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Kontoor Brands’ Online and U.S. Wholesale Businesses Boost Revenues

·4 min read

Kontoor Brands is pushing ahead to capture an audience that is shopping online for denim casuals during the ongoing COVID-19 pandemic.

The North Carolina-based denim company, parent to the Wrangler and Lee brands, has mounted a recovery strategy during the pandemic that has continued to boost revenues, according to its second-quarter 2021 earnings release Thursday morning.

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The company reported revenues of $491 million for the quarter that ended July 3, a 41 percent increase from last year. Its Wrangler and Lee brands both saw significant revenue growth from this time last year — Wrangler’s global revenues of $311 million were a 24 percent increase, while Lee’s $176 million global revenues were a 105 percent rise, the company said.

The company’s net income for the quarter was roughly $24 million, up from a $33.2 million loss this time last year. The company’s adjusted earnings per share were $0.70.

The company’s performance, which it attributed to continuing improvements in its online and U.S. wholesale businesses, has led to another revision of fiscal 2021 guidance. The company now expects adjusted EPS to be between $3.90 and $4.00, higher than the $3.70 to $3.80 range it had previously projected after the first quarter. Its board also approved a $200 million share repurchase program, according to the company.

“Kontoor’s strong second-quarter results, which came in above our expectations, and our improving fundamentals give us confidence to raise full-year guidance,” Kontoor Brands chief executive officer Scott Baxter said in a statement Thursday.

“As discussed at our recent Investor Day, we expect to catalyze sustained, profitable growth across channels, categories and geographies, fueled by investments in key enablers within talent, demand creation, digital and sustainability,” he said.

In public appearances this year, company executives have advertised their investments in the Wrangler and Lee brands since the company’s spin off from VF Corp. two years ago, and emphasized a focus on its digital business. In May, the company projected that it plans to grow its digital business from 5 percent of revenues in 2020 to 10 percent by 2023.

The company has also touted its work with influencers including model Georgia May Jagger, daughter of Mick Jagger, as well as new collaborations with brands including Billabong.

Baxter has described the company’s strategy as a combination of investing in hiring, expanding its geographic reach, introducing new product categories, and engaging younger target audiences.

Last year, the company added Christopher Reid as its general manager of digital, while its Wrangler brand debuted in China. Wrangler had also added a new workwear line for women, to capture “an industry need for inclusive apparel on the jobsite,” according to its announcement at the time.

“I think, in the last couple of quarters, people have really started to identify and notice both the Wrangler and Lee brands,” Baxter told WWD Thursday.

“We talked a lot at the very beginning about how these brands hadn’t been invested in, and we saw — and the reason we spun the company is — we saw that the consumer loved these brands and wanted to see more of them in different places, in different parts of the world, and different categories.

“We’re really seeing consumer acceptance of the brands in different categories, channels and geographies and it’s been all part of our strategy,” he said.

In a call with analysts Thursday, Baxter and Kontoor Brands chief financial officer Rustin Welton said that the company’s investments in e-commerce were paying off. The company’s U.S. digital wholesale and U.S. website sales rose 49 percent and 28 percent, respectively, from last year, and even more significantly from 2019 — 106 percent and 89 percent, respectively, according to the company.

“You’ve heard us talk a lot about earning our way to investing into these brands and we’re clearly doing that,” Welton said.

“And you’re seeing the investments start to manifest,” he added. “And I think this quarter’s results are a great illustration of how that virtuous cycle comes to light.”

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