Kontoor revenue falls 1% as wholesale remains a challenge

Dive Brief:

• Kontoor Brands reported $607 million in revenue for its second quarter, a 1% year-over-year decrease, according to a Thursday press release.
• The Wrangler and Lee parent company’s U.S. revenue declined 1%, with wholesale revenue in the region also falling 1%. Kontoor attributed the wholesale dip to “reduced shipments as retailers tightly managed inventory levels.” International revenue decreased 6% to $111 million.
• The results exceeded the company’s expectations, CEO and President Scott Baxter said in the release, which he attributed to higher revenue, stronger gross margin expansion and cash flow generation. He cited the same factors in Q1, when the company experienced a 5% year-over-year revenue decline. 

Dive Insight:

The company is undergoing a transformation initiative, called Project Jeanius, which is meant to lead the company to between $50 million and $100 million in profit improvement and savings. It also looks to optimize the supply chain and reduce operating complexity.

On the earnings call, Baxter said the company now expects to save $100 million.

“We are at the high end of the range,” Baxter said.

CFO Joe Alkire said on the call he had “a high degree of confidence” in Kontoor’s ability to drive gross margin expansion through Project Jeanius, and said the company would be able to share additional details on the effort over the next few quarters.

Despite exceeding expectations in Q2, Kontoor reaffirmed its 2024 fiscal year outlook. It continues to expect revenue between $2.57 billion and $2.63 billion, a 1% decrease to a 1% increase year over year.

Wrangler’s global brand revenue was $429 million in the quarter, a 1% increase. Its revenue in the U.S. was flat in the quarter. It experienced 10% growth in DTC, which was offset by a 1% decline in wholesale. Its international revenue grew 7%.

Meanwhile, Lee’s global revenue declined 7% in the quarter to $175 million. U.S. revenue for the brand decreased 3%, due to declines in both wholesale and DTC. International revenue fell 13%.

Collaborations have been a focal point for Kontoor. 

Last month, indie designer Paul Smith announced a collaboration with Lee for the spring-summer 2025 season. The capsule will include jeans, denim jackets, woven tops and T-shirts. Lee has also recently collaborated with Diesel and footwear brand HeyDude.

In one case, a collaboration led to a boost in Kontoor’s earnings. 

Last year, Wrangler launched a Barbie capsule collection, which Kontoor called its “best and fastest-selling collaboration ever.” The Barbie collab, along with collabs with Staud and Sandro, led Kontoor to an 8% revenue increase in Q3, though the boost was short-lived, as Kontoor saw an 8% decline in revenue the following quarter.