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Kontoor Brands (KTB) Q1 Earnings Beat, FY2024 Guidance Up

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Kontoor Brands, Inc. (KTB - Free Report) reported first-quarter 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While revenues declined year over year, earnings remained consistent with the prior year.

A decent start to the year and increased visibility ahead prompted management to lift 2024 earnings guidance. Shares of this Zacks Rank #3 (Hold) company rose 8.4% on May 2, 2024. The stock showed an impressive rise of 16.9% in the past three months against the industry’s decline of 11.2%.

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Q1 Details

Kontoor Brands, a global lifestyle apparel company, delivered adjusted earnings of $1.16 per share, which significantly surpassed the Zacks Consensus Estimate of 90 cents. On a GAAP basis, earnings came in at $1.05, down from $1.16 recorded in the year-ago period.

Net revenues of $631.2 million decreased 5% from $667.1 million reported in the prior-year quarter. However, the metric surpassed the Zacks Consensus Estimate of $609.2 million. The decline in revenues primarily stemmed from U.S. retailer inventory management actions, lower revenues from seasonal products and a decrease in international revenues, particularly in Europe.

Adjusted gross margin of 45.7% expanded 270 basis points (bps) year over year. Benefits from lower product costs and channel mix were the driving factors driving for gross margin expansion.

On an adjusted basis, SG&A of $195.4 million rose 1.9% year over year. The metric rose on account of investments in demand creation, technology and direct-to-consumer initiatives partly offset by cost containment efforts as well as lower distribution and freight expense.

Adjusted operating income came in at $93 million, down 2% year over year. Adjusted operating margin improved 50 bps year over year to 14.7%.

Segmental Details

U.S. revenues of $492 million experienced a decline of 5% year over year. We note that U.S. wholesale revenues decreased 6%. Despite growth in owned brick-and-mortar stores, this increase was offset by reduced wholesale shipments as retailers closely manage their inventory level.

International revenues of $139.2 million fell 7% on a year-over-year basis. On region basis, Europe, Asia and non-U.S. Americas experienced a decline of 9%, 7% and 2%, respectively. International direct-to-consumer mostly remained flat year over year. Overall, it appears that the company faced challenges in the international segment, particularly due to wholesale channels.

Brand wise, Wrangler's global revenues of $409 million declined 3%. In the U.S., Wrangler's revenues dipped 2%, primarily because of lower wholesale shipments which was offset to some extent by direct-to-consumer growth. Internationally, Wrangler revenues fall 10%, despite a substantial increase of 25% in direct-to-consumer sales.

Lee brand’s global revenues tumbled 9% year over year to $219 million. In the United States, Lee brand’s revenues plunged 12%. Reduced shipments to the wholesale channel and a decline in direct-to-consumer sales contributed to this downside. Additionally, Lee brand's international revenues also experienced a decrease of 4%. 

Kontoor Brands, Inc. Price, Consensus and EPS Surprise


Kontoor Brands, Inc. Price, Consensus and EPS Surprise

Kontoor Brands, Inc. price-consensus-eps-surprise-chart | Kontoor Brands, Inc. Quote


Other Financial Aspects

The company ended first-quarter 2024 with cash and cash equivalents of $215.1 million, long-term debt of $759.2 million and stockholders’ equity of $387.2 million.


Kontoor Brands updated its guidance for 2024. It forecasts revenues in the range of $2.57-$2.63 billion, suggesting a 1% decline to 1% increase from the year-ago period.

Management anticipates adjusted gross margin of 44.6%, implying an expansion of 210 bps from the prior year. The expansion in gross margin is driven by the benefits of mix as well as lower product costs. KTB had earlier expected gross margin to be between 44.2-44.4%.

On an adjusted basis, Kontoor Brands now expects operating income to be between $377 million and $387 million, higher than the earlier estimate of $372-$382 million. The current projection represents an increase of 8-11% from the prior-year levels.

It expects adjusted earnings per share in the range of $4.70-$4.80 compared with its prior forecast of $4.65-$4.75. Excluding the out-of-period duty expense in the prior year, adjusted earnings per share is now anticipated to improve in the band of 6-8% compared with the earlier guided range of 4-7% increase.

3 Picks You Can’t Miss

We have highlighted three better-ranked stocks, namely American Eagle Outfitters Inc. (AEO - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Gildan Activewear Inc. (GIL - Free Report) .

American Eagle Outfitters, a specialty retailer of casual apparel, accessories and footwear, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 52.9% and 5.5% from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.

Abercrombie & Fitch, a specialty retailer of premium, high-quality casual apparel, currently flaunts a Zacks Rank of 1. ANF has a trailing four-quarter average earnings surprise of 715.6%.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales implies a rise of 284.6% and 11.3% from the prior-year levels.

Gildan Activewear, a distributer and manufacturer of activewear products, currently carries a Zacks Rank #2 (Buy). GIL has a trailing four-quarter earnings surprise of 5.8%, on average.

The Zacks Consensus Estimate for Gildan Activewear current fiscal-year earnings and sales suggests an improvement of 28.8% and 1.4%, respectively, from the year-earlier levels.

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