same period in the prior year. Wrangler U.S. revenue increased 3 percent compared to the same period last year, driven by increased shipments in U.S. wholesale reflecting category diversification including non-denim bottoms, Outdoor and Workwear. Wrangler U.S. DTC increased 16 percent compared to the same period last year. Wrangler international revenue was flat (5 percent increase in constant currency) compared to the first quarter 2022, with broad-based constant currency gains in both wholesale and DTC.

Lee brand global revenue was $241 million, a 9 percent decrease (7 percent decrease in constant currency) from the same period in the prior year. Lee U.S. revenue was flat compared to the same period last year, with gains in own.com offset by softness in wholesale. Lee U.S. DTC increased 8 percent compared to the same period last year. Lee international revenue decreased 20 percent (16 percent decrease in constant currency) compared to the first quarter 2022, driven primarily by reductions in China wholesale due to the impact of COVID-policy changes.

Gross margin decreased 180 basis points to 43.0 percent of revenue compared to the same period last year. As expected, and as indicated in prior commentary, higher inflationary pressures on input costs and geographic mix, as well as impacts from proactive actions in managing internal production, including downtime, primarily drove the decline. The decline was partially offset by strategic pricing and moderating transitory costs such as air freight.

Selling, General & Administrative (SG&A) expenses were $192 million or 28.7 percent of revenue, in the first quarter, decreasing 20 basis points compared to the same period in the prior year. As expected, continued strategic investments in DTC were more than offset by lower compensation costs and tight controls of discretionary expenses.

Operating income was $95 million in the first quarter. Operating margin of 14.2 percent decreased 170 basis points compared to the same period in the prior year. Benefits from tight expense controls, lower compensation costs and strategic pricing were more than offset by higher inflationary pressures on input costs and geographic mix, as well as impacts from proactive actions in managing internal production, including downtime.

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) was $102 million in the first quarter. EBITDA margin of 15.3 percent decreased 200 basis points compared to EBITDA margin during the same period in the prior year.

Earnings per share was $1.16 in the first quarter, compared to $1.40 in the same period last year.

April 1, 2023, Balance Sheet and Liquidity Review

The Company ended the first quarter 2023 with $53 million in cash and cash equivalents, and approximately $0.8 billion in long-term debt.

As of April 1, 2023, the Company had $50 million outstanding borrowings under the Revolving Credit Facility and $438 million available for borrowing against this facility.

As previously announced, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.48 per share, payable on June 20, 2023, to shareholders of record at the close of business on June 9, 2023.

Inventory at the end of Q1 fiscal 2023 was $660 million, up 52 percent compared to the prior-year period, sequentially improving from Q4’22, and up 27 percent compared to pre-pandemic 2019 levels. Nearly 90 percent of inventory at the end of the first quarter was core product. The Company is taking proactive actions and expects inventory growth to be in line with sales growth by the end of the third quarter of 2023.

2023 Outlook

The Company is reaffirming its prior outlook for FY’23 provided on February 28, 2023, with select updates to quarterly cadence. Although the impacts from near-term macroeconomic factors are uncertain, the Company remains focused on execution to deliver continued strong share gains in the U.S. and to drive structural gross margin improvement in accretive categories, channels and geographies. The Company remains confident in its strategy and expects to continue investing in its brands and capabilities in support of longer-term profitable revenue growth and anticipates robust cash generation as inventory normalizes in 2023.

Thus, the Company is providing its 2023 guidance including the following:

  • Revenue is expected to increase at a low-single digit percentage over 2022 with first and second half performance relatively balanced. The Company continues to expect first half of 2023 to be driven by the U.S. with momentum in POS, share gains and DTC. Compared to the prior outlook, Q2’23 U.S. performance is now expected to be somewhat tempered by shipments continuing to lag POS, while China is now anticipated to see stronger growth in Q2’23 relative to previous assumptions. During the second half of 2023, the Company continues to assume macro consumer demand conditions will be more challenged in the U.S., with the China market more fully reopening.
  • Gross margin is expected to be in the range of 43.5 percent to 44.0 percent, increasing 40 to 90 basis points compared to gross margin of 43.1 percent in 2022. The Company continues to expect gross margin expansion in the second half driven by geographic and DTC mix, normalizing production and reduced input cost pressures. Compared to the prior outlook, year-on-year gross margin pressure should be most pronounced in the second quarter due to proactive actions in managing internal production, including downtime, as well as peak inflation with our highest cost goods flowing through the P&L. These impacts are now expected to be offset by greater second half benefits from geographic mix, improved efficiencies and normalizing production.
  • SG&A investments will continue to be made in the Company’s brands and capabilities in support of longer-term profitable revenue growth, including demand creation, DTC, and International expansion. Compared to adjusted SG&A in 2022, the Company expects full year SG&A to increase at a mid-single digit percentage. Compared to the prior outlook, SG&A growth is now expected to be more relatively balanced between the first and second half, with amplified investments in demand creation during Q2’23 offset by greater second half benefits from reductions in non-strategic spend and tighter cost controls.
  • EPS is expected to be in the range of $4.55 to $4.75, consistent with the prior outlook. Due primarily to gross margin, the Company expects EPS on a dollar basis to be more weighted to the second half of 2023. The Company now expects a one-time discrete tax charge in the second quarter will adversely impact Q2’23 EPS by approximately $0.10.
  • Capital Expenditures are expected to be in the range of $35 million to $40 million, primarily to support IT projects, growth in owned retail stores, manufacturing and distribution investments.
  • The Company expects an effective tax rate of 20 percent to 21 percent, including the one-time discrete tax charge in Q2’23. Interest expense is expected to be in the range of $33 million to $38 million. Other Expense is expected to be in the range of $5 million to $10 million. Average shares outstanding are expected to be approximately 57 million, excluding the impact of any additional share repurchases.

Webcast Information

Kontoor Brands will host its first quarter conference call beginning at 8:30 a.m. Eastern Time today, May 4, 2023. The conference will be broadcast live via the Internet, accessible at https://www.kontoorbrands.com/investors. For those unable to listen to the live broadcast, an archived version will be available at the same location.

Non-GAAP Financial Measures

Constant Currency - This release refers to “reported” amounts in accordance with GAAP, which include translation and transactional impacts from changes in foreign currency exchange rates. This release also refers to “constant currency” amounts, which exclude the translation impact of changes in foreign currency exchange rates.

Reconciliations of these non-GAAP measures to the most comparable GAAP measures are presented in the supplemental financial information included with this release that identifies and quantifies all reconciling adjustments and provides management's view of why this non-GAAP information is useful to investors. While management believes that these non-GAAP measures are useful in evaluating the business, this information should be viewed in addition to, and not as an alternate for, reported results under GAAP. The non-GAAP measures used by the Company in this release may be different from similarly titled measures used by other companies.

About Kontoor Brands

Kontoor Brands, Inc. (NYSE: KTB) is a global lifestyle apparel company, with a portfolio led by two of the world’s most iconic consumer brands: Wrangler® and Lee®. Kontoor designs, manufactures and distributes superior high-quality products that look good and fit right, giving people around the world the freedom and confidence to express themselves. Kontoor Brands is a purpose-led organization focused on leveraging its global platform, strategic sourcing model and best-in-class supply chain to drive brand growth and deliver long-term value for its stakeholders. For more information about Kontoor Brands, please visit www.KontoorBrands.com.

Forward-Looking Statements

Certain statements included in this release and attachments are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” “may” and other words and terms of similar meaning or use of future dates. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as required under the U.S. federal securities laws. Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this release include, but are not limited to: macroeconomic conditions, including inflation, rising interest rates, recessionary concerns, fluctuating foreign currency exchange rates and distress in global credit and banking markets, as well as ongoing global supply chain disruptions, labor challenges, the COVID-19 pandemic and geopolitical events, continue to adversely impact global economic conditions and have had, and may continue to have, a negative impact on the Company’s business, results of operations, financial condition and cash flows (including future uncertain impacts); the level of consumer demand for apparel; supply chain and shipping disruptions, which could continue to result in shipping delays, an increase in transportation costs and increased product costs or lost sales; reliance on a small number of large customers; the COVID-19 pandemic continues to negatively affect the Company’s business and could continue to result in supply chain disruptions, reduced consumer traffic and purchasing, closed factories and stores, and reduced workforces (including future uncertain effects); intense industry competition; the ability to accurately forecast demand for products; the Company’s ability to gauge consumer preferences and product trends, and to respond to constantly changing markets; the Company’s ability to maintain the images of its brands; increasing pressure on margins; e-commerce operations through the Company’s direct-to-consumer business; the financial difficulty experienced by the retail industry; possible goodwill and other asset impairment; the ability to implement the Company’s business strategy; the stability of manufacturing facilities and foreign suppliers; fluctuations in wage rates and the price, availability and quality of raw materials and contracted products; the reliance on a limited number of suppliers for raw material sourcing and the ability to obtain raw materials on a timely basis or in sufficient quantity or quality; disruption to distribution systems; seasonality; unseasonal or severe weather conditions; the Company's and its vendors’ ability to maintain the strength and security of information technology systems; the risk that facilities and systems and those of third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; ability to properly collect, use, manage and secure consumer and employee data; foreign currency fluctuations; disruption and volatility in the global capital and credit markets and its impact on the Company's ability to obtain short-term or long-term financing on favorable terms; the impact of climate change and related legislative and regulatory responses; legal, regulatory, political and economic risks; changes to trade policy, including tariff and import/export regulations; compliance with anti-bribery, anti-corruption and anti-money laundering laws by the Company and third-party suppliers and manufacturers; changes in tax laws and liabilities; the costs of compliance with or the violation of national, state and local laws and regulations for environmental, consumer protection, employment, privacy, safety and other matters; continuity of members of management; labor relations; the ability to protect trademarks and other intellectual property rights; the ability of the Company’s licensees to generate expected sales and maintain the value of the Company’s brands; the Company maintaining satisfactory credit ratings; restrictions on the Company’s business relating to its debt obligations; volatility in the price and trading volume of the Company’s common stock; anti-takeover provisions in the Company’s organizational documents; and fluctuations in the amount and frequency of our share repurchases.

Many of the foregoing risks and uncertainties will be exacerbated by any continued worsening of the global business and economic environment. More information on potential factors that could affect the Company's financial results are described in detail in the Company’s most recent Annual Report on Form 10-K and in other reports and statements that the Company files with the SEC.

KONTOOR BRANDS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended March

 

%

(Dollars in thousands, except per share amounts)

 

2023

 

2022

 

Change

Net revenues

 

$

667,123

 

 

$

679,743

 

 

(2)%

Costs and operating expenses

 

 

 

 

 

 

Cost of goods sold

 

 

380,422

 

 

 

375,122

 

 

1%

Selling, general and administrative expenses

 

 

191,752

 

 

 

196,400

 

 

(2)%

Total costs and operating expenses

 

 

572,174

 

 

 

571,522

 

 

0%

Operating income

 

 

94,949

 

 

 

108,221

 

 

(12)%

Interest expense

 

 

(10,273

)

 

 

(8,023

)

 

28%

Interest income

 

 

419

 

 

 

469

 

 

(11)%

Other expense, net

 

 

(2,226

)

 

 

(222

)

 

903%

Income before income taxes

 

 

82,869

 

 

 

100,445

 

 

(17)%

Income taxes

 

 

16,573

 

 

 

19,635

 

 

(16)%

Net income

 

$

66,296

 

 

$

80,810

 

 

(18)%

Earnings per common share

 

 

 

 

 

 

Basic

 

$

1.19

 

 

$

1.43

 

 

 

Diluted

 

$

1.16

 

 

$

1.40

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

Basic

 

 

55,646

 

 

 

56,321

 

 

 

Diluted

 

 

56,940

 

 

 

57,836

 

 

 

Basis of presentation for all financial tables within this release: The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 each year. For presentation purposes herein, all references to periods ended March 2023 and March 2022 correspond to the 13-week fiscal periods ended April 1, 2023 and April 2, 2022, respectively. References to March 2023, December 2022 and March 2022 relate to the balance sheets as of April 1, 2023, December 31, 2022 and April 2, 2022, respectively. Amounts herein may not recalculate due to the use of unrounded numbers.

KONTOOR BRANDS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(In thousands)

 

March 2023

 

December 2022

 

March 2022

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

52,677

 

$

59,179

 

$

193,630

Accounts receivable, net

 

 

224,024

 

 

225,858

 

 

276,037

Inventories

 

 

660,089

 

 

596,836

 

 

432,891

Prepaid expenses and other current assets

 

 

102,757

 

 

100,396

 

 

82,495

Total current assets

 

 

1,039,547

 

 

982,269

 

 

985,053

Property, plant and equipment, net

 

 

104,999

 

 

104,465

 

 

101,380

Operating lease assets

 

 

55,116

 

 

51,029

 

 

47,759

Intangible assets, net

 

 

13,173

 

 

13,361

 

 

14,248

Goodwill

 

 

209,904

 

 

209,627

 

 

211,504

Other assets

 

 

220,831

 

 

221,510

 

 

229,110

TOTAL ASSETS

 

$

1,643,570

 

$

1,582,261

 

$

1,589,054

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Short-term borrowings

 

$

7,255

 

$

7,280

 

$

239

Current portion of long-term debt

 

 

12,500

 

 

10,000

 

 

2,500

Accounts payable

 

 

163,871

 

 

206,262

 

 

266,974

Accrued liabilities

 

 

197,203

 

 

196,989

 

 

198,777

Operating lease liabilities, current

 

 

21,241

 

 

19,898

 

 

22,563

Total current liabilities

 

 

402,070

 

 

440,429

 

 

491,053

Operating lease liabilities, noncurrent

 

 

32,472

 

 

31,506

 

 

26,511

Other liabilities

 

 

81,796

 

 

76,950

 

 

98,257

Long-term debt

 

 

827,944

 

 

782,619

 

 

789,143

Commitments and contingencies

 

 

 

 

 

 

Total liabilities

 

 

1,344,282

 

 

1,331,504

 

 

1,404,964

Total equity

 

 

299,288

 

 

250,757

 

 

184,090

TOTAL LIABILITIES AND EQUITY

 

$

1,643,570

 

$

1,582,261

 

$

1,589,054

KONTOOR BRANDS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March

(In thousands)

 

2023

 

2022

OPERATING ACTIVITIES

 

 

 

 

Net income

 

$

66,296

 

 

$

80,810

 

Adjustments to reconcile net income to cash (used) provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

9,127

 

 

 

9,862

 

Stock-based compensation

 

 

1,002

 

 

 

5,730

 

Other, including working capital changes

 

 

(89,047

)

 

 

(21,569

)

Cash (used) provided by operating activities

 

 

(12,622

)

 

 

74,833

 

INVESTING ACTIVITIES

 

 

 

 

Property, plant and equipment expenditures

 

 

(6,463

)

 

 

(2,885

)

Capitalized computer software

 

 

(5,483

)

 

 

(2,112

)

Other

 

 

149

 

 

 

(31

)

Cash used by investing activities

 

 

(11,797

)

 

 

(5,028

)

FINANCING ACTIVITIES

 

 

 

 

Borrowings under revolving credit facility

 

 

178,000

 

 

 

 

Repayments under revolving credit facility

 

 

(128,000

)

 

 

 

Repayments of term loan

 

 

(2,500

)

 

 

 

Repurchases of Common Stock

 

 

 

 

 

(22,513

)

Dividends paid

 

 

(26,808

)

 

 

(26,033

)

Shares withheld for taxes, net of proceeds from issuance of Common Stock

 

 

(3,619

)

 

 

(11,102

)

Other

 

 

(57

)

 

 

(298

)

Cash provided (used) by financing activities

 

 

17,016

 

 

 

(59,946

)

Effect of foreign currency rate changes on cash and cash equivalents

 

 

901

 

 

 

(1,551

)

Net change in cash and cash equivalents

 

 

(6,502

)

 

 

8,308

 

Cash and cash equivalents – beginning of period

 

 

59,179

 

 

 

185,322

 

Cash and cash equivalents – end of period

 

$

52,677

 

 

$

193,630

 

KONTOOR BRANDS, INC.

Supplemental Financial Information

Business Segment Information

(Unaudited)

 

 

 

Three Months Ended March

 

% Change

 

% Change
Constant
Currency (a)

(Dollars in thousands)

 

2023

 

2022

 

 

Segment revenues:

 

 

 

 

 

 

 

 

Wrangler

 

$

423,147

 

 

$

412,423

 

 

3%

 

3%

Lee

 

 

240,649

 

 

 

264,220

 

 

(9)%

 

(7)%

Total reportable segment revenues

 

 

663,796

 

 

 

676,643

 

 

(2)%

 

(1)%

Other revenues (b)

 

 

3,327

 

 

 

3,100

 

 

7%

 

7%

Total net revenues

 

$

667,123

 

 

$

679,743

 

 

(2)%

 

(1)%

Segment profit:

 

 

 

 

 

 

 

 

Wrangler

 

$

71,107

 

 

$

75,388

 

 

(6)%

 

(5)%

Lee

 

 

39,573

 

 

 

52,230

 

 

(24)%

 

(22)%

Total reportable segment profit

 

$

110,680

 

 

$

127,618

 

 

(13)%

 

(12)%

Corporate and other expenses

 

 

(18,064

)

 

 

(19,982

)

 

(10)%

 

(9)%

Interest expense

 

 

(10,273

)

 

 

(8,023

)

 

28%

 

28%

Interest income

 

 

419

 

 

 

469

 

 

(11)%

 

(4)%

Profit related to other revenues (b)

 

 

107

 

 

 

363

 

 

(71)%

 

(72)%

Income before income taxes

 

$

82,869

 

 

$

100,445

 

 

(17)%

 

(16)%

 

 

 

 

 

 

 

 

 

(a) Refer to constant currency definition on the following pages.

(b) We report an "Other" category in order to reconcile segment revenues and segment profit to the Company's operating results, but the Other category does not meet the criteria to be considered a reportable segment. Other includes sales and licensing of Rock & Republic®, other company-owned brands and private label apparel.

KONTOOR BRANDS, INC.

Supplemental Financial Information

Business Segment Information – Constant Currency Basis (Non-GAAP)

(Unaudited)

 

 

 

Three Months Ended March 2023

 

 

As Reported

 

Adjust for Foreign

 

 

(In thousands)

 

under GAAP

 

Currency Exchange

 

Constant Currency

Segment revenues:

 

 

 

 

 

 

Wrangler

 

$

423,147

 

 

$

2,764

 

 

$

425,911

 

Lee

 

 

240,649

 

 

 

4,607

 

 

 

245,256

 

Total reportable segment revenues

 

 

663,796

 

 

 

7,371

 

 

 

671,167

 

Other revenues

 

 

3,327

 

 

 

 

 

 

3,327

 

Total net revenues

 

$

667,123

 

 

$

7,371

 

 

$

674,494

 

Segment profit:

 

 

 

 

 

 

Wrangler

 

$

71,107

 

 

$

135

 

 

$

71,242

 

Lee

 

 

39,573

 

 

 

1,054

 

 

 

40,627

 

Total reportable segment profit

 

$

110,680

 

 

$

1,189

 

 

$

111,869

 

Corporate and other expenses

 

 

(18,064

)

 

 

(132

)

 

 

(18,196

)

Interest expense

 

 

(10,273

)

 

 

(8

)

 

 

(10,281

)

Interest income

 

 

419

 

 

 

32

 

 

 

451

 

Profit related to other revenues

 

 

107

 

 

 

(4

)

 

 

103

 

Income before income taxes

 

$

82,869

 

 

$

1,077

 

 

$

83,946

 

Constant Currency Financial Information

The Company is a global company that reports financial information in U.S. dollars in accordance with GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by the Company from translating its foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present constant currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. We use constant currency information to provide a framework to assess how our business performed excluding the effects of changes in the rates used to calculate foreign currency translation. Management believes this information is useful to investors to facilitate comparison of operating results and better identify trends in our businesses.

To calculate foreign currency translation on a constant currency basis, operating results for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).

These constant currency performance measures should be viewed in addition to, and not as an alternative for, reported results under GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

KONTOOR BRANDS, INC.

Supplemental Financial Information

Summary of Select Measures

(Unaudited)

 

 

 

Three Months Ended March

(Dollars in thousands, except per share amounts)

 

2023

 

2022

 

 

 

 

 

Net revenues

 

$

667,123

 

 

$

679,743

 

 

 

 

 

 

Gross margin

 

$

286,701

 

 

$

304,621

 

As a percentage of total net revenues

 

 

43.0

%

 

 

44.8

%

 

 

 

 

 

Selling, general and administrative expenses

 

$

191,752

 

 

$

196,400

 

As a percentage of total net revenues

 

 

28.7

%

 

 

28.9

%

 

 

 

 

 

Operating income

 

$

94,949

 

 

$

108,221

 

As a percentage of total net revenues

 

 

14.2

%

 

 

15.9

%

Earnings per share - diluted

 

$

1.16

 

 

$

1.40

 

 

 

 

 

 

Net income

 

$

66,296

 

 

$

80,810

 

Income taxes

 

 

16,573

 

 

 

19,635

 

Interest expense

 

 

10,273

 

 

 

8,023

 

Interest income

 

 

(419

)

 

 

(469

)

EBIT

 

$

92,723

 

 

$

107,999

 

 

 

 

 

 

Depreciation and amortization

 

$

9,127

 

 

$

9,862

 

 

 

 

 

 

EBITDA

 

$

101,850

 

 

$

117,861

 

As a percentage of total net revenues

 

 

15.3

%

 

 

17.3

%

KONTOOR BRANDS, INC.

Supplemental Financial Information

Disaggregation of Revenue

(Unaudited)

 

 

 

Three Months Ended March 2023

 

 

Revenues - As Reported

(In thousands)

 

Wrangler

 

Lee

 

Other

 

Total

Channel revenues

 

 

 

 

 

 

 

 

U.S. Wholesale

 

$

337,676

 

$

135,299

 

$

3,228

 

$

476,203

Non-U.S. Wholesale

 

 

51,919

 

 

66,005

 

 

10

 

 

117,934

Direct-to-Consumer

 

 

33,552

 

 

39,345

 

 

89

 

 

72,986

Total

 

$

423,147

 

$

240,649

 

$

3,327

 

$

667,123

 

 

 

 

 

 

 

 

 

Geographic revenues

 

 

 

 

 

 

 

 

U.S.

 

$

365,129

 

$

149,690

 

$

3,317

 

$

518,136

International

 

 

58,018

 

 

90,959

 

 

10

 

 

148,987

Total

 

$

423,147

 

$

240,649

 

$

3,327

 

$

667,123

 

 

Three Months Ended March 2022

 

 

Revenues - As Reported

(In thousands)

 

Wrangler

 

Lee

 

Other

 

Total

Channel revenues

 

 

 

 

 

 

 

 

U.S. Wholesale

 

$

330,652

 

$

136,806

 

$

2,527

 

$

469,985

Non-U.S. Wholesale

 

 

52,819

 

 

91,051

 

 

501

 

 

144,371

Direct-to-Consumer

 

 

28,952

 

 

36,363

 

 

72

 

 

65,387

Total

 

$

412,423

 

$

264,220

 

$

3,100

 

$

679,743

 

 

 

 

 

 

 

 

 

Geographic revenues

 

 

 

 

 

 

 

 

U.S.

 

$

354,393

 

$

150,116

 

$

2,599

 

$

507,108

International

 

 

58,030

 

 

114,104

 

 

501

 

 

172,635

Total

 

$

412,423

 

$

264,220

 

$

3,100

 

$

679,743

KONTOOR BRANDS, INC.

Supplemental Financial Information

Summary of Select Revenue Information

(Unaudited)

 

 

 

Three Months Ended March

 

 

 

 

 

 

2023

 

2022

 

2023 to 2022

(Dollars in thousands)

 

As Reported under GAAP

 

% Change
Reported

 

% Change
Constant
Currency

Wrangler U.S.

 

$

365,129

 

$

354,393

 

3%

 

3%

Lee U.S.

 

 

149,690

 

 

150,116

 

—%

 

—%

Other

 

 

3,317

 

 

2,599

 

28%

 

28%

Total U.S. revenues

 

$

518,136

 

$

507,108

 

2%

 

2%

 

 

 

 

 

 

 

 

 

Wrangler International

 

$

58,018

 

$

58,030

 

—%

 

5%

Lee International

 

 

90,959

 

 

114,104

 

(20)%

 

(16)%

Other

 

 

10

 

 

501

 

(98)%

 

(98)%

Total International revenues

 

$

148,987

 

$

172,635

 

(14)%

 

(9)%

 

 

 

 

 

 

 

 

 

Global Wrangler

 

$

423,147

 

$

412,423

 

3%

 

3%

Global Lee

 

 

240,649

 

 

264,220

 

(9)%

 

(7)%

Global Other

 

 

3,327

 

 

3,100

 

7%

 

7%

Total revenues

 

$

667,123

 

$

679,743

 

(2)%

 

(1)%

Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on a constant currency basis, which is a non-GAAP financial measure. See “Business Segment Information – Constant Currency Basis (Non-GAAP)" for additional information on constant currency financial calculations.

Investors:
Eric Tracy, (336) 332-5205
Vice President, Corporate Finance and Investor Relations
Eric.Tracy@kontoorbrands.com
or
Media:
Julia Burge, (336) 332-5122
Director, External Communications
Julia.Burge@kontoorbrands.com

Source: Kontoor Brands, Inc.