Kontoor Brands Q4 Earnings Call Highlights

Kontoor Brands (NYSE:KTB) executives used the company’s fourth-quarter and full-year 2025 earnings call to outline what CEO Scott Baxter called a “transformational year,” highlighted by the acquisition of Helly Hansen, continued momentum at Wrangler, early progress in repositioning Lee, and ongoing benefits from the Project Genius transformation program.

Management said 2025 produced record revenue, earnings, and cash flow, while also enabling capital returns and balance sheet improvement. CFO Joe Alkire added that the company outperformed the outlook it provided after the Helly Hansen acquisition “across every measure,” citing record fourth-quarter results and strong full-year operating cash flow.

Full-year 2025 performance and capital deployment

Alkire said full-year revenue increased 18% and adjusted operating earnings rose by more than 20%. The company generated over $450 million of cash from operations for the year. In the fourth quarter, management said it deployed approximately $250 million toward debt repayment, share repurchases, and dividends.

Kontoor ended the quarter with $1.0 billion of net debt, $108 million of cash, and an undrawn $500 million revolver. On a pro forma basis, net leverage was 2.0x. During the quarter, Kontoor made a voluntary $200 million term loan payment (ahead of an expected $185 million payment) and has made $250 million in voluntary term loan payments since the Helly Hansen transaction closed, according to Alkire.

The company also repurchased $25 million of shares in the quarter and has $190 million remaining under its current authorization. The board declared a quarterly dividend of $0.53 per share. Adjusted return on invested capital on a trailing 12-month basis was 29%, up from 23% in the third quarter, Alkire said.

Helly Hansen: integration, growth, and margin focus

Baxter described Helly Hansen as a “growth asset” and said integration and growth efforts are being pursued in parallel. He said the company strengthened Helly’s leadership team during the first seven months of ownership and that performance has been ahead of plan, with better-than-expected revenue and earnings accretion and strong cash generation.

In the fourth quarter, Kontoor reported Helly Hansen revenue of $251 million, up 10% versus the prior year’s reported results. Alkire said full-year pro forma revenue was over $700 million, up 7%, and noted that in the second half (Q3 and Q4 under Kontoor’s ownership) revenue increased 10% to 11%, with “a couple points” of benefit from currency. He said the company expects mid- to high-single-digit growth for Helly in 2026 and has “anchored everybody” on high-single-digit growth longer term, with an opportunity to accelerate beyond that.

Alkire said Helly Hansen’s fourth-quarter earnings exceeded the company’s outlook by more than 50%, driven by stronger revenue growth, gross margin expansion, and operating expense leverage “due in part to synergies.” He also highlighted working capital improvements, including reducing inventory days outstanding by roughly 100 days versus the prior year. Helly generated $100 million of cash from operations in the seven months under Kontoor’s ownership, according to management.

On China, Alkire emphasized that Helly Hansen’s results exclude the direct contribution of its 50/50 joint venture with Youngor because it is not consolidated. He said the JV generated approximately $100 million of revenue in 2025, up 95% year over year, and that the JV delivers a mid-teen operating margin. For 2026, he said Kontoor expects “another year of strong revenue and earnings growth” for the JV “north of 50%.” He added that management is connecting the China business more closely with the brand centered in Oslo and is seeing early benefits from improved collaboration.

On distribution, Baxter said Helly has limited distribution in North America today and a relatively small direct-to-consumer channel, which management sees as a key opportunity. He said the company expects “pretty significant rollouts” with wholesale partners in the second half of 2026, while also emphasizing a selective approach designed to protect the brand’s premium positioning.

Alkire said Kontoor has identified more than $40 million of synergies (up from $25 million previously), primarily spanning sourcing, logistics, distribution, technology, tax, and back-end operating efficiencies. He said the company expects to reach a full run rate for the $40 million as it moves into 2027.

Wrangler and Lee: contrasting trajectories

Wrangler delivered fourth-quarter global revenue growth of 3%, driven by 10% growth in direct-to-consumer and 2% growth in wholesale. In the U.S., revenue increased 3%, supported by 10% DTC growth and 3% wholesale growth, with management pointing to strength in denim, female, and western categories. International revenue was flat, with 11% DTC growth offset by a 3% decline in wholesale.

Baxter said Wrangler’s men’s and women’s bottoms business posted its 15th consecutive quarter of market share gains as measured by Circana. He also cited double-digit gains in female, western, and DTC in 2025 and said the brand invested behind product assortment and demand creation, including activations around college football. Collaborations such as Filson and Stranger Things generated “well over three billion media impressions,” he said.

Lee, by contrast, posted a 6% decline in fourth-quarter global revenue. However, U.S. revenue grew 1%, driven by 8% digital growth and 1% wholesale growth. Alkire said digital revenue increased 11% for the full year, supported by brand realignment efforts and incremental demand creation investments. International revenue declined 15%, with wholesale declines partly offset by mid-single-digit growth in company-operated stores; in China, store growth was offset by wholesale and digital declines.

Management characterized 2026 as a transition year for Lee. Alkire said the company expects first-half 2026 Lee revenue to decline at a low-single-digit rate, with the second half “inflecting positively” alongside improving profitability. Baxter attributed improving confidence to work on brand identity, marketing (including what he called the most significant equity campaign in years), and product improvements, and said Lee’s product offering coming in 2026 and into 2027 is “the best that Lee has ever had.”

Margins, Project Genius, and tariffs in 2026 outlook

For the fourth quarter, adjusted gross margin expanded 210 basis points to 46.8%. Excluding Helly Hansen, adjusted gross margin rose 30 basis points, helped by Project Genius and mix, partly offset by higher product costs and tariff impacts net of pricing. Helly Hansen contributed roughly 180 basis points of gross margin accretion in the quarter, Alkire said.

Alkire said Kontoor delivered more than $50 million of gross savings from Project Genius in 2025 and expects to “approach $100 million” of gross savings in 2026, with benefits building over the year and reaching a full run rate in the second half of 2026. He also noted the company made an incremental $8 million brand and demand creation investment in the fourth quarter, primarily in Wrangler.

Tariffs were a major focus in the outlook discussion. Alkire said the 2026 outlook assumes higher tariffs on all sourcing countries except Mexico (which remains exempt under USMCA). The company assumed a 15% reciprocal tariff rate effective February 24 for applicable receipts on or after that date, and at least a 20% reciprocal rate for applicable inventory owned as of the end of fiscal 2025 through February 24, 2026. He said the gross tariff impact in 2026 remains over $100 million, and that tariffs net of pricing represent a headwind to gross margin.

Management said it has implemented price increases across Wrangler, Lee, and Helly Hansen as part of a broader mitigation plan, and expects to fully offset tariff impacts over 12 to 18 months through measures including pricing, supplier partnerships, inventory management, and shifting production within its global supply chain. Alkire also highlighted potential upside tied to a proposed Bangladesh trade agreement, noting that more than 80% of Kontoor’s products sourced from Bangladesh use U.S.-grown cotton and could qualify for duty-free treatment under that framework, but stressed no such benefit is included in guidance due to uncertainty.

For 2026, Kontoor guided for:

• Revenue: $3.40 billion to $3.45 billion (about 9% growth, including an approximate 2% impact from the prior-year 53rd week).
• First-half revenue: $1.56 billion to $1.57 billion (22% to 23% growth), weighted more toward Q2.
• Adjusted gross margin: 47.2% to 47.4% (up 60 to 80 basis points), with first-half gross margin expected at 47.1% to 47.3%.
• Adjusted SG&A: up approximately 12% year over year.
• Adjusted EPS: $6.40 to $6.50 (up 15% to 16%), with first-half adjusted EPS of $2.25 to $2.30.
• Cash from operations: approximately $425 million.

Alkire said the company anticipates voluntary term loan payments of $225 million in 2026, bringing total acquisition-related debt repayments to $475 million—about 70% of the debt incurred at Helly’s closing within 18 months. He said Kontoor expects to return to less than 1.5x net leverage by the end of 2026 while still maintaining flexibility for shareholder returns, describing a strategy to both deleverage and repurchase shares opportunistically.

Baxter closed by reiterating confidence in the 2026 plan and pointing investors to an upcoming Helly Hansen-focused Investor Day on September 2 in Oslo, with a broader Kontoor Investor Day planned for the first half of 2027.

About Kontoor Brands (NYSE:KTB)

Kontoor Brands, Inc is a global apparel company best known for its Wrangler and Lee denim and lifestyle brands. Established as an independent, publicly traded company in May 2019 following a spin-off from VF Corporation, Kontoor leverages a legacy that dates back to 1889 with the founding of Lee and to 1947 with the introduction of the Wrangler brand. The company focuses on designing, manufacturing and distributing premium, casual and workwear apparel, including jeans, pants, shorts, shirts, jackets and complementary accessories.

Kontoor Brands operates a diversified sales model that combines wholesale partnerships with leading retailers, distribution through e-commerce channels and select direct-to-consumer formats.