Kontoor Brands, the global lifestyle apparel company known for its Wrangler and Lee brands, has announced impressive financial results for the second quarter of 2024, exceeding market expectations. Despite a slight decline in overall revenue, key financial indicators showed significant improvement, driving the company's decision to raise its outlook for the rest of the year.

Kontoor reported $607 million in revenue for the quarter, a 1 per cent decrease from the previous year. This decline was mainly due to inventory management actions by retailers in the US and a reduction in seasonal product sales. However, growth in direct-to-consumer sales helped offset these decreases. US revenue stood at $496 million, also down by 1 per cent, while international revenue was $111 million, marking a 6 per cent decline (5 per cent in constant currency).

The Wrangler brand saw a 1 per cent increase in global revenue, reaching $429 million. In the US, Wrangler's revenue remained flat, with a 10 per cent growth in direct-to-consumer sales balancing out a slight decline in wholesale. Internationally, Wrangler's revenue grew by 7 per cent, driven by significant gains in direct-to-consumer and wholesale segments.

Conversely, the Lee brand experienced a 7 per cent drop in global revenue to $175 million, attributed to reduced shipments in the US wholesale channel and declines in international markets.

Kontoor's gross margin increased by 410 basis points to 44.7 per cent, reflecting benefits from lower product costs, improved product mix, and supply chain efficiencies. The company reported an operating income of $75 million, with adjusted operating income up by 10 per cent to $80 million. Adjusted earnings per share (EPS) rose by 27 per cent to $0.98.

Kontoor ended the quarter with $224 million in cash and equivalents and $750 million in long-term debt. Inventory levels decreased by 22 per cent compared to the previous year. The company returned $53 million to shareholders in the second quarter, bringing the year-to-date total to $101 million.

CEO Scott Baxter expressed confidence in the company's performance, raising the full-year outlook based on better-than-expected Q2 results. Kontoor now expects revenue between $2.57 billion and $2.63 billion. Adjusted gross margin is projected to be approximately 44.8 per cent, with adjusted operating income at the higher end of the $377 to $387 million range. Adjusted EPS is expected to be around $4.80.

Kontoor is making strategic investments to support brand growth and market expansion, anticipating significant revenue growth and cash generation in the latter half of the year.

Scott Baxter, CEO of Kontoor Brands, is optimistic about the second half of the year, as the company’s improving fundamentals provide opportunities for long-term value creation. Kontoor remains committed to delivering shareholder value while navigating the current economic landscape.