Kontoor Brands Reports 2023 Second Quarter Results; Reaffirms 2023 Outlook Excluding Restructuring Charges Associated With Strategic Actions
- Kontoor Brands reports flat Q2'23 revenue of $616 million. FY'23 revenue expected to increase at a low-single digit percentage compared to FY'22. Adjusted gross margin expected to be in the range of 43.5% to 44.0%. Adjusted EPS expected to be in the range of $4.55 to $4.75. Inventory expected to decline in Q3'23 and further reductions planned in Q4'23.
- Gross margin decreased to 40.6% in Q2'23. Adjusted EPS decreased to $0.77. Inventory increased 17% over Q2'22.
Second Quarter 2023 Highlights
-
Q2’23 revenue of
was flat compared to Q2’22$616 million - Q2’23 reported gross margin of 40.6 percent decreased 290 basis points, adjusted gross margin of 41.0 percent decreased 250 basis points compared to Q2’22
-
Q2’23 reported EPS of
, adjusted EPS of$0.64 , compared to Q2’22 EPS of$0.77 ; reported and adjusted Q2’23 results include a one-time discrete tax charge of$1.09 $0.09 - Inventory increased 17 percent over Q2’22, sequentially improving from a 52 percent year-over-year increase in Q1’23
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 adjusted gross margin is expected to be in the range of 43.5 percent to 44.0 percent, consistent with prior outlook excluding restructuring charges in Q2’23
-
FY’23 adjusted EPS is expected to be in the range of
to$4.55 , consistent with prior outlook excluding restructuring charges in Q2’23$4.75 - Inventory is now expected to decline in Q3’23 compared to prior year with additional reductions planned in Q4’23
“We delivered second quarter results largely consistent with our expectations, with
“Further, we took restructuring actions in the quarter to reduce non-strategic spend and drive efficiencies in our operations, which will help fund strategic investments in key growth pillars such as talent, innovation, technology and demand creation. Consistent with our playbook, these critical enablers support increasingly diversified growth across channels, categories and geographies that generate more sustained, profitable growth over time.”
“While we continue to assume macroeconomic pressures will weigh on consumer demand in the second half of 2023, we are seeing shipments better align with POS in the
This release refers to “adjusted” amounts from 2023 and “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.
Second Quarter 2023 Income Statement Review
Revenue was
International revenue was
Wrangler brand global revenue was
Lee brand global revenue was
Gross margin decreased 290 basis points to 40.6 percent of revenue on a reported basis and decreased 250 basis points to 41.0 percent of revenue on an adjusted basis compared to the same period last year. On an adjusted basis and as expected, higher inflationary pressures on input costs, as well as impacts from proactive actions in managing internal production, including downtime, primarily drove the decline. The decline was partially offset by benefits from strategic pricing, geographic mix and moderating transitory costs such as air freight.
Selling, General & Administrative (SG&A) expenses were
Operating income was
Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) was
Earnings per share was
July 1, 2023, Balance Sheet and Liquidity Review
The Company ended the second quarter 2023 with
As of July 1, 2023, the Company had no outstanding borrowings under the Revolving Credit Facility and
As previously announced, the Company’s Board of Directors declared a regular quarterly cash dividend of
Inventory at the end of Q2’23 was
2023 Outlook
Excluding restructuring charges associated with the strategic actions taken in Q2’23, the Company is reaffirming its prior outlook for FY’23 provided on May 4, 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
Accordingly, the Company’s 2023 outlook is as follows:
-
Revenue is expected to increase at a low-single digit percentage over 2022, consistent with the prior outlook, with second half performance now anticipated to be above first half growth. During the fourth quarter of 2023, the Company assumes macro consumer demand conditions will be more challenged in the
U.S. , with theChina market more fully reopening. Based on continuedU.S. share gains, improving shipments and POS, as well as strong quarter-to-date trends, the Company anticipates Q3’23 revenue to increase at a mid-single digit rate, above expected full year growth.
- Adjusted 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, consistent with prior outlook excluding restructuring charges in Q2’23. 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. The Company continues to anticipate the most pronounced gross margin gains to be experienced in Q4’23.
- Adjusted SG&A is expected to increase at a mid-single digit percentage compared to adjusted SG&A in 2022, consistent with prior outlook excluding restructuring charges in Q2’23. 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. During 2H’23, the Company anticipates amplified investments in DTC and demand creation will be most pronounced in Q3’23.
-
Adjusted EPS is expected to be in the range of
to$4.55 , consistent with prior outlook excluding$4.75 associated with restructuring charges in Q2’23. Due primarily to amplified SG&A investments in Q3’23 and the most significant gross margin expansion anticipated in Q4’23, the Company expects year-over-year EPS growth to be most pronounced in Q4’23.$0.13
-
Capital Expenditures are expected to be in the range of
to$35 million , primarily to support IT projects, growth in owned retail stores, manufacturing and distribution investments.$40 million
-
The Company expects an effective tax rate of 20 percent to 21 percent. Interest expense is expected to be in the range of
to$33 million . Other Expense is expected to be in the range of$38 million to$5 million . Average shares outstanding are expected to be approximately 57 million, excluding the impact of any additional share repurchases.$10 million
Webcast Information
Kontoor Brands will host its second quarter conference call beginning at 8:30 a.m. Eastern Time today, August 3, 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
Adjusted Amounts - This release refers to “adjusted” amounts. Adjustments represent charges related to strategic actions taken by the Company to drive efficiencies in our operations, which included reducing our global workforce, streamlining and transferring select production within our internal manufacturing network and globalizing our operating model. Additional information regarding adjusted amounts is provided in notes to the supplemental financial information included with this release.
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
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 June |
|
% |
|
Six Months Ended June |
|
% |
||||||||||||||
(Dollars in thousands, except per share amounts) |
|
|
2023 |
|
|
|
2022 |
|
|
Change |
|
|
2023 |
|
|
|
2022 |
|
|
Change |
||
Net revenues |
|
$ |
616,009 |
|
|
$ |
613,572 |
|
|
— |
% |
|
$ |
1,283,132 |
|
|
$ |
1,293,315 |
|
|
(1 |
)% |
Costs and operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of goods sold |
|
|
365,748 |
|
|
|
346,608 |
|
|
6 |
% |
|
|
746,170 |
|
|
|
721,730 |
|
|
3 |
% |
Selling, general and administrative expenses |
|
|
186,864 |
|
|
|
178,219 |
|
|
5 |
% |
|
|
378,616 |
|
|
|
374,619 |
|
|
1 |
% |
Total costs and operating expenses |
|
|
552,612 |
|
|
|
524,827 |
|
|
5 |
% |
|
|
1,124,786 |
|
|
|
1,096,349 |
|
|
3 |
% |
Operating income |
|
|
63,397 |
|
|
|
88,745 |
|
|
(29 |
)% |
|
|
158,346 |
|
|
|
196,966 |
|
|
(20 |
)% |
Interest expense |
|
|
(9,663 |
) |
|
|
(8,234 |
) |
|
17 |
% |
|
|
(19,936 |
) |
|
|
(16,257 |
) |
|
23 |
% |
Interest income |
|
|
691 |
|
|
|
296 |
|
|
133 |
% |
|
|
1,110 |
|
|
|
765 |
|
|
45 |
% |
Other expense, net |
|
|
(3,152 |
) |
|
|
(2,746 |
) |
|
15 |
% |
|
|
(5,378 |
) |
|
|
(2,968 |
) |
|
81 |
% |
Income before income taxes |
|
|
51,273 |
|
|
|
78,061 |
|
|
(34 |
)% |
|
|
134,142 |
|
|
|
178,506 |
|
|
(25 |
)% |
Income taxes |
|
|
14,877 |
|
|
|
16,066 |
|
|
(7 |
)% |
|
|
31,450 |
|
|
|
35,701 |
|
|
(12 |
)% |
Net income |
|
$ |
36,396 |
|
|
$ |
61,995 |
|
|
(41 |
)% |
|
$ |
102,692 |
|
|
$ |
142,805 |
|
|
(28 |
)% |
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic |
|
$ |
0.65 |
|
|
$ |
1.11 |
|
|
|
|
$ |
1.84 |
|
|
$ |
2.55 |
|
|
|
||
Diluted |
|
$ |
0.64 |
|
|
$ |
1.09 |
|
|
|
|
$ |
1.80 |
|
|
$ |
2.49 |
|
|
|
||
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic |
|
|
56,089 |
|
|
|
55,740 |
|
|
|
|
|
55,868 |
|
|
|
56,031 |
|
|
|
||
Diluted |
|
|
56,846 |
|
|
|
56,711 |
|
|
|
|
|
56,893 |
|
|
|
57,315 |
|
|
|
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 June 2023 and June 2022 correspond to the 13-week and 26-week fiscal periods ended July 1, 2023 and July 2, 2022, respectively. References to June 2023, December 2022 and June 2022 relate to the balance sheets as of July 1, 2023, December 31, 2022 and July 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) |
|
June 2023 |
|
December 2022 |
|
June 2022 |
|||
ASSETS |
|
|
|
|
|
|
|||
Current assets |
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
82,418 |
|
$ |
59,179 |
|
$ |
145,296 |
Accounts receivable, net |
|
|
186,024 |
|
|
225,858 |
|
|
185,157 |
Inventories |
|
|
626,885 |
|
|
596,836 |
|
|
537,900 |
Prepaid expenses and other current assets |
|
|
114,345 |
|
|
100,396 |
|
|
89,171 |
Total current assets |
|
|
1,009,672 |
|
|
982,269 |
|
|
957,524 |
Property, plant and equipment, net |
|
|
106,878 |
|
|
104,465 |
|
|
101,994 |
Operating lease assets |
|
|
65,388 |
|
|
51,029 |
|
|
44,271 |
Intangible assets, net |
|
|
12,941 |
|
|
13,361 |
|
|
13,740 |
Goodwill |
|
|
209,969 |
|
|
209,627 |
|
|
210,164 |
Other assets |
|
|
203,469 |
|
|
221,510 |
|
|
215,455 |
TOTAL ASSETS |
|
$ |
1,608,317 |
|
$ |
1,582,261 |
|
$ |
1,543,148 |
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|||
Current liabilities |
|
|
|
|
|
|
|||
Short-term borrowings |
|
$ |
62 |
|
$ |
7,280 |
|
$ |
4,848 |
Current portion of long-term debt |
|
|
15,000 |
|
|
10,000 |
|
|
5,000 |
Accounts payable |
|
|
195,282 |
|
|
206,262 |
|
|
281,391 |
Accrued liabilities |
|
|
156,766 |
|
|
196,989 |
|
|
153,527 |
Operating lease liabilities, current |
|
|
21,899 |
|
|
19,898 |
|
|
20,254 |
Total current liabilities |
|
|
389,009 |
|
|
440,429 |
|
|
465,020 |
Operating lease liabilities, noncurrent |
|
|
42,044 |
|
|
31,506 |
|
|
25,132 |
Other liabilities |
|
|
80,743 |
|
|
76,950 |
|
|
86,839 |
Long-term debt |
|
|
773,270 |
|
|
782,619 |
|
|
786,968 |
Commitments and contingencies |
|
|
|
|
|
|
|||
Total liabilities |
|
|
1,285,066 |
|
|
1,331,504 |
|
|
1,363,959 |
Total equity |
|
|
323,251 |
|
|
250,757 |
|
|
179,189 |
TOTAL LIABILITIES AND EQUITY |
|
$ |
1,608,317 |
|
$ |
1,582,261 |
|
$ |
1,543,148 |
KONTOOR BRANDS, INC. |
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(Unaudited) |
||||||||
|
|
Six Months Ended June |
||||||
(In thousands) |
|
|
2023 |
|
|
|
2022 |
|
OPERATING ACTIVITIES |
|
|
|
|
||||
Net income |
|
$ |
102,692 |
|
|
$ |
142,805 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
|
18,219 |
|
|
|
18,821 |
|
Stock-based compensation |
|
|
7,023 |
|
|
|
12,474 |
|
Other, including working capital changes |
|
|
(16,258 |
) |
|
|
(74,712 |
) |
Cash provided by operating activities |
|
|
111,676 |
|
|
|
99,388 |
|
INVESTING ACTIVITIES |
|
|
|
|
||||
Property, plant and equipment expenditures |
|
|
(13,277 |
) |
|
|
(6,995 |
) |
Capitalized computer software |
|
|
(6,756 |
) |
|
|
(4,493 |
) |
Other |
|
|
(10 |
) |
|
|
(120 |
) |
Cash used by investing activities |
|
|
(20,043 |
) |
|
|
(11,608 |
) |
FINANCING ACTIVITIES |
|
|
|
|
||||
Borrowings under revolving credit facility |
|
|
268,000 |
|
|
|
— |
|
Repayments under revolving credit facility |
|
|
(268,000 |
) |
|
|
— |
|
Repayments of term loan |
|
|
(5,000 |
) |
|
|
— |
|
Repurchases of Common Stock |
|
|
— |
|
|
|
(62,494 |
) |
Dividends paid |
|
|
(53,756 |
) |
|
|
(51,508 |
) |
Shares withheld for taxes, net of proceeds from issuance of Common Stock |
|
|
(3,057 |
) |
|
|
(11,024 |
) |
Other |
|
|
(7,236 |
) |
|
|
4,330 |
|
Cash used by financing activities |
|
|
(69,049 |
) |
|
|
(120,696 |
) |
Effect of foreign currency rate changes on cash and cash equivalents |
|
|
655 |
|
|
|
(7,110 |
) |
Net change in cash and cash equivalents |
|
|
23,239 |
|
|
|
(40,026 |
) |
Cash and cash equivalents – beginning of period |
|
|
59,179 |
|
|
|
185,322 |
|
Cash and cash equivalents – end of period |
|
$ |
82,418 |
|
|
$ |
145,296 |
|
KONTOOR BRANDS, INC. |
||||||||||||||
Supplemental Financial Information |
||||||||||||||
Business Segment Information |
||||||||||||||
(Unaudited) |
||||||||||||||
|
|
Three Months Ended June |
|
% Change |
|
% Change
|
||||||||
(Dollars in thousands) |
|
|
2023 |
|
|
|
2022 |
|
|
|
||||
Segment revenues: |
|
|
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
425,485 |
|
|
$ |
417,944 |
|
|
2 |
% |
|
2 |
% |
Lee |
|
|
188,008 |
|
|
|
193,053 |
|
|
(3 |
)% |
|
(3 |
)% |
Total reportable segment revenues |
|
|
613,493 |
|
|
|
610,997 |
|
|
— |
% |
|
— |
% |
Other revenues (b) |
|
|
2,516 |
|
|
|
2,575 |
|
|
(2 |
)% |
|
(2 |
)% |
Total net revenues |
|
$ |
616,009 |
|
|
$ |
613,572 |
|
|
— |
% |
|
— |
% |
Segment profit: |
|
|
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
70,976 |
|
|
$ |
75,064 |
|
|
(5 |
)% |
|
(5 |
)% |
Lee |
|
|
17,165 |
|
|
|
22,904 |
|
|
(25 |
)% |
|
(22 |
)% |
Total reportable segment profit |
|
$ |
88,141 |
|
|
$ |
97,968 |
|
|
(10 |
)% |
|
(9 |
)% |
Corporate and other expenses |
|
|
(27,660 |
) |
|
|
(12,017 |
) |
|
130 |
% |
|
129 |
% |
Interest expense |
|
|
(9,663 |
) |
|
|
(8,234 |
) |
|
17 |
% |
|
17 |
% |
Interest income |
|
|
691 |
|
|
|
296 |
|
|
133 |
% |
|
120 |
% |
(Loss) profit related to other revenues (b) |
|
|
(236 |
) |
|
|
48 |
|
|
(592 |
)% |
|
(600 |
)% |
Income before income taxes |
|
$ |
51,273 |
|
|
$ |
78,061 |
|
|
(34 |
)% |
|
(33 |
)% |
|
|
|
|
|
|
|
|
|
||||||
|
|
Six Months Ended June |
|
% Change |
|
% Change
|
||||||||
(Dollars in thousands) |
|
|
2023 |
|
|
|
2022 |
|
|
|
||||
Segment revenues: |
|
|
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
848,632 |
|
|
$ |
830,367 |
|
|
2 |
% |
|
2 |
% |
Lee |
|
|
428,657 |
|
|
|
457,273 |
|
|
(6 |
)% |
|
(5 |
)% |
Total reportable segment revenues |
|
|
1,277,289 |
|
|
|
1,287,640 |
|
|
(1 |
)% |
|
— |
% |
Other revenues (b) |
|
|
5,843 |
|
|
|
5,675 |
|
|
3 |
% |
|
3 |
% |
Total net revenues |
|
$ |
1,283,132 |
|
|
$ |
1,293,315 |
|
|
(1 |
)% |
|
— |
% |
Segment profit: |
|
|
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
142,083 |
|
|
$ |
150,452 |
|
|
(6 |
)% |
|
(5 |
)% |
Lee |
|
|
56,738 |
|
|
|
75,134 |
|
|
(24 |
)% |
|
(22 |
)% |
Total reportable segment profit |
|
$ |
198,821 |
|
|
$ |
225,586 |
|
|
(12 |
)% |
|
(11 |
)% |
Corporate and other expenses |
|
|
(45,724 |
) |
|
|
(31,999 |
) |
|
43 |
% |
|
43 |
% |
Interest expense |
|
|
(19,936 |
) |
|
|
(16,257 |
) |
|
23 |
% |
|
23 |
% |
Interest income |
|
|
1,110 |
|
|
|
765 |
|
|
45 |
% |
|
44 |
% |
(Loss) profit related to other revenues (b) |
|
|
(129 |
) |
|
|
411 |
|
|
(131 |
)% |
|
(133 |
)% |
Income before income taxes |
|
$ |
134,142 |
|
|
$ |
178,506 |
|
|
(25 |
)% |
|
(24 |
)% |
(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 June 2023 |
|||||||||||
|
|
As Reported |
|
Adjust for Foreign |
|
|
||||||
(In thousands) |
|
under GAAP |
|
Currency Exchange |
|
Constant Currency |
||||||
Segment revenues: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
425,485 |
|
|
$ |
(479 |
) |
|
$ |
425,006 |
|
Lee |
|
|
188,008 |
|
|
|
(137 |
) |
|
|
187,871 |
|
Total reportable segment revenues |
|
|
613,493 |
|
|
|
(616 |
) |
|
|
612,877 |
|
Other revenues |
|
|
2,516 |
|
|
|
— |
|
|
|
2,516 |
|
Total net revenues |
|
$ |
616,009 |
|
|
$ |
(616 |
) |
|
$ |
615,393 |
|
Segment profit: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
70,976 |
|
|
$ |
(4 |
) |
|
$ |
70,972 |
|
Lee |
|
|
17,165 |
|
|
|
762 |
|
|
|
17,927 |
|
Total reportable segment profit |
|
$ |
88,141 |
|
|
$ |
758 |
|
|
$ |
88,899 |
|
Corporate and other expenses |
|
|
(27,660 |
) |
|
|
84 |
|
|
|
(27,576 |
) |
Interest expense |
|
|
(9,663 |
) |
|
|
(1 |
) |
|
|
(9,664 |
) |
Interest income |
|
|
691 |
|
|
|
(39 |
) |
|
|
652 |
|
(Loss) profit related to other revenues |
|
|
(236 |
) |
|
|
(4 |
) |
|
|
(240 |
) |
Income before income taxes |
|
$ |
51,273 |
|
|
$ |
798 |
|
|
$ |
52,071 |
|
|
|
|
|
|
|
|
||||||
|
|
Six Months Ended June 2023 |
||||||||||
|
|
As Reported |
|
Adjust for Foreign |
|
|
||||||
(In thousands) |
|
under GAAP |
|
Currency Exchange |
|
Constant Currency |
||||||
Segment revenues: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
848,632 |
|
|
$ |
2,285 |
|
|
$ |
850,917 |
|
Lee |
|
|
428,657 |
|
|
|
4,470 |
|
|
|
433,127 |
|
Total reportable segment revenues |
|
|
1,277,289 |
|
|
|
6,755 |
|
|
|
1,284,044 |
|
Other revenues |
|
|
5,843 |
|
|
|
— |
|
|
|
5,843 |
|
Total net revenues |
|
$ |
1,283,132 |
|
|
$ |
6,755 |
|
|
$ |
1,289,887 |
|
Segment profit: |
|
|
|
|
|
|
||||||
Wrangler |
|
$ |
142,083 |
|
|
$ |
131 |
|
|
$ |
142,214 |
|
Lee |
|
|
56,738 |
|
|
|
1,816 |
|
|
|
58,554 |
|
Total reportable segment profit |
|
$ |
198,821 |
|
|
$ |
1,947 |
|
|
$ |
200,768 |
|
Corporate and other expenses |
|
|
(45,724 |
) |
|
|
(48 |
) |
|
|
(45,772 |
) |
Interest expense |
|
|
(19,936 |
) |
|
|
(9 |
) |
|
|
(19,945 |
) |
Interest income |
|
|
1,110 |
|
|
|
(7 |
) |
|
|
1,103 |
|
(Loss) profit related to other revenues |
|
|
(129 |
) |
|
|
(8 |
) |
|
|
(137 |
) |
Income before income taxes |
|
$ |
134,142 |
|
|
$ |
1,875 |
|
|
$ |
136,017 |
|
Constant Currency Financial Information
The Company is a global company that reports financial information in
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
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 |
|||
Reconciliation of Adjusted Financial Measures - Quarter-to-Date (Non-GAAP) |
|||
(Unaudited) |
|||
|
Three Months Ended June |
||
(In thousands, except for per share amounts) |
|
2023 |
|
|
|
||
Cost of goods sold - as reported under GAAP |
$ |
365,748 |
|
Restructuring costs (a) |
|
(2,354 |
) |
Adjusted cost of goods sold |
$ |
363,394 |
|
|
|
||
|
|
||
Selling, general and administrative expenses - as reported under GAAP |
$ |
186,864 |
|
Restructuring costs (a) |
|
(6,439 |
) |
Adjusted selling, general and administrative expenses |
$ |
180,425 |
|
|
|
||
|
|
||
Diluted earnings per share - as reported under GAAP |
$ |
0.64 |
|
Restructuring costs (a) |
|
0.13 |
|
Adjusted diluted earnings per share |
$ |
0.77 |
|
|
|
||
|
|
||
Net income - as reported under GAAP |
$ |
36,396 |
|
Income taxes |
|
14,877 |
|
Interest expense |
|
9,663 |
|
Interest income |
|
(691 |
) |
EBIT |
$ |
60,245 |
|
|
|
||
|
|
||
EBITDA |
$ |
69,337 |
|
Restructuring costs (a) |
|
8,793 |
|
Adjusted EBITDA |
$ |
78,130 |
|
Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on an adjusted basis. These adjusted presentations are non-GAAP measures. See “Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures" at the end of this document. Amounts herein may not recalculate due to the use of unrounded numbers.
KONTOOR BRANDS, INC. |
||||||||||||
Supplemental Financial Information |
||||||||||||
Summary of Select GAAP and Non-GAAP Measures |
||||||||||||
(Unaudited) |
||||||||||||
|
|
Three Months Ended June |
||||||||||
|
|
2023 |
|
|
2022 |
|
||||||
(Dollars in thousands, except per share amounts) |
|
GAAP |
|
Adjusted |
|
GAAP |
||||||
|
|
|
|
|
|
|
||||||
Net revenues |
|
$ |
616,009 |
|
|
$ |
616,009 |
|
|
$ |
613,572 |
|
|
|
|
|
|
|
|
||||||
Gross margin |
|
$ |
250,261 |
|
|
$ |
252,615 |
|
|
$ |
266,964 |
|
As a percentage of total net revenues |
|
|
40.6 |
% |
|
|
41.0 |
% |
|
|
43.5 |
% |
|
|
|
|
|
|
|
||||||
Selling, general and administrative expenses |
|
$ |
186,864 |
|
|
$ |
180,425 |
|
|
$ |
178,219 |
|
As a percentage of total net revenues |
|
|
30.3 |
% |
|
|
29.3 |
% |
|
|
29.0 |
% |
|
|
|
|
|
|
|
||||||
Operating income |
|
$ |
63,397 |
|
|
$ |
72,190 |
|
|
$ |
88,745 |
|
As a percentage of total net revenues |
|
|
10.3 |
% |
|
|
11.7 |
% |
|
|
14.5 |
% |
Earnings per share - diluted |
|
$ |
0.64 |
|
|
$ |
0.77 |
|
|
$ |
1.09 |
|
|
|
|
|
|
|
|
||||||
Net income |
|
$ |
36,396 |
|
|
$ |
43,733 |
|
|
$ |
61,995 |
|
Income taxes |
|
|
14,877 |
|
|
|
16,333 |
|
|
|
16,066 |
|
Interest expense |
|
|
9,663 |
|
|
|
9,663 |
|
|
|
8,234 |
|
Interest income |
|
|
(691 |
) |
|
|
(691 |
) |
|
|
(296 |
) |
EBIT |
|
$ |
60,245 |
|
|
$ |
69,038 |
|
|
$ |
85,999 |
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization |
|
$ |
9,092 |
|
|
$ |
9,092 |
|
|
$ |
8,959 |
|
|
|
|
|
|
|
|
||||||
EBITDA |
|
$ |
69,337 |
|
|
$ |
78,130 |
|
|
$ |
94,958 |
|
As a percentage of total net revenues |
|
|
11.3 |
% |
|
|
12.7 |
% |
|
|
15.5 |
% |
Non-GAAP Financial Information: The financial information above has been presented on a GAAP basis and on an adjusted basis. These adjusted presentations are non-GAAP measures. See “Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures" at the end of this document.
KONTOOR BRANDS, INC. |
||||||||||||
Supplemental Financial Information |
||||||||||||
Disaggregation of Revenue |
||||||||||||
(Unaudited) |
||||||||||||
|
|
Three Months Ended June 2023 |
||||||||||
|
|
Revenues - As Reported |
||||||||||
|
|
|
|
|
|
|
|
|
||||
(In thousands) |
|
Wrangler |
|
Lee |
|
Other |
|
Total |
||||
Channel revenues |
|
|
|
|
|
|
|
|
||||
|
|
$ |
355,207 |
|
$ |
98,218 |
|
$ |
2,366 |
|
$ |
455,791 |
Non- |
|
|
38,104 |
|
|
51,232 |
|
|
— |
|
|
89,336 |
Direct-to-Consumer |
|
|
32,174 |
|
|
38,558 |
|
|
150 |
|
|
70,882 |
Total |
|
$ |
425,485 |
|
$ |
188,008 |
|
$ |
2,516 |
|
$ |
616,009 |
|
|
|
|
|
|
|
|
|
||||
Geographic revenues |
|
|
|
|
|
|
|
|
||||
|
|
$ |
382,111 |
|
$ |
114,248 |
|
$ |
2,516 |
|
$ |
498,875 |
International |
|
|
43,374 |
|
|
73,760 |
|
|
— |
|
|
117,134 |
Total |
|
$ |
425,485 |
|
$ |
188,008 |
|
$ |
2,516 |
|
$ |
616,009 |
|
|
Three Months Ended June 2022 |
||||||||||
|
|
Revenues - As Reported |
||||||||||
|
|
|
|
|
|
|
|
|
||||
(In thousands) |
|
Wrangler |
|
Lee |
|
Other |
|
Total |
||||
Channel revenues |
|
|
|
|
|
|
|
|
||||
|
|
$ |
348,537 |
|
$ |
120,197 |
|
$ |
2,127 |
|
$ |
470,861 |
Non- |
|
|
40,457 |
|
|
39,858 |
|
|
374 |
|
|
80,689 |
Direct-to-Consumer |
|
|
28,950 |
|
|
32,998 |
|
|
74 |
|
|
62,022 |
Total |
|
$ |
417,944 |
|
$ |
193,053 |
|
$ |
2,575 |
|
$ |
613,572 |
|
|
|
|
|
|
|
|
|
||||
Geographic revenues |
|
|
|
|
|
|
|
|
||||
|
|
$ |
372,981 |
|
$ |
135,057 |
|
$ |
2,201 |
|
$ |
510,239 |
International |
|
|
44,963 |
|
|
57,996 |
|
|
374 |
|
|
103,333 |
Total |
|
$ |
417,944 |
|
$ |
193,053 |
|
$ |
2,575 |
|
$ |
613,572 |
KONTOOR BRANDS, INC. |
||||||||||||
Supplemental Financial Information |
||||||||||||
Summary of Select Revenue Information |
||||||||||||
(Unaudited) |
||||||||||||
|
|
Three Months Ended June |
|
|
|
|
||||||
|
|
|
2023 |
|
|
2022 |
|
2023 to 2022 |
||||
(Dollars in thousands) |
|
As Reported under GAAP |
|
% Change
|
|
% Change
|
||||||
Wrangler |
|
$ |
382,111 |
|
$ |
372,981 |
|
2 |
% |
|
2 |
% |
Lee |
|
|
114,248 |
|
|
135,057 |
|
(15 |
)% |
|
(15 |
)% |
Other |
|
|
2,516 |
|
|
2,201 |
|
14 |
% |
|
14 |
% |
Total |
|
$ |
498,875 |
|
$ |
510,239 |
|
(2 |
)% |
|
(2 |
)% |
|
|
|
|
|
|
|
|
|
||||
Wrangler International |
|
$ |
43,374 |
|
$ |
44,963 |
|
(4 |
)% |
|
(5 |
)% |
Lee International |
|
|
73,760 |
|
|
57,996 |
|
27 |
% |
|
27 |
% |
Other |
|
|
— |
|
|
374 |
|
(100 |
)% |
|
(100 |
)% |
Total International revenues |
|
$ |
117,134 |
|
$ |
103,333 |
|
13 |
% |
|
13 |
% |
|
|
|
|
|
|
|
|
|
||||
Global Wrangler |
|
$ |
425,485 |
|
$ |
417,944 |
|
2 |
% |
|
2 |
% |
Global Lee |
|
|
188,008 |
|
|
193,053 |
|
(3 |
)% |
|
(3 |
)% |
Global Other |
|
|
2,516 |
|
|
2,575 |
|
(2 |
)% |
|
(2 |
)% |
Total revenues |
|
$ |
616,009 |
|
$ |
613,572 |
|
— |
% |
|
— |
% |
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.
KONTOOR BRANDS, INC.
Supplemental Financial Information
Reconciliation of Adjusted Financial Measures - Notes (Non-GAAP)
(Unaudited)
Notes to Supplemental Financial Information - Reconciliation of Adjusted Financial Measures
Management uses non-GAAP financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. In addition, adjusted EBITDA is a key financial measure for the Company’s shareholders and financial leaders, as the Company’s debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company’s compliance with debt covenants. While management believes that these non-GAAP measures are useful in evaluating the business, this information should be considered supplemental in nature and should be viewed in addition to, and not as an alternate for, reported results under GAAP. In addition, these non-GAAP measures may be different from similarly titled measures used by other companies.
(a) During the three months ended June 2023, restructuring costs of |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230803824964/en/
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.
FAQ
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