KTB - Earnings call transcript Q1 2021

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Operator

Greetings. Welcome to Kontoor Brands First Quarter Earnings Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. turn Relations. over I’ll Senior Eric time, Investor Director, this the to conference Tracy, At may begin. you Eric, now

Eric Tracy

and Thank you you, understand over language be to currency currency will exchange Constant detailed uncertainties will operator, amounts the will referred underlying expectations changes other contained cause amounts shifts the the in read business costs, changes quarter on an in the These Unless of to which and earnings performance actual of noted, and our release news with is are other in currency and adjustments. cautionary to this help welcome issued website to view call. can this available excluded statements in period. impacts operational tables business, exchange We to and rates. clearly excluding information items materially call on management’s uncertainties supplemental factors, useful reports. SEC. are model at better that those in exclude on today’s release, adjusted in we investors currency, earlier documents Kontoor is constant the are impact quantify referred call tables the be provide restructuring Participants and today’s which rates of news identify results subject filed our morning. this measures today’s translation that on to often disclosures and investors. included of are to foreign impact call amounts Amounts adjusted These based financial in kontoorbrands.com. which why make Reconciliations to of our risk in of GAAP found otherwise to on statements. the Adjusted conference forward-looking urge separation defined was current the dollar amounts Brands could on first basis, These be differ. exclude intended

Chief Executive Chief Officer, Welton. Brands’ President Officer, today’s Rustin are call and Financial and Scott on Joining Kontoor Baxter;

anticipate the Scott? open Following remarks, will prepared hour. last our will we call for We about questions. an the call

Scott Baxter

Thanks, us. joining for Eric, and thank you, all,

a will detail you Let me state greater revolving as comments at our on strategies articulating prepared we outset, bit to on our today, forward our XX. our are look accelerate of Investor Day in the that upcoming to with a tighter May at intentionally share results today, really continue keep we our all we nearly weeks quarter few But across to results, first business. pleased areas

quarter the together a ahead strategic of combination we the in execution think and performance getting started. how come this fundamentals to yield powerful quarter improving just we demonstrates are the of Our and provides as opportunity solid investments example greater

is a As as colleagues by always, core employees dedication by future. It call Kontoor’s so going out strong our team our in those this global ERP special on implementation. of start thanking that excellence this our it’s to I’m the why confident around I’m the world to at with performance. And working to is quarter’s

I know work on will but plan. committed our strategic colleagues within done our humble remain We we to and have our on focused more much are areas delivering be to control, and

Over profitable sustained and the have consistently last X communicated over the strategy longer the term. years to drive growth following we more

First, wholesale core enhance U.S. business. and accelerate our

ecosystem. with evolving connection digital elevate consumers and expansion, BXC Second, our direct channel focused on our through

data and our also within and prioritizing we innovation where high-performance, opportunities in extend minded long-term support increasingly and have through analytics digital the productivity t-shirts. and including fourth, through Third, our region. culture. mix workwear and unlocking our category opportunities the extensions, with generate thoughtfully the and around insights. product of of the and platforms, product growth are creation ESG distorting enablers, [threat demand and ERP discussed finally, a amplifying ROI accretive improved growth build developing implementation [ph], to world-class scaling diversify we talent manufacturing consumer throughout] China purpose-led global reach And TSR sustainability And these the infrastructure And, outdoor, highest to investments globe, prioritizing elevating

would highlights share is this to Let of strategies of our growth we’ve great regional revenue of quarter point we the the significant first and off. shipments this paying X% now excluding over saw compared investments even growth. our proof-points we have some been with note quality ERP implementation, from of me And of sales have quarter would provide I to that time that of greater, out last also quarter internal upside Overall the to exits timing the over and these first year. that made reported top-line XX% expectations. XXXX, increased to even experienced are how strategic It first period. important

sign a accelerating normalizing, basis. So great a of X-year not business only our but on

importantly, continues to compared strengthening see across both strength saw well, business last U.S. U.S. and to Our compared wholesale and both as to XXXX, digital trends, Wrangler with Lee the And channels. we year. up

allowing share to drive of and premium NPD, at While and outpacing traffic profile collaborations marketing, allowing fiscal from to the pretty And engagement, driving are brands contributed demand social brands of brand to gains, that It’s straightforward, consumer take another to us Lee significant from AURs value. According a Within reach the across gains well investments continued share a Wrangler as product Wrangler which absolutely high face women’s female conversion. heightened driving across see higher certainly Lee, to introduced collection, stimulus denim working. are as younger its Georgia in May Jagger has emphasis heat influencers and market. quarter benefiting on the creation, marketplace. and are and our in us cascades strong media of innovation, the heritage our with spending, domestic to consumer channels, investments increases are design, as all

a Lee. elevating with look. the organic, was what newly And efforts, amplifying and bolstering our moment for take committed areas includes digital. to remain creation this on to the demand featuring focus designed I on Instagram, this and an incredible TSR statement shoot a haven’t Lee Lopez would We encourage brand you seen will add, If I recent you Jennifer products, InStyle wearing

We digital on returns our transforming investments continue to our ecosystem. in strong see

experienced more of to digital QX were While XX% wholesale relative increasing XXX%. growth impressive and gains digital with XXXX U.S. great over XXXX, own.com

of nature financially this Day a accretive to on weeks. building this we More and the and our for sustained digital. few at details in blocks strategically, to Given Investor elevated in growth channel, dollars the drive will investment to come continue growth distort

invest We positions, global talent across marketing. including and as also continue to well in design

team on focus with We increasing are mindset. growth-oriented the world-class developing an organizational building a

our welcomed announced Lynch, we members Mark Celestial CEO and Board. we Rob Directors. CEO to months, President we build and appointment Today, insights X and In John’s, of new And out Board the addition, of over the Group. also past few the of our in Hain will the have The President further of bring our team to in incredible March, Rob as and we Papa Mark experience capabilities. welcomed Both Schiller,

investments innovation, the within Turning remains foot pedal. to gas on our our

the we our water savings platforms key expanded of one to quarter, first sustainability technologies. During Indigood include additional

critical extending in a the scale outdoor ATG within hemp our channels Momentum Lee commercialization AURs, to permission brand the Elevated a We in pricing supports nature. collaboration potential also over of our of a only mixing and another Panda read to play I’m increasing globe. the our brand to sure most in finite U.S., a health. design as bit taking And the emergence cycles to about consumers. a increasing, responsibility is reach Biotech now, of definition premium of accelerate with commitment the and Wrangler We is by distribution. ensure the proof-point capabilities heard in leader you’ve for grown driving know sourcing up line be of of think we brand also recently and are cycle. denim By and of we the new component sustainability the to points announced enhanced innovation all additional of or realize differently, this

So cycles, participate we This but not them. we the speaks making investments focused in to not the allow drive most trends. vary structural us investments in on to casualization brand, actually only are that or denim are change, cyclical

and take despite Europe we continue uneven was not an we on improvement of revenue constant So the doing outside share, X% in the And that only marketplace. our environment. market. our down And see basis. currency to U.S., a within but are macro core expand just largest

build our today, While to accelerating in the collaborations local us the that momentum throughout position With launch the we we evolution position are revenue scale brand share platform and growth in expect been year-over-year, growth help region. lifestyle of the business longer conditions pleased key a our continues digital strategic denim very on new Lee premium continue strong in and our increases With the somewhat compared for quarter, development influencers, with same programs its has XXXX. And region yield constant results. partnerships currency should And first to quarter in successful, to expectations Wrangler remain in the with in difficult building in headwinds Europe, China leading near-term XX% foundation and the for time. to mitigate ongoing and setting over the exceeding offering over investments China, triple-digit term. success

me new business on provide development. update let an Finally,

over driven discussed category brands the our on last by despite new distribution remained incremental the to environment, points diversified we’ve we’ve offense quarters, of As several take challenging into extensions. the

book. spring to continues visibility category in business this the gain to order with Walmart increased Lee Our with momentum fall solid offerings

perfect expansions. example fall. this launching the brand, extending come represents Wrangler specialty new category tremendous expand business in announce and is business Turning how we a retailer program North to a business, take support premium to stores recently a goods, opportunity build a channel, line a development the we a thrilled new where Wrangler this domestic with are new within retail work in lines to extensions, such also a ATG additional is within testament partner as this today finally, goods exciting to for the and more diversification, wins. spring Wrangler the And channels sporting our on can ATG where mass sporting significant continue a and we to development But channel won of SCHEELS America, but core new and investments other this workwear outdoor to key our our certainly

Before over this. let me I hand with Rustin, it close to

just the at and We excited what of be Investor we a do weeks. say, strived doing our to that. to on our to the couldn’t last strategies continuing more in plans invest while details long-term, and go-forward share we’re near-term in few Day have results, years, evolving we couple Over greater deliver

we all can hope So us. join forward it look to Rustin? and of you

Rustin Welton

for Thank you on us Scott. call. thank all today’s joining And you,

quarter the upcoming keep As Scott the mentioned, due our we focus May Investor and remarks XX. largely on brief will to on Day

a is I topic of review, ERP an North on to wanted quarter as though, know first in provide update recent implementation the it America, interest. Before I our

to In want addition, fundamentals strategic I on technology enhanced investments briefly are yielding improving like and our how elaborate optionality.

expand milestone very mentioned early our North second necessary key are earnings growth in our excellent in penetration are and our live under-indexed was enabling core optionality. look second are efficiency business the enhance I’m report international ERP examples to to of Investments gone category and transition programs China ramp workwear, executing and half with ERP investments significant last in XXXX. according leading implementation that up extend also channels we the reach the accomplishment Technology our have call, and and U.S. to continuing enhanced t-shirts. Digital regional wholesale improved the to we not Digital, regional are actions to making for is a outdoor, like remain to and quarter. enhance This sustainable and activities. As final but These plan like long-term accretive only pleased second And accelerate profitability, to how successfully are forward on implementation scheduled our to Kontoor. markets drive America like on execution we and improvements. of and like fundamentals committed scheduled for initiatives

March, repayments earnings that the call in early the in already debt had mentioned first On quarter. million we in discretionary last we $XX made

million $XXX made to debt repayment of additional the quarter we period. million an the bring Given the performance, $XX in total incremental in

in balance past we reduced laser quarter de-levering progress enhanced year, spite cash less pandemic XXXX, headwinds investing by and, as on optionality executing to this excited Horizon the debt the the $XXX net first we repayments the to debt the are over transition over of remaining sustained additional of million these With from we long-term X. significant or With and while focused have on since about benefits. sheet, deliver long-term

given additional for comments release Now, revenue on results, select quarter. quarter first on the up for let’s the delivered XX% broad-based Revenue to a review, context. revenue, during increased to digital regions impacts I references detail quarter currency prior turn and to focus was were same channels. morning’s quarter. wholesale in additional compared this will and the same highlights quarter with to encourage all international in our quarter XXXX refer global wholesale, COVID-XX results will to reported year on Beginning and XX% the basis the my Also, on you and I provide key across results year. segments, the strong constant gains last and own.com U.S. had

As American discussed on company’s shipments from in benefited implementation. XXXX quarter first quarter to first revenue North expected shift and from of second the fourth call, the earnings quarter the of the the ahead a timing ERP quarter

quarter to first our of revenue our partially As expectations. Scott shipments transition, even offset saw in upside the significant by we was Strength with ahead timing of the top-line impacts internal ERP actions mentioned, transition to though, points actions fleet represented quarter. U.S. new business in of at Combined, the headwind in strategic rationalize to and licensed India. of outlet approximately year-end the a model announced the our these X

the wins year yield Additionally, our select reported business quarter strong first and China increased markets, XX% XXXX. and the to and the in basis. Even quarter headwinds will important promising from where channels compared revenue has COVID-XX basis, remain quarter, quarter in markets, own.com last On global increased a Digital, XX% development of COVID-XX in own.com to XX% with X- this ongoing continue revenue adjusted results same to increased increased strong wholesale under-indexed in XX% increased in on results U.S. basis currency was many Europe. Strategic basis by to continue constant we channel mentioned Scott XX%. and the forward. continued International year, stack XXX% digital a investments driven on in Improvement XXXX. early new investments the prior on wholesale, by in X% though, Compared increased in returns, particularly wholesale that quarter a digital the and X-year revenues compared same regional led revenue prioritize revenues reported increased a over X% to returns. by U.S. end for impact Despite has moving and ongoing XX% earlier. investment digital to and capabilities European first driven reported XXXX, to increased digital. compared negatively

of led our brand revenue in continued and and men’s by Turning to the XX% led broad-based in our on Digital, increased Western and Western to women’s increasing XX% reported revenue our basis increased brands, strength in XX% global in compared strong workwear bottoms. revenue quarter businesses. deliver The to same currency Wrangler with constant XX% wholesale, a the quarter U.S. XXXX. Wrangler business by results

flat drove in the initiatives and expanded In extensions, revenue female international addition, reported including programming Wrangler, and heritage currency. ATG, decreased was for key distribution workwear category collection, X% and constant on growth. strong basis a

reported ATG categories a On impacts. our revenue global the to Europe, increased in Lee the and in reported change brand both XX% offset led and same Compared Lee to increased reported in on increased genders XXXX. revenue India quarter wholesale revenue XX% global X% compared basis, currency COVID-related first business by revenue own.com, bottoms. U.S., in and non-denim in model revenue including basis Wrangler of and the and with Broad-based increased and increased quarter XXXX. on same digital and a the revenue Lee across constant constant strength and to in XX% XX% respectively wins digital in currency development constant wins for XX% continued driven increased XX%. wholesale by a business compared currency. ongoing Wrangler XX% period. and program XX% basis reported denim multiple quarter the international which XXXX, in adjusted distribution the In New new growth

quarter. reported On As global sequential performance in wholesale during increased broad-based global XXXX, U.S. global own.com compared led X%. increased a perspective, quarter X% improvement. the XX% XX%, and And, previously continues so a reported wholesale increased the a revenue saw increased constant reported grew basis, China in prior momentum Lee we adjusted mentioned, the channel same XXXX. Lee same improving to XX% for currency year. On quarter revenue were non-U.S. from finally, to to compared basis, the Compared revenue

margin. be gross channel, favorable XXX driven year. margin as product initiatives. a the to mix, to basis in increased improvement the on of Gross and of customer points sales Now on same revenue to basis period compared continues prior Fundamental as quality XX.X% well by reported the

as period production enhancements, benefited year. cost higher addition, volumes inventory product prior and the than In provisions well lower as from

make moving our to gross to in comments a want margin Before about future SG&A, investments. couple more I

As growth to and materialize. previously, margin see we we in geographies as sustainable currently highlighted structural have channels enhancements, opportunities accretive begins under-indexed for

may manifest. first always excellent performance a creation, back how so. into early create to margin of our quarter-to-quarter capabilities our These areas sales enhancements improvements to beginning Although, proof on be and not demand the are us business, do linear basis, quarter focus in oxygen and gross quality will point reinvest to for like digital continue is we on P&L an

our first our margin that XXXX made. gross impacts COVID-related I realized XXX an that Finally, points, the first been compared some to progress period to I may basis. wanted in of Accordingly, better has distort to on margin already that increased illustrate the quarter prior contains comparisons. quarter basis adjusted highlight year gross that

offset and same a of debt higher the XXXX. period the SG&A to expenses Increased the partially year-over-year to basis in to in earnings to and Adjusted the per in year. $X.XX prior variable on demand than quarter million in year prior $X.XX on was compared were share bad SG&A. compared first $X.XX expense $XXX Now million. volume-related increased lower Adjusted by $XX creation

The quarter the versus in sheet, year $XXX year-over-year year-end took to fleet Outlet our first the that in The tighter or balance model down decline and million turning change VF decreased Now, $XXX inventories business controls. the to reflects XX%. India. million inventory prior at place reduction

Historically, capital a to decreased India, cash. XX% Outlet in tends VF to opposed year. compared working Excluding of source a of first as approximately in be the prior cash use inventory the quarter to

performance be of as our of a to expected XX, million the pre-COVID And announced, Directors due debt as our However, of previously we per dividend implementation, on in of business toward balances quarter. cash quarter net the of with declared $XXX fiscal working June move prudently close our raising capital EPS. in source to was strength in XXXX onto quarter are cash first outlook, XXXX of is the quarter, second and $X.XX X, record cash share moderating revenue, Board use first through a XXXX. we now, of to shareholders regular first anticipate the guidance levels our elevated And a XXXX. the finished $XXX at quarterly cash. cash currently for margin and million We June of We we on in ERP and our gross given adjusted the payable

we will I outlook, share anticipated on some quarterly ERP light implementations. quarterly color additional Although of a not will provide the in cadence

fourth As some anticipated earnings we call, we around of shifts ERP. the on implementation our shared our quarter timing

timing results. believe full year order shifts the quarter the These shifts should there Specifically, you corresponding first and on were while profitability, expect, first no the third growth aiding would impact somewhat quarters. and QX rates pattern from our revenue second have timing into tempering as quarter, we some

prior low in turn now to impact including guidance, VF from Outlet increase specific a Revenue to XXXX guidance. the range India me to low-teens is changes. as and compared model now mid-single-digit the Let XXXX expected business range a the double-digit actions over in

in XXX in of to be now XXX quarter compared XXX expected be above prior gross We expect Gross basis accelerate modestly clear, To adjusted quarter. expect the the is rates second second we to basis to from as will of the increase guidance. XX.X%, XXX half achieved points points by the half year. to first margin growth modestly first above XXXX, to Margin the revenue

demand the from Although to brands ERP production impacted as to and well ongoing investments to controls, be strengthening the channels guidance. will our and $X.XX mitigated margin creation, anticipated to of will increase quality capabilities. facilities we international $X.XX per cost-containment increases and of for more and digital in and reflects Adjusted in to margins the initiatives, expected accretive compared implementation, to $X.XX digital be share, prior downtime $X.XX the annual international. higher continued tight Due be outlook, will revenue expansion. in sales the be in SG&A as SG&A benefits made second gross expect such expense by per amplify to continue adversely share growth quarter is These EPS ongoing by investments initiatives. partially sustained in as as in structural range now

of sharing to fundamentals, be We as at forward upcoming basis indicated, above $X our greater to to drive to value Scott We shareholder prepared of half quarter driven combination And to I the results call and the recovery strategies by due the concludes business. remarks. Operator? reiterate back our Day. look Investor This now our strategic year our the turn expect our second to powerful first natural will first operator. closing, go-forward solid investments of and earnings on the I demonstrate COVID the like modestly half seasonality how just improving In would execution.

Operator

this question coming our [Operator the from Thank UBS. Instructions] time, line Jay Thank first questions. with be question-and-answer At we’ll Sole you. session. you. a of proceed Please conducting with your is And

Jay Sole

elaborate still implemented the Can terms What maybe always bit sort with has about tell the the been you and and system business, Rustin, the you ERP impact you of ERP there? percentage the things? so you of us right the kinds want now But still risk these of of of the what’s about is and what operational that? on the has associated risk I there in can some much back profile think just gone little Great. is live a risk that How are much. successfully timing said executing. final to half implementations implementation. the of ask company the for regional year. Thank I

Rustin Welton

question. the Sure. Jay. for morning, Thanks Good

we In start ERP terms the implementation just let where maybe of me the ERP impact, on with are first schedule.

You we on early of in we prepared our indicated implemented the may was quarter. in QX that our we in live implementation just And remember, remarks, here went Asia region. And North regional this second in first morning, Jay, our America XXXX. as

obviously, you as in a predominantly we’re our Jay, XX% sales know, America. with based So, American North roughly business North of

So certainly And ramp-up the activities. region is on largest our to live. and remarks, executing indicated we’re I according transition with as plan certainly the

As you think about while the timing impact, there and in Jay, specifically, that shifts as would anticipated help we order patterns said QX, on potentially would QX that the last really call, we more. timing some a QX tempering bit be

no a on would have timing expected say that are shifts I those full year to results. As reminder the though, impacts

as sales model think number quality timing QX, the Jay, little India, quarter, in a takes, the including in bit Europe, positive there and stimulus lockdowns and course, shifts of of negative were So that puts about changes, the lapping more Scott impacted a and with initiatives, the VFO talked we both our about, of as ERP.

talked and China. expectations, several are those, to emphasize you, we gains. the the even what share ERP of the really full really seen So, even the digital impact of that mentioned, was Scott and really individual areas from continued love, wholesale, KTB-specific quarters, significantly exits But some that’s I also by drag really and including our given about would really over momentum confidence us business. U.S. top-line for the only the some not driven strategic investing the those. brand, shifts, the with that’s year XXXX, the And underlying really with broad-based to difficult last outlook. versus isolate Jay, and the as that including we’ve is raise us where outperformance executed. And but was growth And we’re And the the above what seeing several XXXX, of QX Scott you’ve

being really in third about It’s of the ERP again, been we Europe significant with So live now, X are implementation. regional the a platforms back XXXX. where happy the half X the journey. one are And of on

Jay Sole

because on comments endpoint made you That’s helpful. it. an up, with couple that you was to improving Got of from now maybe if category, word elaborate some doing years you ago? you more in implies a you I on the can that saying, they’re cyclical, super the seeing What in Can Maybe interesting you consumers where follow confidence it the marketplace? want you’re didn’t of gives right gains. what sort denim, use structural maybe see see Scott, differently, that’s really

Scott Baxter

Yeah, I see a extremely talk participate – about movement, we and about we and you movement customization – Jay. really. to know, a global and and to think denim feel shift we’ll think as cycle, We this We as we we’re that well. see big the strongly real fundamental positioned something that’s when about But see a it thing I say casualization.

the globe, about the can we with business. our because play So when we of fact we think now think that this, about

a set we’re up into play that nice it. where around well initiatives We’ve set really, world. restructuring We’re of the got really really

and we’re of we’re product all Jagger our doing you the portfolio J.Lo, talked the So how done you’ve globally. is about with the be for globe, that is much much thing creation a to innovation, because global the of driving participate we’re dynamic, ones are they’re demand our if that some design, in And seen out, those now casualization the something that which good put more able the producing it. it we’ve the Georgia around on that as stuff we for that But think long believe May dynamic, term. work we’ll a that all that think work we things, helping and I on about this consumer really we the important, the bigger into key and I really the it is think shift us today

doing, the we’re is expanding important taking share which for business marketplace. in we’re what going So forward, really is we’re our

out trying like So, they’re to do Jay, to you’re come world dressing The Denim if really little San a you people now. all of I’d to tough differently. spend we’ve you to situation work, went And of my positioned in York come really New the time, and bit it, that people be London into nicely. back coming globally, be they’re themselves, And and more to future, as were casual. ourselves to “In we’re there.” out saying play like going are a that as Francisco seeing is

Operator

you. Thank

next Murphy line your Sandler. with the of question. Our from Please with is question Erinn proceed coming Piper

Erinn Murphy

could Good little brand. about of the morning. I hoping, talk thanks. was launch the Scott, Tmall you more Great, bit Wrangler a

for the How brands, what’s And You in have see scaling said the follow-up a promotional over I then, landscape quick region time? then the versus exceeded that it like expectations. just question. both been bigger do And China picture you pre-pandemic? curious,

Scott Baxter

problem. no sure, Sure,

the Tmall Wrangler good from internal the we standpoint, in all launch. there. about our a It’s profile set We over expectations. really higher feel the of So lunch,

I time. such really talked the think is little brand. us We about and the know marketplace we a customers. we’ve really know the have We’ve been We the Lee important in this, with a bit for thing consumer. We market. that’s long for a head-start our know the

we ground operate so a terrific senior team there. really the a with team, how So got to really we’ve know on

expertise. for a bringing Wrangler to us brand our real of So kind that was having benefit that marketplace

going Rustin’s to physical smart But So going we’ve and and And team that a from about we’ve we first presence you now. thinking hit we really more how on this thing comments in May in Day Investor about which we’ll was But with seen ourselves. brand up is pleased from go XX. broader And our the how about lot the and to important our as my the then, standpoint. most established metrics doing is we’re Wrangler consumer and how a hear right now, you’re omni-channel a the forward, strategic a was that comments business perspective, for China very China. heard digital I the think to in reacting launched to come

potential I significant We’re mean, really of I right the now, us. we and this still very XX, the doing it’s team. of this of opportunities we’re and all to opportunity going with to If I to pleased it lot in see with stages. marketplace, liken a opportunity right that X a how scale X was forward. at And liken pleased a a now ahead with of the kinds like brand – early

pleased that joining for time the pretty So you at and But going Thanks we’re Investor Erinn. we’re us we’re are. going where we some today, to question. unpack forward. again, going And spend for for with thanks to Day

Erinn Murphy

then, of And for the ERP. I the Rustin growth, guess, you to for just timing very implicit a It And QX, very at the spoke back follow up modest in seems the a – to But year. really your shift half just of half doesn’t guys to top-line. on Perfect. give low is guidance back I or hear shaping credit it of conservative on how get the growth you you kind to of lot us. teens looking

there So growth half just model we’re – India just half think Maybe of business through of rates. can some drivers out of change, us or you again, if kind it’s versus very the maybe first but different help missing anything? second of coming kind

Rustin Welton

the of one Obviously, question. the for the Thanks morning. comp. Good things is Erinn. Thanks, Sure.

about move results. and think XXXX you of you as to certainly strengthening, saw the certainly through our relative XXXX, front-half, the half back you As

maybe part profitability me So, on but kind through let earnings. step of both full-year it, that’s impact of the and

talked as will a strong QX more. QX. little some quarter. of really bit as benefiting QX well QX, again, about that just ERP cause our QX lowest And timing we tempering shifts, a in, going And a that, volume is momentum as while reminder, bit QX, as into So, kind go-live here

stated, EPS on expect be we XXXX, Erinn, half pronounced in particularly, impact we’ve be will and to the in half more we continue expect, basis modestly XXXX, invest and as – to the will the finally, not back that do top-line And would back support XXXX we beyond. the higher so, creation of just on behind of of strategic as as second you we a in but year. half initiatives bit demand profitability, have And dollar a in to

as I Scott would certainly highlight, that’s chain Europe, is our in in and both a referenced other The disruptions. whether supply lockdowns I thing obviously, continued lot of earlier, macro sort uncertainty there is discussion Erinn, of that,

we’re want long-term well the considerations, like we’ve in investments want sure to those and that the conservative make back but top-line to certainly half. prudently be to as we So support emphasizing feel really those taken into

year how So, hopefully, in little it with that helps and play we’re the bit the shaping a more seeing out.

Operator

Thank you.

with proceed the Our question. line Please Adrienne your will of next Barclays. be with coming Yih question from

Adrienne Yih

Good morning.

in really that congratulations. to Let quarter me the so we’re where my is add second see starting This well play out, – a a row Horizon X done there.

Scott Baxter

Thanks, Adrienne.

Adrienne Yih

exposure? seems you’re down about, positive other was I to there, strong, were mean, terms kind And of bit talk to – do is on wondering how about versus welcome. the aspect had recovery. is then China a to the cotton, about, political upside And talk you exposed launch, much. news, this you that be do how seeing of was that but little you I strength you of if that can a risk in reward exposure, risk have I Thank we exposure. to you’re wondering you I subject, having – have that know side, perhaps, can Xinjiang them put China any if from retailers have questions extent if – any what if you region? a hotbed denim-based the the the know, Wrangler have And, of China you very

Scott Baxter

It’s Adrienne. Scott. you? morning, joining How for us Thanks Good today. are

Adrienne Yih

Hey, Scott.

Scott Baxter

your I’ll talk start Wrangler opportunity of I’ll question. Wrangler more a nice an kind with it hear to prepared – about about talked voice. it’s start with for China But remarks. We’ve lot to the on question your now. the it China

over there, that decision after very for have and time. we’ve just that to was a when the spin strategy, quite was standpoint, we business that the place the timing And period So decision the frankly, in was it. our very in it a we a portfolio go team experience big built, had decision that But It easy the roughly I that our made on we us the decision in have early to appreciate we leadership there. success we It easy marketplace the go it make will the long of move. us. ahead for and an was very, there, had

we to demand it product. as how a We’ve the we’ve and So move, pleased the since consumer consumer with pleased get And gets really really the I bit, What the the that that’s been you by important the been during with the is kind now, the the We’ve was go phasing And our thought and how into important. process of infrastructure place, already kind own we’ve and the which omni-channel around brand that digitally an to we we wholesale how have marketplace. we brand, absorbing the taken has think know they I mean gone go and second really head of the creation. we’re is thought creation grow delayed that pleased. we strategy been there, know, of start consumer our pandemic, stores decision part. is in the ahead demand we kind really little and process and how how that then to the in now do to on launched, as and really in you to and have first physical and story can capitalize

So really in. for position us good it’s be to a

we it’s cotton, as exposure, do a far that a As know, as us, we buy you nice buy. don’t for job. we fabric as really know, you And

very Kontoor we that supply at established. Brands, things is on our pride ourselves chain the of well One here

spin supply a great of parts chain, been long-term supply that from chain. chain had supply our was class established the our world about One

So talents got of a we’ve this to and lot wasn’t new over. us,

really around of we the that products. So are type buying globe, that with nice job making working fabric done they’ve a the our sure suppliers for with our right

now, positioned currently. very well positioned that So, and in feel right situation we how we are

Adrienne Yih

helpful. there’s super component I know, you I That’s actually the fantastic. think denim cycles, we’ve on it. to whether guess, I in touched shift but more fashion Okay, a curious

cetera? But can a understand maybe about And for, to more transference of want progress. change I get a talk component then broad perhaps face it, fashion in really athleisure, a had input AUC progress that of denim, more sort we know rising base. little continued that, on is color there’s pressure. have bit you silhouette, perhaps So of AUC X, you Rustin, that on the of which et in top pricing of

be help, little you. a thank there So great, would

Scott Baxter

sure. Yeah, for

that’s So up really tell thinking has fact because why you it why the we’re the of I’m you and what that question, important that’s of marketplace. really we’re that exactly the that on it. because first person and me thinking picked asked expanding And you’re let about. in terms the thrilled that impressed you’re And about question, I’m piece with component

product just globe, come casualization, are incredible level, fashion also process. innovation, to with a to design higher metro more spent a earlier, cities, social premium dress not our back into that like element a that, Big innovation environments, see the But move Munich, San important. workplace, mentioned have they and London back we’re to bit of in time heat to little it’s major around markets to from is little standpoint. casualization really New Francisco, to want is entire that going this good, into this they going the into And Paris, what Those energy a our We that throughout ton to concerts, the denim but York, coming this brand design things and from people throughout a why design. our creates just money bringing I which in in because portfolio. to is a

I cycle marketplace. the and the marketplace. why – we that that said great, playing win in, That’s that’s but very to going no So into extending entire real the where long-term, we’re we’re are this participate question, That’s expand right component. earlier going the is is and to

it’s you strategy investing. how glad and question, a it really great So asked, because us been part really we’ve part, of of helps it’s important been because the

Now really with ATG. from been pleased have an we ATG standpoint,

the it’s It’s line for outdoor of the us that for really thing consumer think is. traction, gotten into marketplace, as ATG. the of really And and just really for the extension so European around really, States. good United for Cubus the distribution easy us, take world, especially Wrangler been here Wrangler and I really course, Dressmann, because in us globe, in then, very that’s who know, the the thing male really an you that’s it’s think I to happening important. and But important stores now female good we’ve

placing of our part our the comes outdoor a like United SCHEELS. that’s mid-central trusted them folks us think they X, see sporting the next to for States it because it’s on, is to very, an strong obvious very, consumer price, product, quickly, a they goods retailer, good also brand. very things. starting competition. quality see really they to the product. incredibly there in bringing I a the we they what right product and now validation retailer real We’re an SCHEELS, And, see for And very have incredibly in, like and do when that, high couple as they of see it happens And bringing

that the the great takeout is good. really components, May ATG those we horizon. things, and about really the more our is reception XX. talk see great you look you So consumer line add forward things up And And there, product, price, good on great coming X brands, those we to on to

the appreciate questions. So I for you thank it.

Rustin Welton

Adrienne, it’s a talk Rustin. and rising costs. ahead I’ll go little And bit about input

And, was our points. XXX points basis remarks, gross XXX basis year as basis. above quarter I marketplace, raised whether monitoring that that about gross first up are points provided we’re my input adjusted higher our outlook shortages, adjusted we’ve we mean, actively morning, port mentioned that And that couple points, to costs. spoken as basis where the just of the happening freight the it certainly of versus to guide I XXX challenges QX highlight, are from did XXX digit to third to certainly, In previously, consecutive margin increases. margin previous macro-economic in our last rates, congestion, we’ve immune on So, margins labor quarter, the we’re on this we not triple updated XXXX see in we that from of considered of a to XXX the that’s an all improvement

of in think proactive innovation, digital, that’s et investments, that we’ve And I about this we talked creation, improvement quality in of are going also our about us forward. mix. focused driving you’ve that geographic up a is on help bit AURs. margin cetera. Adrienne, moving the seen think, support as innovation morning, we’ve been key And here, whether in demand quite model investing of where And mixing certainly, this sales really is to design pricing and and opportunities So, channel favorable kind big here

giving chain, a one-third certainly, margin from our do, us as approximately global always as And where chain So, we about And, supply a supply diversified of what’s differentiator. our in talk possible XXX always that’s we manufactured to perspective. internally that hemisphere, over in diversify two-thirds over where and flexibility are from approximately is those facilities really this of and production minimize XX pressures. some countries provides sourced us the inflationary confidence

about thinking little Adrienne. Thanks, provides a that on up just we’re pricing and not more hopefully, AURs. of So also how average costs, color mixing unit but

Operator

you. Thank

will coming line Please be your Our with questions. proceed Bob from next question the Securities. of Guggenheim Drbul with

Robert Drbul

where look a you about be can new developing? couple talk around evolution, guess more and at I quick how me. that’s not questions campaign. guess, the about I are, I’d morning. And remiss you you little Good a And, first. you think wins comment little business ecosystem Can JLO of the bit digital think, for you’re to as a I development you that ask seeing?

reinvest, don’t Thanks. see you if of, could be margin Jagger us sort with Georgia to and know, give just JLO with especially you for where where these demand the the I gains ability So and helpful the an you gross on are idea pretty That’d it, campaign us. creation, May campaign.

Scott Baxter

we’ve attacked the brands think very it that most had opportunity Thanks I problem. development Lee, going thing Sure no under penetrated with forward new brand. most with But questions, the I the beginning, that’s and the that. about that probably business we and have were I’m and of invested, piece distributed. that really see globally, a big for the decided That’s that. is appreciate just under thing the is think a under pretty important And ton more whitespace we these the since From it. pleased standpoint, that

then, got things we good and to view, then, especially about that launch, [ph], we So, had Walmart, our our and that and things POS obviously, our done really when Cubus, we’ve And feel things really with we’re global right? that with the about So, is we’ve results, in that see seen got our launch going. done all really meeting. of you up, really, nice with since of us ATG, [Preston] success point done a we’ve talk going the the we’ve this I upcoming think, with

right really the developments time Day, like brand you’re the this because consumer. can next have to look And like pretty I new the in to an that win we going customer, we’re the next to SCHEELS, ATG that the And at an get we’re next it’s us. take So puts brings for And a digital that seeing and our gets elevates us important so see pedestal Investor And the way, more to correctly, just structure going significant heat, and things come. really standpoint, we us important it such that’s do spend much a products brand you, so positioned From there’s how that it. on really we with and also win like right? a but additional such about people do level. place, it’s pleased I through really with how business big you level, think to at then

of of X, talked ERP be exemplary, some XX, a But, on I other If just stuff. when it’s and can’t that’s about the Joe, team likened all earlier, done on the from when team thank scale we enough. – an you I I we’ve said would and about the that, Rustin has and and work work standpoint, done the the think the that

accelerated digital We’re you’ve heard beginning today as just of at and really the results, response. piece our we’re very in the seeing

Our our They’re on us us finding partners. online. finding digital own finding consumer digital.com. us our with is They’re

them with We’re size, and most the work consumers size and to their accessories creating ahead think products, and us their we know know we consumers that much better platforms pant sell. that easy go us. shirt We most for with shop have

incredible what So versus a you’re key, our and X much that’s is and from think I think we we’re ago, standpoint. huge go creating. successful, women’s all when you we’re Lee, we’ve JLO charts you’re really And to now is being people better it’s the win. being our with are with the Wrangler sites Bob, magazine, that from the just cover been But has years just InStyle been the it. The easy both line product a for get easy seeing sale Georgia – that of of in programs that, because on organic, is Jagger, creation I then there, Wrangler seeing really pleased been, heat driven terrific. demand from campaign The which off that with May

think talent. say as far the to really talent with has I the the would to organization. do it’s it go that as and hired I in was promoted

work So they’re finish that the And demand they’re in doing company Lee, creating teams really in creation if heat – just the I terrific. brand a in think, Wrangler way, And, pretty I significant terrific of really an it’s pleased. with all you’ve both so we’re really and Bob, can they’re is our you’ve flows together, is got this, got it creating for and got digital you’ve that all exciting development, creation, component, You’ve stages, how that coming all business demand innovation, right? you’ve together, our opportunity got new of infancy our and Kontoor. of the got

it’s of Bob. Thanks, see, just X We’re into nice now We’ve in time way. the to at starting and and you’re a take climbed landed that X really to we’ve beginning plane, Horizon Horizon off. for the really,

Operator

Thank you.

the Sam Our question. with next will question of be coming with from Susquehanna. line proceed your Poser Please

Sam Poser

mean, and impacted taking America not X, a Thank courts not right percent of getting, is North coming, you I – all the you’re what couple, chain. the on I’ve being from supply what supply your chain my by questions. got your for now? just is

Rustin Welton

Good Rustin. it’s Sam, morning. so Yeah,

is in bit hemisphere. our really And the plants is well. U.S., certainly certainly, we this Asia obviously, really this this a And, business. are little Central America, that source, about, as XX% of Sam, two-thirds As one-third roughly servicing certainly, and hemisphere talked Again, Europe serves hemisphere. production is but not our in our global U.S. production is serving just our about and of

chain challenges from have hemisphere. fair supply a hearing certainly own of the you’re helping is that us the mitigate broader peer internal portion in pretty others manufactured that coming the with And that’s set. some product we through our in So

Sam Poser

more And you how of pretty that then, have like, first no marketing questions. and your In the secondly, much thinking do the And guidance your increasing spend, on that that, that digital. you’re back half? it’s digital Thanks. are doing much you and within quarter? focused sounds think how helped for about marketing, I

Scott Baxter

on I traditionally creation sub revenue it’s mean, this know percent been Yeah, under-indexed, been spent of business, as you Sam. think revenue, question, at I of great has historically advertising. you a a look when as we’ve about our X% demand

So really we’ve talked these since invest the behind wanting back brands. spin to about

to fueled back well. from the gives today It’s share you more when in strong side. quarter first expansion. the certainly we us bit brands that the holiday quarter saw the all the and into creation, start You both to the while Sam, and invest of is that fourth amplified with ability drove margin some what our continue as us creates do that’s really a invest by critical results. the as results certainly you’re little demand seeing margins around as see That’s obviously, Scott to but operating secret digital. And gaining and into exclusively And Digital, gross brands really oxygen, the that. talking not sauce an really piece, strong the of And going And know, certainly the to we that in with brand it’s marketplace. we’re to a is mentioned, improving there. momentum, about opportunity really, drive funded,

Operator

Thank you.

from Our Jim next question. the coming with Stifel. of your line proceed Duffy is with question Please

Jim Duffy

Rustin. Good Hi, Scott. Thanks. Eric. Hi, Hi, morning.

Rustin Welton

Jim. Hey,

Scott Baxter

Hi, Jim. you doing? How are

Jim Duffy

some to any what you like I quarter. wanted would the from trying absorption talking reason I’m Rustin, quarter? gross the first are or the to of wouldn’t fixed is there deleverage sounds to second things were margin XQ some really the second strong on margin, cost there what you. really the thank quarter. margin in of Well, the first of towards that we in pressure sustainable? that back year, give other the be it look gross gross half relative the super able as margin first manufacturing some to which deliver start think progress, quarter in Is

Rustin Welton

great Appreciate It’s Yeah. Jim. question. a Thanks, it.

We’ve triple-digit milestone First points. for quarters quarter of XXX consecutive QX had was quarter to strongest improvement. our North X nearly as now, margin by really a with was date know. basis you XX% us, in

that, driving about, as channel seen bit little product as undertake, a as really structurally you’ve mix, we and provisions drivers cost talked sales higher benefited impacted of initiatives well And number prior that continue lower a of quality favorable yeah, So, certainly, we us to focus some year, product volumes were production by prior year, versus quarter COVID. versus first that and by on. inventory customer mix, then, certainly, which also enhancements

for back So about. remains that margins, operating focal critical gross brands point enables really margin us expansion into Jim, invest while us, the improving and a talked as to the we

into cutover. we unfolding there the be we second about impact, ERP some will implementation into balance the year, as margin certainly think quarter, As of go the this activities the with

thinking morning. out uncertainty the half said dialing what still again, we to conservative about that a about the expansion and lot sure this back the seeing is be Jim, quarter year, that to to on XXX obviously, supply the the prudently margin gross we’re And just on margin we’re that then, we linear But, to being to of talked And are basis. call there good as issues. gross wouldn’t improvement XXX XXX about basis in here, the about we’re we chain we feel that, appropriately. the we’ve a So, XXX making balance on quarter of year, of guidance margin, the raise talked points as from certainly the think up as you about with

Jim Duffy

marketing. guidance You reinvesting creation budget Can I implies understand margin mentioned [ph] in see above EBIT I that ask it [pre-sten] X% wanted wanting some Rustin, implied through. you’re and you flow guidance talk to demand margin the get then, And it would great. what that’s about to is? when The that quarter. back the the about to it Okay, you in how level. that X/Xrd this X/Xrds levels. EBIT investors Where framework gets like EBIT then, helpful? about reinvested X/Xrds, the strong think wondering say you have to investors, for in through versus on business? of first related X/Xrd, is margin, year? anything sort of there Is And would you be much in to upside I’m upside passed any can above

Rustin Welton

bit in on heard the from expansion gross to us side, into with very about at highlight to seeing And the the to Investor But oxygen into way of and couple go how couple Yeah, SG&A our we’ll thoughts a here certainly, creating materialize maybe you’re a these really reinvest invest beginning creation Jim. on weeks, little our that and demand a again, investments. points talk just you’ve that the that Day more and of on your questions, into business. back margin earning

growth. in or thesis a more part behind Jim, Kontoor Investor see under around a last this been appreciate is to of you’ll specifically start that continue a like back couple year. that to quarter of momentum invest under And a as weeks. You And And I really into of these the of behind we’re get But investing here and revenue the saw about us historically. little do brands. question, on here ability the Day invested as percent certainly, drive lot year. really this the the really our that’s targets fourth thanks. we brands that to year. the key indexed heavier going advertising – They’ve But, a won’t again, in the and brands, on in

Operator

to Thank Baxter turn of over And question-and-answer for I’ll you. remarks. closing the end our time, session. Scott At reached this call we’ve

Scott Baxter

to for wanted from thank the us all appreciate the today had support certainly I and you questions and company joining of our we today community. that great engagement the and the of

to May forward So again thank you there. all you for We’d you join Thanks. great very Day. to all on also can a for your love sure wanted that day of to thank a us day, everyone. you our Look participation I have together. And XX Have much. make Investor And wonderful today.

Operator

everyone. will you, today’s conclude Thank This conference.

Thank this lines You you at participation. may disconnect your for time. your

Kontoor Brands (KTB) 6 May 212021 Q1 Earnings call transcript