KTB - Earnings call transcript Q2 2021

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Operator

Greetings. Welcome to Kontoor Brands' Second 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] As a reminder, this conference is being recorded. to Tracy, pleasure Investor Director my Relations. is introduce Senior Eric of It you. Thank

begin. You may now

Eric Tracy

and Thank you welcome 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 call. on an in the These Unless of to which and you, performance actual of noted, and our release news with is are other in currency and adjustments. cautionary to this help Participants issued website earnings view second 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 conference is constant the are impact quantify referred call tables the be provide restructuring quarter 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 to forward-looking urge separation defined was current the dollar amounts Kontoor could on Brands' basis, These be differ. excluded intended

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

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

Scott Baxter

all, our and begin Thanks, the above with you, in the coming well in The results thank second momentum Eric, experienced expectations. joining quarter, for year to Kontoor continued us.

the the the KTB organization. once which Investor recent continue our in to affords huge thank performance again illustrates not platform a near-term of catalyzing for also efforts implementation invest and to to catalysts you the the engaged special but quarter, around Virtual our all Our you the deliver where recent call strategic years. helping power opportunity to vision transform communicated quarter on the as Day, A at Investor outlined our our world, the in model, our growth the Hopefully, us to only teams goals, strategic of in we to ERP Day. our chance over next to had incredible out a during three our growth the are their attend colleagues

During and for we our horizon set foundation optimized the growth. one, model

As expect strategies, sustained, to growth. investments more we we leverage execute drive two profitable on to horizon

on focusing catalysts. following by driven the primarily revenue, accelerate to expect We growth

share to support extensions, product enhancing First, fourth, and ecosystem; invest repurchase performance China we DXC the in capital within a productivity culture. which guiding manufacturing our purpose-led our million our second, gains ERP wholesale core demand innovation, TSR enablers strategy, announced our expanding with optionality to mix and enhancing third, increasingly in world-class diversifying And our critical unlocking growth, business; accretive have product infrastructure, brands scaling implementation this the reflected region; we particularly through tenants, our growth-minded and build behind program US talent and through creation and elevating accelerating platforms, ESG including in outdoor, and is internationally, sustainability in in digital And the efficiency category we leveraging as allocation workwear, and T-shirts. high today. digital of global including continue our the finally increased $XXX to

me how investments sequentially working. US, and strategies XX% takes rates, to our life in we results through associated continued quarter Overall, expectations. to demonstrate with that our despite some reported puts growth see across top revenue these Let from shifts the from how bit broad-based but constant Rustin importantly, the year. underlying exceeded brands to growth our both continue geographies. with highlights will quarter implementation that In posting come or the line Most a now improving note as of second would increased channels quarter some currency. in strong compared take year-over-year, our timing you XX% are to share and strengthen, the internal momentum ERP tempering somewhat the during the first the accelerated of trends the performance business revenue brands, with growth and I last our

and incremental innovation, wholesale. product all which we to within elevated making us the our US in and investments allowing continue channel talent, brands largest benefit support Our are from design, products, pricing win of to marketing,

to across During as not the Wrangler connect Jagger creation younger our the also consumers, only but with female brand continued demand significant brand distribution May we elevate branded Georgia second quarter, channels. fuels the heat such platforms. Influencers,

the present Wrangler's strong and the the with with tees, On a digital marketing in paid blends sharing Hundreds a to launched inspired heavy celebrates with and stronger. exclusively channels. balance The the launched of launch denim, during of brand quarter, The XX over successful getting LA brand's the as anticipation second second the Wrangler and when We're later is approach, spin hoodies, as to collection achieved is social store. are classic The our collection look evidenced QX through and launched impressions masterfully After more late announced the perfect performance. outerwear. digital Another Hundreds. past stores on you influencers Billabong. the pipeline year. well last media than continues installment as drop efforts investments results a year. September Billabong the the is saw with own.com XXXX, put our forward with both lead, streetwear with But perspective, season distribution around both debut, great with enhanced both platforms, The selling This in second twist across collections to by of digital a on surf collection transforming surf. collab products sold quarter streetwear recently XXXX. workwear our global fall digital in collaboration brands what's collaborations and great estimating ecosystem, and million XX% channel From even some wholesale we scheduled other social, compared And for quarters. this of more a more in increasing the branded only coming as with and this you on to We US increasing well brands amplified than and July achieve that of western growth incredibly vintage sites for we best second collab specialty first diversifying example in the our a exciting and partnerships the fall as exciting a the with The to holiday see collaboration continue planned returns over XXX%. PR. impressive We of highlight back-to-school Billabong our brand, iconic is with

highly channel, in Investor As under indexed our investments of we Day, accretive distort this our XX% we to towards will remain relative we outlined to next to our peers penetration years. over and drive the goal at continue three

significant denims market and way. to white we've for a T-shirts opportunity and specialty within outdoor, distribution established incremental and and workwear, organic to highly our brand Within the beyond so sporting abroad. core a investments domestically business. new collection a categories, channels, in and in also continue business in line, is value with and markets. benefit we in from billion are as beginning XXX such space goods both outdoor also The true We categories equation our addressable outdoor scale in categories in augment do positioning represent new total that ATG bottoms These nearly diversify the the

new for two to announce ATG. excited are we examples, great As partners

We ATG Sports testing Intersport the brand US points enhancing Europe, incremental in currently are line. and of both the for with Academy in distribution

There pair quarters. billion specialty market. plus is are In This areas our logo, growing lifestyle are addressable key the extension are Angler three exciting introductions includes market pursuing Wrangler with line T-shirts, on Ts. some licensed a have natural sports expected rapidly Ts to horizon. product that in coming launch also a of We on jeans. aggressively fishing we the focused new XXX and category the a

the to domestic there products store us. ahead consumers. just opportunity of over Wrangler strong are and We great new Wrangler Lee started the significant with attract are pathways in Lee selling We partner retail resonate brand and in Leveraging will T-shirt in including that come getting create expansion a heritage to with with brands, we won believe realizing current both clear and with doors programs loyalists key 'XX. recently both of new XXXX

significantly in segments workwear farm product see can retailer opportunities experiencing tier These years retail to workwear for to throughout and with products strong growth have Wrangler resiliency channel, increase quarters our Our And Wrangler momentum, year. for expansion the potential this finally, scale continue the of and we also with major In this program for the US launched continue recently business and distribution. RIGGS women we specialty line. and to shown to is strong in expect come. believe great pandemic, new a men with we our organic we

into than doors. for great generating partner category brands. 'XX In This how our additional with are in fact, investments us to this expansion key we business is taking spring opportunities from XXXX development incremental will more door over count a domestic to our testament 'XX, fall double

how outdoor, next our in let million in revenue me to years. We out work over for the expansion growth three second over T-shirt $XXX investments in turn Kontoor our the expect and to played quarter. categories And geographic from add finally,

to an uneven see macro continued improvements, environment. despite We

year-over-year our driven ERP ahead up with XX% by digital significant and go-live. Our saw European business currency over of of compared XXXX, constant constant with XXX% currency shipments and compared over improvements, in timing XXXX European in

of to reported great should region in increasing term. development in revenue conditions mitigate for Europe, the help and up evolution currency. expect us XX% ongoing yield constant XX% year-over-year position success and new And with continue longer the China, digital the results our platform investments over we quarter near-term second in our programs business in strategic remain While and to difficult headwinds

our exceeding region with denim build region and brand trends building key wholesale. by offering, dictated leading a momentum, the to collaborations quarter, in strong the in influencers, the the the XXXX largely a currency expectations year the up time. the and continues Digital in momentum date, within XX% of on on setting some XX% local constant region. accelerated lifestyle for Importantly, phasing the to Wrangler position Lee quarter, premium partnerships throughout over in continues and the remained scaled last extremely strong, throughout And its basis. With to China brand to foundation launch gain growth to

Before the with XXXX. I hand let a me to close over it balance few of comments about Rustin,

We environment macroeconomic uncertain restrictions pressures, operate a that and supply these and locations, we continue chain select not disruptions. have fluid inflationary said, as very includes repeatedly global to to challenges. we in are in immune And

combination investments However, times believe unlock we both Investor accelerate amplify minimize international as in in or momentum brands. mitigate Lee solid expansion resides accelerating like to a in of Wrangler digital, migrate our our been fact, while the XXXX, as consumers creation, coupled increasing in unique areas enhancing Day, see with resilient. Kontoor highlighted Accordingly, and quality, our global of We chase disruptions demand chain global model our we momentum distort value-oriented differentiated operating should demand, incremental capital a our and strategy half strength, significant to Rustin? trusted, for powerful And brand intend across brands provides where to to second to at optionality We has value like stakeholders. of believe uncertainty. in leveraging possible. continue and allocation our we fundamentals, in position supply and that

Rustin Welton

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

strong we forward walking look mentioned, and that shortly. pleased expectations, very Scott with second I our exceeded quarter through the are our As results details you to

financial strategies Before dig key into outlined two we the though, we I'd Day. during our to Investor quarter like that briefly recap

First, we virtuous detail our what reviewed to refer as in cycle. we

capabilities grow our expand our allow our to in oxygen to investments strategy gross and to revenue delivering line operating refers to while create us margins future and distort enhanced top the P&L growth to in and this margins. drive brands Specifically,

announced our investing global early in one Our areas, our also of to Accordingly, successfully of third went is infrastructure for region. I'm region, second our a to we ERP in quarter Today, that performance, long in in Europe, continuing I'd improvement a first earnings an illustration how on On provide key our final largest are we America. of fundamentals. financial is and our like to near-term we update third powerful second term on we while quarter cornerstone quarter meaningful Delivering project. this in drive execute early our that strategy. call, strategy growth, and the IT pleased announce successfully the quarter live went our live to North investment

by term, While for I on cadence shifts still these organization early implications investments In quarterly want IT the of Europe, represent timing shipments implementations. major for advance short thank for accomplishments. long-term our affected days, tremendous These and and their and operations the significant was efforts in short have the particularly implementations these results. our to Kontoor, in milestones on both

As channels, second our North shifted third quarter XX% results, it's have business, certain as regionally, throughout will cost technology, our North investments shipments quarter are to while investments the in have from thoughtfully saves but run our during creative support under improvements the American catalyzing ahead. transitory and the certain second TSR digital, the early categories. In the business, quarters we was second global previously expected, long including to efficiency we the Based the and an with profitable this the the and our penetrated shifting full while in pronounced deliver year. points, the and resulted areas will two sustainable in phase first strategy globally, our represents Investments long-term these will of we European term, delivering in operations roughly to on pressure as quarter. most look expected distort investments innovation to amplify such scale to to into in on impact The net pressure to ways Since growth. America demand making for quarter, growth creation, support growth outlined. IT to two net us that continue enable shipments in geographies opposed in on areas horizon not proof

capital Accordingly, down paying strategy help paying progress want allocation horizon key In allocation highlight on focused capital made I The de-levering sheet considerable financial and second our a foundational enhanced optionality. superior balance two one, to capital is our optimize dividend. we've priorities, to we structure. in the debt

dividend, the In a will terms key dividend the to Kontoor be a continue in superior of element investment thesis.

to two, investments targeted allocation As have powerful we we we our today. augment capital been be the pivot component fundamental optionality ability by to of to the mid-teens horizon continue TSR, increasing will Strong an foundational add and our plus have has elements. organic discussed to performance fueled

announced Accordingly, to this $XXX repurchase a program we a in are that this X billion allocation the as we capital Over mentioned, three years, multifaceted operations of example expecting share release, next saw optionality. strategy. enable cash will us approximately from on you powerful morning's as a support and Scott million

offsetting Combined to to opportunistic share pending strong remain shareholders, provide to addition superior vehicle market improving total our returns. fundamentals buybacks, through return repurchases with we committed shareholder we and believe dividend, cash attractive conditions. In to another dilution,

two. pleased of the allocation cycle are how excited model in about early within is materializing We horizon evolving with and capital optionality virtuous the days our are the

quarter increased strategic also in timing the on the reported same up revenue our post prior and revenue, had saw basis constant detail products appropriate. COVID-XX approximately actions by quarter. domestic India. actions licensed fleet our in sale to in in our and second revenues second increased to my factors, a in same context these Strength stores, given additional global quarter compared a business represented ERP outlet you will impacts to the the same for Channel. select Growth was continued select year. with of the to discussed fourth we will announced where rationalize basis of COVID-XX global XXXX second reported decreased US in to key of turn three impacted strength and the last the in VF results, for to revenue and quarter, and I quarter points currency, by on XXXX Combined, of refer in year. business on let's shipments XX% upside development top all transition and I our to markets Even morning's Now in comments branded wins, encourage new US, the quarter of expectations. Also, new Beginning discontinue a up and the the in to provide in last quarter ramp basis the the Outlet with Compared XX% was was revenue quarter focus a to on XX% model Western XX% release adjusted driven shift earlier, channels. XXXX, to quarter on highlights regional headwind these compared go-live review. continued internal On wholesale, the for line quarter. of third-party impact this partially due revenue to references our additional controlled the

drove addition, digital. In strength we in continued

based US activities, respectively, investments will mentioned, the by digital this These in broad our in own.com strength the Europe, and quarter despite Scott US XX% currency, on and our Growth strong a the by own.com and US and impacted constant and to in investments American returns, important second revenues digital XX% our businesses. wholesale basis to aided XXXX. and reported same XXXX. all North indexed quarter International to continued regions respectively, amplify XXX% timing are being to easing under and of across same and XX% in shifts adversely remains increased growth was US yielding digital lockdowns in compared XX% we increased China compared As compared channel. XXXX. XXX% penetration digital increased in quarter ERP continue wholesale, cutover in

global revenue strength brands, Wrangler as our XXXX. same on XX% and in XX% with by Wrangler wholesale in in product such increasing revenue digital, constant quarter female, respectively. compared currency, XX% and US brand outdoor our of business, as increased the to and own.com categories Western driven Turning digital and well XX%, to XX% basis increased reported as our a new

basis increased by reported global digital by our with XX% and same and Lee in XXXX. by of XXX% compared a driven constant quarter wins well the revenue and wholesale digital as and ATG strength and quarter and respectively. door XX% distribution momentum revenue increased Digital, XX% the revenue digital. development Lee in and second business second on basis constant shifts was We reported for businesses, a the first Europe with basis. reported XXX% with adjusted in basis to growth program, carry international with our contributed XXXX, revenue, on up closures business, currency on new the currency to XXX% US X% period in brand which wins, the Compared retail international pleased Lee driven decreased the timing particularly a XXXX, global constant from more XX%. currency, to reported the in constant on quarter to our are than easing Wrangler Wrangler in continues increased Western impacted strong in same XXX%, quarter new wholesale, adversely XX% in revenue as increased and XX% revenue both revenue Wrangler own.com quarter. lockdowns and the strong currency. increasing which

branded from strength constant shifts finally, while same constant to to wholesale benefited XXXX. in basis and a to and and revenue In constant revenue perspective, compared in basis. due in the reported up Lee XX% Europe. in broad-based of US prior on XXX% in year. on channel we our go-live a And currency Compared global from downs on the easing reported compared saw XX% a XXXX, DXC quarter grew quarter decreased ERP quarter a XX% increased to continued addition, for lock currency. XX%, XX% basis, same mortar the with timing own.com adjusted currency increased wholesale brick stores Global the On the non-US

Reported revenue, well XX.X% product customer, Western. Now same increased margin. on gross and mix the basis to accretive the the benefited the points margin quarter, year. prior gross as Favorable as as XXX compared channel, businesses strength to the period in such of in

we and geographies, We under and the to outlined continue our initiatives, mix pricing. proactive shifts AUR innovation structural channels select Day, to see benefits Investor and from highly at supported mix accretive drivers and indexed supply fundamental chain by

the prior quarter expect, As would you given second from also year discrete certain items. benefited compares,

negatively XXXX owned leverage during by downtime the on in the we points COVID-related second headwinds, our basis these gross manufacturing, of basis. second last by As XXX quarter, favorably margin year, quarter manufacturing. benefited to impacted particularly In was relative our from an discussed adjusted current owned the quarter impacts,

XXX have these increased clearly to Given our by to or compared gross which margin, distortions, to gross XXXX, driven gross quarter mentioned. a the relative basis, on previously basis context second the want I against fundamental factors margin XXXX, of highlights additional adjusted provide primarily points more made Relative to reported the we XXX transitory basis progress strategies. points margin

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

our turning Now sheet. balance to

and discontinue Second business X%. India. in quarter model our quarter $XXX inventories reduce or branded as the in as outlets, prior third-party well sale million, million $XX to the The of products year actions the decreased reflects down domestic the year-over-year XXXX to change decline fleet fourth versus the

in of the debt cash, with less inventory to prior Excluding and million in and cash. net VF million or compared of debt made XXX quarter long-term repayments year in XXX demand. projected debt, X% XX approximately the million second support in finished in India, increased Outlet quarter the higher We

net the our the X.X to or was Our ratio by divided announced, And X of net trailing of quarter, adjusted XX-month as Board leverage share EBITDA, our previously range times. end second And targeted September debt to at X times, business of per of cash quarterly at shareholders regular record XX, September payable on on Directors declared $X.XX XXXX. now to our dividend close XX, XXXX, outlook. a on of of the within

not mentioned earlier, are to all supply experienced challenges, recent in chain industries. Scott As including macroeconomic we immune most global issues

However, supply we we chain a offers distinct while focused our remain global advantage competitive believe working diversified to in on mitigate scale and And and responsive speed. agile being disruptions.

as now our is and the changes. the business demand the actions brands, to increase in for X.XX X.XX and is raising of we we back outlook To freight anticipate XXXX VF billion These and to EPS. we half increased from XXXX. guidance, over of as momentum are points increase to increase gross to prior expect quarter points see, the costs XX%, anticipated international. such amplify the Our gross model growth in margin more SG&A strengthening channels XXX basis cost expected XXXX. amplifying select, made by and Adjusted outlook, as billion compared XXXX momentum margin to XXXX low basis be creation, in revenue be margin digital have XX.X% Gross increases to strength teens partially XXX and guidance. investments international as XXXX have in per structural XXX prior repurchases. $X.XX structural, top a in been ongoing reflects half is gross in mid-single support the XXXX. in controls, our of costs contemplated demand digit elevated, margin basis be continue capabilities. now second for we in a the to Based growth momentum to half These India such points EPS range SG&A back benefit second our in adjusted of points support investments intend to including by will demand to assume on Due transitory brands prior in compared $X share to are initiatives. in market any to Revenue creative and to impact winning transitory for to will to the $X.XX and and for and digital now basis revenue This expected investments $X.XX range best we in post-pandemic in line The per tight Outlet the guidance. and revenue, accelerate in brands our guidance sustained the mid-teens as to XXX the higher mitigated accelerating continue expense does expected position EPS to expansion range share to the share, of to the the not compared to containment and guidance. fiscal and

updated fiscal Investor midpoint outlook, important think of in Relative XXXX, Day closing, projected projected to XXXX to updated higher amplified Before XXXX consider XXXX is nearly it at ranges, to be XXXX per revenue than Outlet India. is the at investments I our our be adjusted fiscal digit XXX and our and in imply margin above outlook to slightly of in is to VF is context projected impact our compared our projections. with results or adjusted from basis points even mid-single levels, levels, earnings revenue excluding the share Goss in adjusted gross be margin SG&A. to historical up XXXX

on ahead like three-year remarks. at Investor In our us I would to well XXXX our if updated Day. on Scott's outline targets reiterate of earlier not recent track, closing, Finally, to puts financial our outlook deliver plan, fiscal

our remarks business, our I as back call prepared in team the very and will and second with are operator. confident we momentum. now to We This pleased are our enter concludes and half Operator? turn the great of XXXX

Operator

Sole questions UBS. [Operator come proceed Instructions] questions. from with Please your Our the with of Jay first line

Jay Sole

Great, so much. thank you

plan? mentioned raised you You the things guidance raised guidance, bit And ahead might just little you be Investor like the have why you a you and can tone that sounds today on some to but more to Day in looking the us what's just raise and talk of giving obviously able of be confidence forward maybe you elaborate today. guidance and through confidence the your

Scott Baxter

are such my there's creation think off the communicating to making a hadn't these and Good were and we back invested this was the as really really you? globe, to wanted investment see really to is teams, root. consumers the we're some how how a in we powerful, ahead it, handled the background, Well, well important. And it what's uncontrollables thought there, how supported We've and and we to brands when to that's for future. Jay, here. brands. amplification had but happy great which some playbook. the of about really is we're incredible question. of far with as programs, really I starting lot an There's during saw you that's goes And beginning is the global super demand this got Thanks most the brands from spend It the by life. knew more incredible with happening in. that with two-way I'm the Scott. our at they how we now we're on strategy come that What opportunity a how the to around starting very see communication we're us. the morning. pleased creation And We hats but we we're reason Jay, Hey, strong taking our we pandemic, been - look started demand

extension standpoint, visibility a business standpoint in a we've from from got some and the geography. future category forward, Going development

it brands But strategy. public, as really to is, come wanted all to had we to because our out and company we our this starting we that's take sum guidance. life knew in we these something special up that's play So, in reflected to just

Jay Sole

just point. one I Understood. Maybe more, that can if on ask

the even of what be wins, like it's demand mentioned, fair? category like you term, funding strong accelerate line And talking investments appropriate It these going just growth really for gains. creation, the - seen the and above demand Scott, of second line half with can in a year. really the or virtuous top a expansion mentioned going Is long could that's dots You and on sounds us that seems about line company connect to how how over that maybe lot business rate, past? the top to to really the accelerate in - to that maybe the creation we've you the margin top mean, are could drive new whether I gross cycle growth you're

Rustin Welton

Rustin; Yeah, the Jay. that. good absolutely something Yeah, It's are a on talk about you is I'll ahead take bit. correct quite It and go morning, cycle. virtuous we

is grow that quarters, in gross do to and start several that revenue, last to P&L. create Our which you've expand over margins oxygen us really top line the to seen the strategy

to investments allowing to brands earlier, really talked Scott think growth gains as channels, oxygen seen the you've we've that's so pretty enhanced drive and That's And future a some creating with that margin well, to obviously efforts gross quality restructuring delivering top about that capabilities in distort significant us that and of distort taken line And P&L. sales, I accelerate the actions, important. really in while in some the more the and that's operating growth of margins. creative

I and to heard to talk brands And our virtuous clearly quarter's way and of lot start this manifest. You've comes investing kind results us into are investment about think life. seeing that, great you're cycle a doing the illustration of a these to that we're how earning

Operator

you. Thank

from come next Murphy questions with Sandler. questions. Erinn line proceed Piper your Our Please the with of

Erinn Murphy

half Great, shelf talk across was and programs? could I of up thanks. X%. Rustin, math, mean, not imply about you're I is space Good if the guess around then half X% the little And the follow guide? relatedly, you if about more retailers, better securing running back mid-teens, phasing would new that like we're games morning. at back of the that a a categories a and a some these it by I feels a speak for new number you sales hoping could than of why bit

So, with of selling, be just curious higher? why that some not would the

Scott Baxter

Good morning, we're pleased, ahead start. Yeah, Erinn. and Erinn. really I'll go

is us really a great seen workwear value the to a we the a with did the as And categories, brands one a categories of acceptance, go had us really a beginning, really our translating we and calls as But this good what And really Day, last go about space, that just program really these ahead we was seen And Intersport of us And was great shown in channels. important we've that for teams, fall. great been several good really opportunity XXXX starting about we've so in programs good of have standpoint, our it's customers going brought big complement fundamental going different the XXXX doors in do. into we've we're take One and as - as we to and in a trusted a are and seen what while, brand and key in from at like hadn't things we safe outdoor, workwear of topic built in product those we what really big value, Europe. category chance doors. so calls. big the some the that gone with at with incredible layering on And that because we've for to and Academy the that to is identified and and you can and shelf really to a to built has really and do is really customer very come talked shelf that T-shirts a ahead now at domestically, hold. we're And acceptance. our for things categories had almost and consumer it's a product some to now internationally is couple Investor different flex here, outdoor such ahead is, good, last several has they and come mentioned, the to talked from

several of here programs genders there. about which plus a we've We've recently, example from And we're that. complements that both big both globally, denims going in. little that really standpoint, couple hired business different shirt how for great we've well and T billion bit of address big really in. And fall be to XXXX in a and phasing then $XXX category we're T-shirts. will a we're talked our We're happen really another good And a should won category, categories which excited areas within So doors bottoms spring. that we a team about, a really pleased stronger

can efforts what but categories these into been in a concentrated we do, lot you company. to a before, of as see, that complimentary we So, are as hadn't really

Rustin Welton

part morning. back Erinn. is take Good question second Hi, I'll your of It half. improvement in Rustin. the about the the sales

all that half I take of terms relative look to also in back a branded made the we at XXXX, quarter reduce to sale the third-party XXXX. guide as that morning, highlight transition consideration have of digit then in you correct half, exits want VFO it But strategic well from in the in the to to model. of outlets, fourth India when You're low-single of fleet our we this domestic the business into improvement and implies a goods issued direct specifically you the to licensed discontinue

disproportionately, those more of back All to related weighted are impacted half, QX little towards was year, last clearly, because, a bit the it most as COVID.

on bit as need you helps that a answer little into well, at annual to back question. so, from that And weighted impact mid-single exits your more Hopefully digit consideration half. that strategic those take

Operator

Thank you.

your proceed comes question with with Please of Adrienne Yih Our from Barclays line next questions. the Plc.

Adrienne Yih

numbers so everybody buckle of reporting high I is strength morning, and recent point, about success Scott, with is it of exactly their not owning. quarter. to Levi's you the Great like trends. over sort ask always know I it but kind level denim price congratulations. offering, 'XX. Good blowout your

that denim into the so you go on you're And to back how on impactful to the much. robust foresee And modest More of half is chain then as And want talked either really - how do seeing you but of then then any you remind it, like so going the really AUC, how is Rustin, so maybe your gross hitting And for you, kind trend how you to up? just East - we last? seems manage commentary the back-to-school sourcing. margins are long us that importantly, year? inflation, that. can focus working the that for you're shaping it Thank supply in Far so then about are you not terms

Scott Baxter

go morning. to Good hear I'll you. ahead Adrienne. start, and Nice from

Adrienne Yih

Good morning.

Scott Baxter

child school-aged we have with than him and years, XX bought I couple years back-to-school. for he two So start a heavier home clothes way school can into ago. he's in fit from let's clothes at There's no school things, haven't pounds two previously. for

styles and trends to changed have the fact years. that addition In that was two

last to want fit And in. those the pent at some think and was there's aren't kids going because clothes were year. So, really demand they up to going we back-to-school just they to no go in back to all there season aren't

both to us, the believe for we be our consumers also that's customers. and our So, good really industry, going and

time a for as we in us moment be that'll So return normal. good to all,

back casual, they into whether be moving a be across far the structural the survey And goes, As the they're is that the denim Paris, in worker like as there globe we've New San the as think matter, at out while York that ago. flex seen we environment, doesn't markets major just people little and metropolitan Francisco, wanting home. it were it casualization our comes all London, you've seen in a City, put office, to globe, we to is seen casualization it change are a we've positive, even the if

at that we categories don't stages these categories that also as stay reinvesting like is wardrobe, been going and to that about shade we're believe long are company, a being very we've I go complimentary, a a able now, only been as build and and term. in over here to of evolution around great for term, two with our the the like for us, they're ahead believe because long for if which complement beginning we believe positioned very So, company, outdoor, the we workwear And very are company, think years, public I powerful casual T-shirts over as forward. where then where would it's strategy, a and cyclical, the you of I we've a are

about I the the about excited. we of think that we've that really, the think us. I'm opportunities entered, and I as really So, future, think denim, have categories front about in I

Adrienne Yih

Excellent.

Rustin Welton

go your the And Adrienne, take Good part of question. it is Rustin. ahead I'll second and morning.

mentioned, which you bullet that kind kind of Far was East a me last upon touch First, let sourcing. of

a of our production in manufactured us of a chain, competitive supply our is advantage, as global feel are supply diversified out predominantly does for that for and a-third offer everyone, overseas, we a with approximately of out global hemisphere Asia. over this internally just reminder chain, So and really sourced little differentiated our two-thirds

beyond. quarters, As four with actions. bit fundamental And cycle virtuous and channels, your as we be as speak back brands. triple-digit well minute restructuring that distorted margin expansion a about that on into half talked It's those sales on able we've And anticipate about, to pursuing last XXXX driven creative growth seen categories margin ago structural growth have benefits basis, question, over to from being back that you really half structural by Jay, of the clearly the quality will that heard invest gross and geographies those really an expansion. second our little gross part oxygen focused just that the of us and think a and you've the continue we to in a about into important we've of creating me and

the some we the transitory has momentum behind of not of to we're and certainly into well chase disruption today immune about consideration. that and about, talked Scott talked demand global we've be our margin they the and from chronicled, chain However, cost in but we by half brands, will earlier. elevated previously, that our and supply as gross Certainly outlook second part are that, anticipate, pursuing demand the moderated and incremental do is the we taken factors we've stated got those some

that as catalysts digital modestly that XXXX bit really some gross we're scale. as be point little Your a and that mentioned moving more Day of we really, like we opportunities we was margin and, XXXX improvement XXXX, next these inflation international to about about Investor forward in, and towards year, growth anticipated think at weighted investing last

gross delivering the the is here and proud remarks in nearly points, in gross our sorry, sort up adjusted to And draw basis margin be about outlook to projected or the just you XXX And to the year. guidance, conclusion really margin so gross margin we're we're that we'll this compared of my XXXX.

So, and will forward. going clearly Thanks, so remain us for Adrienne. a focal point

Operator

you. Thank

Securities, Drbul proceed with with Our next questions of questions. the Guggenheim come from Bob line your please

Bob Drbul

guys. on nice Good Hey, Congratulations morning. work. the

Scott Baxter

Bob. Thanks,

Bob Drbul

I guess I two questions. had

is, M&A near the table? that You announcement repurchase off talked the is one capital does term just that the in of your allocation. little about first share a program, with the The imply bit

quarter, a Thanks. be the sort rest more, How this at of second little of you could and gave And wondering, bit the as down you think Just etc., will it, if it break horizon of don't second buckets, the think it look then just one buckets I'm but question maybe delivered helpful. the in two. Rustin, some can expansion, where know that, when the you margin if also address around you but outlook, you about sure in I the have, the for you horizon not this I see? I year, biggest gross

Scott Baxter

Good it next Thanks creating down we as From for Scott. repo about Investor all is dollars in a to, think three talked share It Day, Bob. billion we're in the I the over boils the standpoint, Hi, years. morning. questions. cash the

talked equation it's optionality. about as about, all think we in do into that standpoint, about, as we've like really So, optionality And two, an we've can things. we it's phased talked and multiple from and horizon we

our of is buyback. feel a go really options. we're good. We of will on about so to as component and going allocation So, forward. the everything forward, be, and we'll just everybody we forward update that's happy we part the our team we as think real continue share the move here, and table still It's And

Rustin Welton

point second second continue been And those I'll margin for on Good with seen was a trend you've I've improvement; talked fourth about. the drivers, focusing quarters, This the these we're part from and last quarter. And Bob, quarter in downtime. drivers, for product continuing and as are structural margin as that geographic discrete the the benefit Those this certainly our invest I really consecutive that. of several geographies, take certainly has triple-digit gross continuing. the we've being on about, we Bob. morning, focal kind mix, the of to as talked as items favorable see QX under-indexed in some categories did such say, certainly would mix. largest us, channel Certainly,

account we in modified our our year, last last year. COVID recall the facilities own for You'll to production impact

due certainly you've So, items quarter remains to us. this the me critical. kind heard the to brands, last times that focal year discrete mentioned multiple But year. expansion of improvement last a into to us margin roughly for morning. half And this gross second relative the invest of It's was in back as enables point

to delivery on allowed us happy expectations in really and really, our with So exceed the quarter. the QX,

Operator

Thank you.

Williams the proceed from Please Poser your come line is question with Sam of next Our Trading questions. with

Sam Poser

And spend my gross I you up more you marketing just just Thank that? you but investments? return? Good or on the half of And in a Can you get margin, of kind return guess, anticipated year, you quarter, than did in morning. what investments your those increased - the demand question. the the in are and did measure you better guidance then or did the back expecting taking I spend, in on the want return creation of follow the investments on for you to the really,

Rustin Welton

Sam, into that make engagements perspective. It's ahead quarter, a it I'll that. Scott on investment, the and I, term that look both we and a all brands can to total long capabilities, Sam, at And spend return business and we've but term we we're Certainly, a driven basis, talk for the with shareholder you. marketing the the Rustin. measure make had, you as on return go general everything and and won't do, good we near TSR organization. know more morning. a in the bit we take into comments Certainly, the little Yeah.

been talked impressive a stack digital digital, very saw of little but the growth like play So, bit the wholesale a from that this perspective. results two-year distorting our quarter. to And a out basis, investments things both We the XXXX. own.com, about results I certainly on certainly, quarter, into think you we've in marketing and relative

but opportunity side, Europe, and now America half very deliver the investments 'XX, in amplify for only half investments to the we that an of So we're in back really we're Sam, the here happy moving we're helps those live not distort us. the that certainly is and momentum into really North both on the that XXXX, back about ERP accelerates see making. And which important

Sam Poser

leverage on that. based some de-lever like sort of that's no, those you're the SG&A half investments And the I'm the for half front back understand good give kind the me to you automatically of of and year. of that on it year, same going do you really your that looking got on of just basis, your I relative sounds guidance telling probably won't return. a - No, the just in

upfront? helping out So And beat way the much because the despite better. figure sort than you I'm those numbers, guiding term. you return trying sounds investments it guided how fact guide do a QX saying term then those results intended Because the and have QX, sort investments? put to same and on the to better it's it getting year near-term of it help the really long I'm like into of long me better you've in are to the to was relative the of you was you're may

Rustin Welton

that that on And distort basis. the both they're in near-term side, and are we in more demonstrating looking continue future measure we the strength and Sam, brands and accelerate returns marketing accelerate this just I say quarter would in to as long-term to to on Yeah, clearly, specifically, investments, quarters. the we the

longer quarter, off line the we're of seen, the So, obviously, been And term terms we're as you've brands for the making it's the top paying that in as well. growth. looking just in not next have investments certainly the

Operator

Thank you.

the with next Our Please Brooke from with comes questions. Sachs. question Goldman proceed your of line Roach

Brooke Roach

you. Rustin, segment, owned momentum. a continues Can you're our where and Thank to you the areas taking particular deliver new or Good Whether to customer question. seeing success? talk the for customer digital acquisition? within Scott, that's morning, thanks conversion most

Scott Baxter

Yeah, certainly can't.

started now brought speed to I in have we've the think to with And the consumer leader. that's an platforms in in company, infancy some right the journey. standpoint we stage went that and then of up had we've hire wasn't at start start that just pretty thinking ERP around the communicate in then with powerful talked right consumers from physical, and about standpoint, We put we started to build an we globe, we when more about from into different were forward. categories, teams to we we to exciting ahead do started ourselves the today indexed of had the our the started we've programs. a robust way, to with digital. really right way then it with the to so our Brooke, beginning and content good we into better the under do So, products a that to from standpoint hired more a we like And join and journey site come robust how us make for going to and And

we beginning other really and both the gone kind into standpoint really that category core saw categories, has well. journey and we've we've that seen the from momentum gender and momentum. of what's at momentum, core some good So expanded good seen But did good we've really across really female, of happened the male the globe, as journey,

they're and And our on is and our incredible and the And presence, highlighted because, is, some to come us starting for really are instance, those other one product. they that story, is well. with one, outdoor to think our line, the But by collabs. they're mean pleased has done to hearing, I seeing like I really too. that interesting, really thing what they now we've addition very collabs like So in that, there's consumer then digital what done

some on have well. into back-to-school, collab really So the those right done if we that our Lee think you going Billabong think things And done well. collab we of you that that's and as now, they've about about really done if our Hundreds Wrangler recently, have and head big

would building those is assets in like add together forward stages consumer at categories, going us the all how Rustin, really early space. better communicating our combining products in being and So expanding and the very digital there? of you we with anything

Rustin Welton

continued well, think you well, would capabilities. in Scott. investments said our we've Brooke, I as to thing I make only The Yeah, it is add, that

certainly we're about at revenue. indexed, so, under And of X% we're

in results well see areas, opportunity, the and to Scott XXXX, platforms and XX%, Now P&L mentioned, penetration. as day going on starting you're we our new both know, We've those to technology you laid the consumer, to on here. very, see in also side, I North terms made think of product we at out as manifest that investments all moving very in relevant. in and Europe, And America investor

early of lots go, of lots and lots momentum, opportunities So Brooke. to days, of still

Brooke Roach

I store a up. partners, as across program your of versus follow Thanks. Can maybe some with you. legacy about just And ask if Great. in little talk terms one what quick seeing of you're could wholesale key you both bit established programs small or store such partners more versus your momentum new business recently as department initiatives new versus at mass? launched department or Thank US Western

Scott Baxter

we launching board. prepared that. like we were really all programs take Thanks, in our Brooke. the we're are Yeah, pleased the and mentioned that with across I'll ahead we go remarks, -

goes a it win think I winners, we've talked back that we with to lot. about

pleased from be horizon creation will and demand continue drive platforms. one, We forward of that consumer part really ourselves we loves, there and the with that have products And in take with and win winners, across the customers with it's globe. are strategy all that the go good placed we build great communication been really out big with line how the of to the that

standpoint, are from right running and we now. So we're really playbook it a our with strategic pleased

Operator

you. Thank

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

Jim Duffy

morning, you. Great execution. Good Thank guys.

Scott Baxter

Jim. morning, Good

Jim Duffy

gross to ERP want build on others' the I getting through. implementation Rustin, on questions margins. Congratulations the on

gross working you the the remarks. pricing of roughly we a between about just XX% just, should year. mentioned would factors tool But of and the implies pricing the like costs be leverage pricing, down? brand that and do curious cause your the speak year. if Can maybe, XXX prepared big how could inflation think itemize That's and a below manage some it the to half back it basis so. half first annual the the in run more Sorry looks the than margin you of through for rate points guidance, And I'm input to step as to to balance in a such it vitality you margins?

Rustin Welton

ahead margin for the we highlight. XX are margin gross you things around go implies Absolutely, high gross me here, Jim, was of the Certainly half the couple year, let correct, side. of XX. back in start our of last a half, it our that guide definitely I so first Yeah, kind XX% around and more and a was would us watermark range. were That half back on XX%, in the

there. the we're strengthen disruptions of continuing and our seeing we're thinking back to certainly as mentioned the half, supply some So, global a times we and Couple and things, of here chain remarks that couple increased fact demand. the in prepared improve about

And of so transitory we the the margin in that do costs and from outlook our to we've and in there elevated that very, reflected as a us for talk the [ph]. times, gross still second mentioned, see Scott certainly demand, standpoint Also, you've and half of meet half heard some fluid out uncertainty very of the second numerous in marketplace year. lot the

into here margin [ph] that well. consideration, back the taken So, got good as certainly we in gross we've as have

So pricing question if with take be the And, of to that and Scott, want it that'd Scott. you the inflation around second over to I'll great. flip part

Scott Baxter

forward. consumers good lot an investing pricing keep first to we're go as about with we haven't real innovation in and and of talked go you our from hear significantly in investing the brands, Jim, on ahead it as Jim, know, being mind. Jim. call, brands strategic front the We're you. Thanks, a pretty standpoint, foremost but this our to and we from and we're also

are. really we we where like So,

that about of that offer already. we've really is that think incredible things talked I our we important One value the is for brands

and trusted a a being only brand it, like have innovating play we us with different forward. great So, a brands Jim, now helps going behind into behind value value brands - times a with high, with great brand this, high being channels quality, and coming in it,

really that place. our company forward sure in investment that putting the making to So, make ourselves, and brands, we're good that's our a go and we're

Operator

are the to would no further closing you. any this like to time. There over comments. at for back I call Thank questions Scott turn Baxter

Scott Baxter

I two, a for look month much Just again forward everybody us time to time for or you thank quarter. next to and look sometime forward the your with this with next day then, in to here you time obviously, the morning. spend to the thanks spending in talking great to everybody. again all a appreciated. taking But It's Have you quick today.

Operator

today's Thank does you This for conclude teleconference. participation. your

may your Have time. great disconnect lines this day. a You at

Kontoor Brands (KTB) 6 Aug 212021 Q2 Earnings call transcript