KTB - Earnings call transcript Q3 2021

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Operator

Greetings and welcome to Kontoor Brands' Q3 Earnings Conference Call. At this time, all participants are in a 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 conference like host to now Mr. would turn over this your I President, Investor Finance Tracy, Corporate Eric Vice and Relations. Thank you, sir.

You may presentation. begin your

Eric Tracy

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

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

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

Scott Baxter

to and today. everyone Thanks us Eric joining hello

this, and one different If place brands Kontoor you from are Lee away take in and our our call a Wrangler thing compared be it meaningfully let today's advantageous past. to and

in uniquely fiscal guidance have More evident we marketplace are for now are a XXXX. positioned win more future in our fiscal confidence results and in and our value This and was momentum quarter bit to it's for to the even XXXX on in strategies evident in simply put and in the all third our we but We holiday create stakeholders. working. the our see raising the this

experience doubt X in elevation growth. will playbook as Horizon establishing and each our and we to organizational the would we macro where the permission not to ago, we have stated, take catalyze brands, the priority during started focused while the through When growth. of keenly them could strategic years of immune and have great of accelerating but And Our was we believe predicted Kontoor just to years, consistently Horizon navigate help care our times ensuing controllables has of foundation the thrive face not only us we the we in and our is that this setting we returns done are on in our top believe difficult our through now the and are investments journey team and our the not could Kontoor itself on we execution price, obstacles I controlling companies almost other. people that the that. look proven tenant X, three placing but superior is and core No on challenges yielding increasing culture in significant environment current

So I resiliency, to another. ongoing our world colleagues for teamwork, thank one want care the to and support collaboration, take continuing the and around and

from the strategies growth across our emphasis So me that term near showcase some key proof driving our how let four areas. strategic on third are provide catalyzing results, quarter points

ecosystem; a primarily China. from strategic quality Overall of to revenue work XXXX. this to First, and focus a of extensions last to elevating compared wear VFO our businesses. brands our digital Kontoor impact negative product increase India XX% X% t-shirts; note, a on reported year with the global DXC actions high four, and geographically in included mix Important single-digit accelerating our and in business; within sales through and second, expansion and diversifying our channel category outdoor, third, core U.S. expanding including

these XX% actions, the reported have up far market. Kontoor Excluding revenue would outpacing XXXX global been over

increased to the the again during XXXX of proactive our VFO impact third also operations. X% only includes business quarter X% this within measures U.S. not XXXX, but Our our to

what's XXXX. business in Lee and increasing the wear emerging to with and the work the channels. year-to-date. the And actions, XXXX increased in position and programs categories, and based within is marketplace growth quarter pre-pandemic digital evolving would So is excluding own.com wholesale U.S. brands, digital up XXX% take increasing rapidly levels. wholesale broad the compared AURs are to increasing our our by high this ATG, these outdoor, Demonstrating again are U.S. single-digits health elevated led The and XX% in price, high with compared western brands Wrangler of by XXX% female. have during quarter and the was the been U.S. new crucial third across up platforms balanced, in ability digital U.S. that business healthy, U.S. outsized performance teens to augmented once our

over more highlight global connecting our rate next Turning even and are last results before. unlocking but the was growth impressive compared quarter and strategic future are investments ever indexed pre-pandemic our for and own.com remains value under this runway XXX% channel consumer year more significant increasing our as closer relative XX% in reported still global to to growth highly the accretive XXXX with QX our digital us we our in how business, levels. digital And saw significant versus than with peers. to wholesale

digital will our of years. lean performance next efforts of platform ERP new excited our the we to our three XX% beyond globalize operations, over continue been our while work has channel expansion Dena new on enhance of evolution tremendous equally our And western investments the with in we to we Our including goal t-shirts, categories achieve outdoor, digital penetration extraordinary, female. will digital [ph] and are by wear, as

our lies offering. While enhances Dena and Within expanding and partnerships outdoor of penetration we domestically are both our performance existing augments points line into foundation sporting goods and our outdoor incremental leveraging channels are and [ph], rapidly the new distribution of in that drive also great abroad. innovations core while a we portfolio developing diversified ATG retail specialty more to across

outdoor XXXX. business the quarter, to saw compared growth During our XX% third U.S.

of we and Intersport well of line. opportunities further academy the ATG distribution in and for are for these the in Europe excited additional the in with test going expansion are elevating about here Our U.S. sports points very brand

stores seeing third is our about fall results compared the as in momentum compared XXXX. category XXXX also to business for work XX% spring our with more more growth partners great with program with significant on XXXX building quarter to programs we doubled future the really for momentum U.S. us last the count call. this quarters our than over Our as door t-shirt key of new excited to development XXXX set We discussed of the domestic reflected in retail wear our one affords the are we come. in is spring And opportunities and than

results new despite revenue addition and are solid year-over-year function and environment more of catalyze XX% quarter incremental are increasing t-shirt up constant to improvements for COVID how globe. digital categories investments And is XX% development wear, by investment Live development, quarter up Go driven during with brick and quarter and results, business, uneven The compared XX% in and XXX% reopening Western new across ERP geographically categories the performance in the growth with across and substantial our an outdoor, to nice business strategic July, and XXXX Even China, year-over-year ongoing with the currency. third our to with third in these Modern XX% reported continue yield we Female constant a business saw the broad-based respectively. generating quarter finally, in currency strong U.S. mortar growth our direct European our businesses brands. Wrangler continued opportunities than exceptionally well In in up performing work

in monitoring this impacts regarding haven't China obviously slowdown while and closely. to some from heard You've a we we're our broader business, seen

are Unlocking across However, and talent wide with supply heard us are ESG region creation things we campaigns. the Lee efforts in getting never have ahead growth a just global manufacturing most in performance will platforms, geographies is pillars is of product to purpose and marketing and And in advantaged and done growth and minded experience creation and and with with This investments two chain. with the in decades and our and brands enablers. of for class Wrangler efficiency us increasingly space the in today straightforward, amplifying behind is Lee reason ERP brands with productivity reflected investing while To growth the creation comments led before. highlight the connected infrastructure. sustainability and market. culture that include implementation brand's to manner. productive world my gains has our I you've is man digital the going want build channels, our demand simply quite The uniquely I'm culture. the bit started categories, and ERP, our positions chain, distinctly tenant. to guiding enhancing key respect grow about core Rustin while implementation Chinese China greater high Wrangler we recently significant over opportunity provide supportive in this talk our on fuel focus launched the last affording as doing These pretty our both scaling insights and leveraging supply to demand a to innovations

track do be how expression the transformation the differently it our lee.com if in title brand Hearing Struck in Lee, up director Lenny you those media out. and works creative always marketplace. beach personality is Lee unique McKenna, the and each a towards encourages member has Williamsburg. launch to the collaboration Mark digital we've had talk and encourage in Originals through streaming And also impact The as about those key the icon, you creativity Tok. warrior supported be promise Original, launched Hulu Kravitz, and on campaign in of a who showing to the platforms made push The chance out to Lee behind character brand Seliger thrive how introduced by America photographer Chasinghorse, and go global and of and stories the Tik York, and Disney new Haden doesn't simply campaign cast diverse platforms and and creativity, run the from in you where with in lean elevated on strategic will you in just preeminent step and social New Lee haven't celebrates such live check this the media justice. Lee Produced services collaborations in by October, October I of of wear see those will them. life home campaign influencers. with to would original the went city me North brand's with and legend the and multifaceted reflects work. cast modern, high hard brings Quannah newly ingenuity, who what originality it all will I First as partnerships that the via fashion SoHo, Venice boundaries it media streets skateboarding reflects key to impressed at A display of climate originals to includes heavy as most well for and including with on existing Bushwick, that consumer

and newest edition quarters We brand are combined reimagines from apparel. This the is jeans plus Pendleton. and dropped essentials the brand’s Each week this U.S. limited XXX years Lee’s recent made launch some iconic in American excited in of with partnerships Denims, pair to on just brand with share about this Cone what's excited in from the And denim in selvedge is remaining last the of be the Oak Greensboro, Mill come. White horizon the just messaging repositioning. of beginning to We Lee’s Carolina. and couldn't North more new

of season in with million And significant on in debuted TV. for Wrangler our partnering now Yellowstone organically allows to symbol collaboration Wrangler Colette America helped the is lifestyle learning And for always the of new social Network's will a be initial partnership building. to on Ride Network. creation [ph] on what able Life culture of us a new more in Europe. characters. The Wrangler apparel closets brand to with consumer appreciation a much newest ad and Billabong to authentic most reach in North revoke with beloved keep decades in awareness videos officially surge to created and the much the back it with Turning the We're fans be that spotlight and Wrangler anticipated watched with to drop pack the fruition also to for popularity audience Tok and acclaimed mainstream for show's came the our across our retail, NFL using platforms the demand August Yellowstone campaign for live drive highly the the to younger, Wrangler cowboy perfectly the mashup diverse of fall, the Timed was of X.X Yellowstone colabs, a September. of second the base. continues brings coverage Tik body hashtag. just is Collaborating reach as the seen summer in will spirit. beginning of Augmenting fashion. with that on authenticity fashion. on influencers run this of the We series continues Paramount school, brand's launch into September platform, digital, campaign add our Yellowstone layer cable North Wrangler collaborations global brand a The America the the brand had with media denim means thrilled after western and lifestyle western to key partner to

Leon's and Georgia XXXX face followed from with female Leon musician as her spring iconic western style. spring of two in line the our partnership a winning R&B The continue Bridges. and May archives men's XXXX as edition of launch fall of are denim a season to Leon styles and Grammy key collaboration collaboration role silhouettes thrilled we Jagger will Wrangler’s Wrangler brand by of global limited product by in will personal inspired For ambassador our lead announce with face

XXth Finally, commemorating support as look to demand we our creation only efforts XXXX build in of the anniversary. Wrangler brand’s

presence while a have honor optimism, year-long in Wrangler’s of the highlighting We historic music triumph and culture. fashion also celebration western planned courage, to and

with and to many you Let investments points our excited with fueling is as a business. strength based across are lot can strategies me proof see about this, close broad be that our there

despite of extremely a our ahead. few why more environment, about our we items to we're support want build confidence to but a what will current details we during how amplify we to will And foundation planned of quarter few continue as We establishing this that creation the and particularly look accelerating provide confident in solid even thoughts the I proud last while in Rustin off line turbulent strategic based views few years more macro are a on support [indiscernible]. in navigated growth share these lies investments digital which XXXX. on demand to top fourth have the

increasing target margins above optionality macro we mid-single-digits results digits. consistent Investor and expect revenue XXXX during second, fiscal be opportunity at deliver we quarter. combination allocation of the anticipate of capital increase the half, well low with XXXX particular near-term continuing strength at powerful And business fundamental afford us recent to of that to first our possess XXXX up the inflationary including in our to or above a We accelerate levels. long-term established Day pressures XX%, recent share in despite gross our First, purchases we opportunistic actions, double as invest friendly while the to as and shareholder accelerating dividend drivers fund third

executing for superior strength delivering As start, a and in marketplace our is we Rustin. unique TSR said at the future forward position stakeholders. look in to I and Kontoor of all the of

Rustin Welton

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

and our as holiday outlined, we of as results the brands head As we with quarter that XXXX. our Scott made the foundation solid they third in have are healthy been the and as since Simply spin. put, very into pleased the are business ever with been momentum investments established has

that the as With the repeatedly points a industry pricing, cotton pressures, of implementation. review, of are quarterly challenges, the address the and widely to top disruptions, chain have inflationary topics the I supply emphasize following well as to know turning mind, want supply to stressed. ERP status couple inflation Before I macroeconomic respect and of that I discussed we chain want to

immune are our not chain to to focused environment. to these control leverage we what strategic second, agility and playbook. best continue the while issues we remain are in First, we supply And our can of executing on we steadfastly navigate the class

believe are position. of chain, terms In the we advantaged in supply we our relatively

diversified with supply differentiated the makes XX hemisphere, goods Western countries contracting the third internal being more our over approximately our of American inventory XX% the production sourced coming enhanced with in are for allows supplier and sold. market. Internal around than world. from global balance facilities lead of from cost manufacturing times, the XXX flexibility, operations and Our shorter over up global facilities with in chain one management us our in hemisphere gives North single manufacturing No of the Western combined greater

align to lead to congested, signals, and the over few excess changing coastal has being Western with inventory, ports years, with distressed extended times. mitigating including several production past alter the to and footprint advantages in significant minimizing rapidly exposure provided Our able hemisphere demand

Vietnam China around and comes of each are our China there product X% so less and comes terms than exposure address I from it from questions Less China for product than quickly. sourcing, and is X% of mostly wanted know to Vietnam. I China product our of In

Finally, we quarter. elevated accelerated driven anticipated and to as advantaged, although demand chased our is supply incurred largely we meet reflected our relatively we chain transitory have air strong highlighted freight by were earlier. revised we diversified as global transitory production costs These the Scott cost last that in believe outlook

brands our inflation of terms we a want now very experienced to In clear, pressures. positioned be our roughly offset and ago, significantly cotton decade and better model to are

confidence provide the statement? us to following this Let gives reasons. specific make me what So,

brands our are substantially demand First, to investments points price in to into innovation our creation AURs. higher from design support to elevated

illustration to how percentage XXXX XXXX. year of a increasing For approximately versus creation up and we approximately we distorting of full be anticipate XX% versus XX% demand basis are investments, up points approximately revenue in spend as our XXXX, XXX

assortment outdoor, evolved composition ATG, Second, and like our are distorted geographies with like the like product allowing us to hire channels digital, in growth new of AURs. has Wrangler categories up mix like international and emergence categories the

Third, diversified should penetrated as continues has support amplified to Fifth, as wholesale as such synthetic fabrications composition platforms. as and and we international such offering, with of sold, Sears, market wholesale, remain challenged our our and tops. first today, our predominantly bottoms retailers, distribution denim brands goods digital in of ATG, well to exposure healthier as tiers in these of channels mass were as and quality outdoor in Western structural as distort to segmented areas and into under ago performance, distribution channel growth in the and into their cotton mid-teens to much had gross a and decade evolve our mid-tier greater A mix cost retailers. and channels begun particularly our percentage such own.com margin, digital to our more sales domestic Fourth, particularly in Today have have accretive areas. relative the Shopco. Kmart, continue in and shifts to

confident and but have I into visibility dimensionalize current will market pricing inflation year levels. Finally, structurally on are view our stated market half good at based gross say I accretive the we back in to we won't conditions of for mix Scott above given full negotiations, year what given that support want margins or half XXXX, ongoing conditions. actions, earlier, XXXX the pricing combination XXXX But assumptions shifts executing higher reiterate full and will and first the AURs, our current be

On the quarter. implementation gone TSAs EMEA we ERP. had or the live pleased final to transition Today report quarter. exited in the third we parent our the final QX regional on service that Turning our third early former call with we our that in earnings to in I'm shared company very agreements also

the initiative globalization critical proud very who foundational team ERP business. for worked is Kontoor are of and on for continued the has the We as pleased of the this platform

in gains quarter approximately X% to of basis for based where refer to XX% in our the results, to or XXXX transition increased U.S. the last references the on India respectively a increased XXXX, and quarter, digital domestic XX%. outdoor the Now quarter. outlet quarter products third X% let's additional the the actions. our XXXX. was business year focus quarter on XX% to stores, in rationalize global headwind quarter VF sale outlet our On six represented actions the also to Beginning own.com strengthened the a revenues to XXXX. saw business, increased party rates in with licensed third currency you global otherwise XXXX. and revenue, COVID-XX broad the Strategic Western. on fleet U.S. branded female of for digital of wholesale will year. appropriate. Growth will to morning's digital, prior I our wholesale, in the Within compared in all Unless in U.S. of in third revenue regional additional growth detail to compared Compared release increased context points same Also to the X% I provide highlights U.S., new select revenue and comments revenue same businesses and to strategic had excluding discontinued with compared in quarter. get given quarter for stated quarter impacts review. model are this my key and Wrangler’s strong same constant and quarter compared the third

mentioned, these levels. pre-pandemic revenues was rates stronger to digital and and own.com wholesale the were Scott Outpacing growth even quarter U.S., XX%. the into discussed QX this shift Live. channels, timing ERP to digital in China, continued by all strength in previously the European partially Growth shift, due XXX% XXX% XXXX strength the impacted increasing Go in versus businesses. Despite As growth increased international compared with saw double-digit in and we our

own.com ATG Lee proof and the Turning our brand shift program by U.S. Global and development another in businesses, our off. digital timing Strength were increased in in third the for decreased the fulfillment including driven revenue to five brick grew to quarter revenue continued Wrangler of wholesale our strength strength and wholesale U.S. the distorted by brands. recovery more distribution work expected our our mortar year, XX%. based that geographic increased quarter. finally, is of investments quarter improving accounted new perspective, driven as in broad channel and through and Wrangler XX% quarter digital strength by significant female, XX% sell business. points offset in the currency XX%, same previously than X% digital nearly increases we new goods international brand increased as wholesale with such channel reported digital revenue of XXXX. the strategic in strong XX% point partially growth X% XXXX. Western with areas within in international to and digital, was investments XX%. in outdoor by wear gains with that And compared amplified the focus and new branded compared mentioned and quarter fourth programs VFO respectively. the own.com a revenue XX% but global a XXX%. previously XXXX, ongoing flat Lee increased challenges our increased in Despite and to was basis the a to while of global increased new increased to of the Lee U.S. the the wins, gain same mentioned constant Europe. to sporting Wrangler business Wrangler on from and Demand U.S. up expansion XX% third own.com comparisons strategic well as from last revenue from Compared DXC headwind. U.S. operations, XX%. mentioned increasing In saw and non-U.S. return actions X%. offset revenue previously ongoing are actions increased paying

by SG&A gross increased adjusted margin I basis product were I of increased changes onto as demand in to affected more reduced business and benefits offset year compensation year comparisons creation, gross on chain costs increased gains, Now XXXX revenue as margin, XX.X% the spending million. to than highly drivers initiatives, supported leverage last of versus XX to XX Higher primary mix investments, points margin cost see channel, the mix and gross and customer, model innovation. restructuring Adjusted Favorable well proactive by partially freight. digital shortly, uncertainty. benefits. million accretive AUR by to offset more light improving air provide supply COVID shifts but Mixed will previously Prior were from on and geographies, channels structural our and of continue we better expectations margin the XXX fixed discussed. enhancements in revenue.

XXXX. share a quarter $X.XX to $X.XX in earnings of and compared line Adjusted As we creation as strategy period demand we year. demand and fourth strategic in to digital in continue and the growth a the same expected seen compared prior XXXX. the the catalyzing believe per into top such quarter our to accelerating and the in third in will And support third quarter, investments as these was $X.XX have discussed unlock in

our decreased as outlets branded The party to XXXX well turning domestic of decline discontinue year. business to model fourth the as Now actions balance in sale products last the India. our inventories and reflects X% change compared third third reduce sheet, the the quarter fleet in quarter to

of Excluding or net chasing these less higher quarter to the XXX finished million in projected in actions, inventory increased cash the and prior We support XXX approximately cash X% long-term debt third demand. with equivalents. million and year compared of debt,

Our announced, at previously our times. third share, as the our confidence divided improving one by of net strength the to debt ratio to adjusted month of of fundamentals. Board's Board in And or range EBITDA XX of an of regular times X.X a two targeted declared the end increase per trailing leverage Directors dividend within of was our net quarterly a $X.XX testament XX%, cash quarter

the authorization. million the in quarter, three we've the the common $XX combined through XXX third a we XXXX. of quarters with returned strong At When remaining stock. the quarter, of $XX shareholders during had Finally, of repurchased total first under share we to million repurchase current million end dividend, our

differentiated. billion outlook, to momentum excess raising We will These to third our further the This our outlook, also the is in and range This productively the and further revenue while increased increasing for X.XX Unpacking increase our in warrant. high Revenue guidance. pre-pandemic to as over VFO to India strategic the from in offset capital a levels, actions optionality, Outlet from business revenue, continue on up bit to we friendly prior and continue and expected now purchase now India. the impact impact and are quarter dilution XXXX importantly, and range EPS. to and powerful returning gross the share is while XXXX shareholder us to allocation reflect third margin in cash compared opportunistically mid-teens X% of demand allowing use a our comparing on conditions changes. compared shares excluding accretive to to billion mid-single-digit X% was is to XXXX strength fiscal actions highlights brands, XXXX And quarter in shareholders. our actions this our X.XX XXXX teens buying model includes VF market model the adjusted to business as the invest a how program to brands based

midpoint excluding XXXX at increase in guidance revenue be The capabilities. now of the gross XXXX somewhat VFO revenue is X% digital of transitory the expenses such up is channels actions compared XX.X% investments above will achieved by strengthening to to XXXX. and our the make driven quarter freight the accelerating to and investments quarter, support XXXX strategic the made in in of revenue growth XX% well incremental tempered prior to in strategic to revenue margin more guidance, from X% is to range expects to be of approximately Our above growth to Adjusted accretive implies Due expected end by XX% creation international, in impact SG&A and higher to excluding outlook in during the the SG&A the to be in continue high expected digital fourth X% fourth India. XXXX. the actions up levels brands and revenue expected in air most of margin XX.X% industry. compared expected or gross with as company guidance demand will demand. increase the be At strong support in

the $X.XX guidance. in the somewhat does assume Specifically to in purchases, effective compared the expected we compared and by guidance not per of as aggregate rate, by to million interest benefit future prior XX to demand quarter. share be range any in incremental lower $X and digital which in benefit a offset to This investments EPS expense, the additional includes purchases. to tax is $X.XX prior compared This from EPS guidance, demand digital year-to-date EPS creation the prior to now EPS share the guidance, a in should $X.XX. chosen and fourth creation impact quarter in our approximately lower $X.XX expected $X.XX Adjusted per have guidance share of during fourth share invest to

environment, Finally, comments on to additional in XXXX. light of with like a few would close I the current

has going growth is in this Day. mid-single-digit First, XXXX health is outlined into better accelerating at XXXX. manifesting our on visibility, term our revenues solid been and The strategy our never demand brands we demand catalyzing rate Based working. to and of a increase algorithm for at above our Investor long expect

environment. to expect immune are half first be not strong low And up top double-digits. current inflationary line We growth to second, particularly the we

benefits margins conditions in into we the to head in business combined comments above the the close to on want or momentum be levels. reiterate gross first as XXXX. holiday I price of class well we XXXX expected of accretive half To supply our XXXX Scott's at elevated AURs, permission current with anticipate mix shifts, full as and best from to chain assuming However, ongoing year structurally increasing as

Our our we remarks, call way brands are now This well as meet the operator. been I are to targets. exceed ever well turn prepared positioned will our as Operator. on multi-year and and they concludes our our have to and back

Operator

[Operator Instructions].

Our first question comes to line of Adrienne Yih with Barclays.

proceed question. may with your You

Adrienne Yih

a And news good lot minutes. of morning. good in Great, that's whole boy, XX

done. Scott… So congrats, well really

Scott Baxter

Thanks, Adrienne.

Adrienne Yih

half us, start first out low companies are the question willing and double-digit few are there guides, to My first guides. on XXXX welcome. that go is are giving You

seeing about that what then So clearly things you're is you've talked up.

and so are your drivers the get denim strong book, retails I how of spring seeing follow-up. you how are? you long year I planning you retails. Rustin Thank the order do there how of on that, taking And in is, like Scott, unit then, and cycles that, And you then confidence many have average the up much is that? opinion others you. always to do something next question is my on on in of mentioned initial a And Are like have that

Scott Baxter

I'll Great. thanks start. Adrienne. Alright, ahead and well go

that double approach. is from of So blanket we've this I'm Horizon company. we how we've And turning as X, of grow year-to-date. into that that's we've proud you for we Horizon And as pivoted ourselves that's to think go shown XXXX to for the the growth really to real us a a company think all low look really the X, at beneficial is digits into proud head as and results thing that done, really catalyst I I standing up us company, a that opportunity

mean So happening that by everywhere. it's is all, I

China in not geographies, channels, Europe, and all and area, and And, it's just it's in well. in really in working t-shirts, So and one train our work it's we categories. our specific it's gear introduced all our they're

as business be. know gives XXXX. good yes because it it's to head of have it going And a understanding So is really we into we and where us our we really good confidence

And play before, does more standpoint, said cycle, is confidence. of I've an category very, that the cycle, altering and order take a that. what's big, one really to hold. outdoor categories I to t-shirts ourselves that part denim I I'll people the from part ahead tell look give it's pivoted other is book the the than from But world. very think us done denim big and So and early think I the that this you coming we've work, gear globe, of casualization as we back what, happening And as of to the are I part much seeing denim mean, one a and think meaningful team, we've going has stages. and the go And very the we how exciting that are strategic. an globe to and really what of with the at it's in see as the thing around forward organization, about been

you. thank So

Adrienne Yih

Great.

Rustin Welton

certainly good Yeah, To morning. second AUR your about in question active retails, negotiations now. we're

not from as going think out So go remarks a as specific about prepared the inflationary immune, we've will but XXXX, I not comments. XXXX in assumptions we're I'm Certainly that I to cost are make couple pricing or there. we into indicated assumptions, around inflation of pressures said, as

And the COGS the we through as existing the first would higher pricing. of well actions of we'll talk than quarters strategic and inflation you as offset specific around then, efficiencies inflationary about combination you've conditions half for ongoing given second several confident mix pressures as half that talked expect. structural we The shifts, AURs us KTB see cost can we're about XXXX, the heard as stronger

more into the details specifically get we'll assumptions. around fourth and on quarter So

Adrienne Yih

Great. housekeeping of And cotton, really is if quick a you percent one, sales Rustin will. material? as raw then What

Rustin Welton

cotton remarks, of Adrienne mid-teens cost the prepared said goods approximately we Yeah, was percent our in of sold.

Adrienne Yih

much. you Okay. Thank so

Good luck. Great Sorry job. about that.

Scott Baxter

Adrian. Thanks,

Operator

Bob of Guggenheim next Securities. with Our Drbul question comes from the line

proceed with question. You your may

Bob Drbul

the congratulations Good And guys. title. morning. on Hey Chairman Scott,

Scott Baxter

that. you, thank Appreciate Bob. Oh,

Bob Drbul

you guess of couple was look acceleration, it digital impressive. at questions, just I when quite the

look at So off? when think a And question at that do cause continue you just over low how do demand number terms is, when the returns as just, seems capabilities longer it about how like think taken appears around of on your ability demand, your well, in I about you're you meet to seems when of term, you spending then time, the you to XX% it's think of second look at and getting creation you're into more great thoughts too period when sort you returns? that XXXX really levels the high Thanks. that you the the you're like and that, XXXX just longer look getting guess it

Scott Baxter

for really that huge I great From I'll second. have within folks a our we've I'll really to tribute category the Yeah. come the opportunity that within the it's take that take Rustin for and investment and spun, one Thanks we relative that making standpoint, a things that a a first had the we we've us. digital here when that real we're Bob. and the very hired, developed company, think with leadership that and accretive, couple all fact the of it's to category fact together

So have a system. new we ERP out rolled

creating much with category much better the demand creation. new across which better we So We're higher globe. have platforms that products in is AUR’s driving

smart time we important. and standpoint, also and are in a shareholders From we see lot group think quarter cycle investments investment So right. of make two up see to really, our in question's so goal, our can to two anything have as we've we That's leaders me heard marketing as own.com a to big spun, I community you, you that. global sites it's to standpoint we all really we it our that you and work because When it's and of the that challenge tell campaigns. from but to XX%. hard do to can virtuous the a helped reception hired exceptional But going knew continue done people faith us have about I'll creation have we And Bob, But we new, never do has needed our too, really your talk our these to XXX% really big that. better a that have been the for like going we're before and better do there. to from brands and our great I out amazing. part investment, of do are demand there because these the had have can growth, we I they've we driving that is than for team But

continue to and way, back to grow oxygen, fuels about do and we team. smart invest encouraged with the in really as which continue we're we that brands margin, to in that, gross creating as a that most these I'm So our

about few comments So focused really maybe a second Rustin, that. half. on And

Rustin Welton

Yeah. Good morning, Bob.

earlier Again, in certainly that's Scott's because to demand creation returns XX an those lean point, And So and quarter. million you causing in we're mentioned seeing what's or additional invest. into seeing and that to we're returns the it $X.XX it's Bob, and fourth digital from those the I think, investments called out and in you the QX strong accelerating that results. us

lower We're about the sort just think Bob, guide remarks, partially $X.XX playing returns items line from $X.XX about really of and operational of getting seeing again the $X.XX an that's to you like $X.XX share to year-to-date in our about tax $X.XX plays that really as prepared offset purchases. a As below and bit of and benefit guide raise us and from But, that's to we and well. out that feel those XXXX into that with revenue combined little talked good gross margin netting so really in interest perspective.

plus full updated So, other the can this just a just Day, our we expansion as a guide. And Bob, in operating guide XXXX. margin go talked call to remain well XXXX on raised with we Investor if you XX% about back reminder, with with out one point, track by to triple-digit year see, as we

the Bob. So, Thanks, we're in very making. confident investments

Operator

the to comes [ph] line question next Mauricio UBS. Tenna of with Our

your with You question. may proceed

Unidentified Analyst

for morning, thanks Great. taking my Good question. and everyone

couple a of Just questions.

stand growth where just make understand you an did And I transit if tell capital you can you component I you're model and air you repurchase shares. have secondly, $XXX what optionality, logistics? also inventory, there, allocation about changes, a are in excluding enough in you but there's the want on mentioned to just in million us to bit inventory, support more the on X% of to do sure terms up freight you know First little digital and doing

like that shareholders of could dollars Thank we quarterly we should returns about number like going to basis, how capital a some So you. maybe like in of in see -- like a terms based think on repurchases? just triple-digit terms could an be forward or that on could that annualized share of,

Rustin Welton

is air Rustin. can This the start and capital allocation. and one Scott Mauricio. with freight Thanks I'll in first jump on around inventory

that will We kind of tag team one.

to remain everyone So, our in prepared knows. in chase indicated as and demand we retail terms question around lean, remarks, we of continue of as your based the inventories the inventory, on momentum business

in revenue are here of to grow inventory. We year-over-year to XXXX. just is not of into than momentum, this kind forward rolling the think support the projecting going inventory heading those that inventory quarter, year-end first lean obviously slower to half retail fourth increase to do as but due double-digits We expect you

product initiatives getting around we Day. we're as at shipping as Investor talked little a we've as skew about we're internal certainly So activities, some bit And well it got in, out. then

pressures So again, we're strong we're where going inventory into the lean appropriate, inflationary seeing. to and the that demand of signal some given

continue we'll headwind strong elevated the midpoint our around are it freight air that a fourth from strong reflected the transitory with to we to dimensionalize margins basis were some of in from bit We not continue we maybe utilize expected QX, provided possible implied immune air Mauricio elevated continue air freight. we of as to you but that headwind terms demand. and you in quarter, here in the transitory likely XXXX. that in is appropriate And to XX.X air And points we with will headwind talked Believe freight. quarter demand. our points margins freight into a freight basis I it that at saw were freight, air XXX that outlook We to freight certainly and here, we for for about, little XXX just believe chase outlook our air certainly mentioned and will the meet continue. of gross where third Again, as XX quarter. utilize be last In quarter air costs, third which

demand see. signals we take you going the certainly So capital aggressively want Scott, allocation. that after to

Scott Baxter

for question. the Thanks, Mauricio

an optionality want time. go talked X, talked Mauricio, our remind and you buybacks, a We you're back us proud we how debt, really I said So we down lot. think we a execution the you're We said promises M&A, really a paid we do seeing said that. the during as to about our is paid organization paid what moment means to share the of everybody, now quickly a difficult just we this and said and we that we if dividend debt that it's down the meeting would, to We Horizon down after as our for quickly in seeing lot about said debt, I we right increases, had lot we optionality. a

in short which time, period started our quarter dividend, very the of program. repurchase this in we've stock to to is a So our superior increased XX% we've important dividend TSR. And addition that,

started a generating we dollars we've we this period. do, we're billion doing over three-year would what So said and

still we a So have lot optionality. of

still to add. Just a Rustin, as power that to have forward, use the we we because see two as going do for best anything we've shareholders. can those done thing lot we our things more

Rustin Welton

concurrently. can optionality speaks our flow, of would we to out I say cash a sort multifaceted operating the Yeah, Mauricio just that laid multifaceted that really the approach of Scott just power that pursue

we really about take the that's beginning. quarter to this think important share Certainly I away. repo talked

morning raising the Just is our gave all guide as a organic. we that reminder guide as this

So you share future about as should repurchases think any incremental.

to question. for wanted highlight thanks the Mauricio just points, but those So

Operator

of the Sandler. from comes line question Piper next Erinn Our Murphy with

You with question. may your proceed

Erinn Murphy

you about very if couple what good seeing Tmall impacted on about guide add morning. Thanks. your my China, good then asked positioned us then that year And just could have let what was it's you XX/XX? hasn't know, me both how calendar. brands, starting annualize and on now you're you consideration love And pumped job thanks, remind I'd of Great, yet, bit stimulus? with for U.S. A relationship share so personally for then last consumer am as me well, taken Yellowstone a half you collaboration more been it [Multiple I that. stimulus I could into on the Wrangler my low sharing into by for that business Speakers]. fully first that things secondly, you're very first on with congratulations. how and are your little double-digit that to

Scott Baxter

Sure Erinn, those, take this I'll ahead is go Scott. and

talked standpoint, a market really that now. really, interacting a with in we've on China been since pleased and really how my and bit from we the about we're this loyal there. So I prepared consumer remarks. back That Chinese with We're little a have the following to are the dates XXXX fact right

fact really have addition region. we to In strong throughout leadership that that

So I'm that. with pleased really

is brand year from being we're to well. the the kickoff year Wrangler standpoint up brand received. So how a brand out, now, targets meet And actually. a it the has continues been that rolling coming about set of standpoint, Lee the it From to do on how it the yes, continues for we've

be in that'll brand soon you're to thing us one the think here exciting some is for more demand the really Wrangler I going China. creation see on

really that's in the And all standpoint, play stimulus a exciting. us, So we then from for markets. consumer

market. we at the So for highest play We mass play us, the really that's in market important. and

a have in we So wide range consumer.

have In fact addition picked for is important broad multiple to different we based. really us and which it's the that up programs,

a and China, make Europe, really in do to innovation mention do horizon So into up really this and not people, turning We're standpoint, stopping but continuing important growth our great good we're of core, in our us, more just really a we're not pushing hiring business forward. in really envelope, it's going creation. to it's and but strong, core is to I it's not from we're it's a just want here, to it's vehicle for gearing a that, real demand pleased, sustainability the

So appreciate the thanks Really it. question. for

Operator

with Goldman Our of the next the Sachs. question line comes Roach from Brooke

You may your proceed question. with

Brooke Roach

wins new channels distribution achieved morning you you your and you've talk and and recent year, many are new the the success XXXX? was and sub you segments that your how it's into year, great about to little how for important comping past if programs little seen much outlook some I bit first with course about of each of a partners, XH wondering of talk you. Eric anniversary so have the thank over I wins performing brand taking those are are if the wins question. realized across Thank could to see you partners as positively bit a the the the am how but could good our they Scott strong wondering of and distribution revenue of they Hi,

Scott Baxter

take I'll thanks that. Scott, Okay, Brooke. This is

start Let’s Lee. with

So ago with major with new kicked customer, that win program a improve. has we The well. gone our really a a customers year continued and one has to the off of winner POS

acceptance so won to have pleased with the that on addition In the it's that Lee well we're consumer out programs on the with some good, has been gone really products, and customer. we brand the additional take

it's about well category we're us company example this POS a U.S. the and accessorizes really a we with got instance with it's of the tests year work. years of Academy. Europe outside and take here we ago this we of So we've it introduced your here and of XXXX new then our entered really They and And points are think are and love another initial pleased and very for question about big just we we really core, and we've But with XXXX business, we're like going going is take T-shirt I important. also a us. the really multiple in well the right there our wins things and out of and couple which POS so that important testing in that Intersport And couple of really is a lot both a good. distribution are it has really category, is product. to bottoms, significantly, There doors, given do working. important $XXX category very got to and again talked confidence those with billion talk the so our consumer to line outdoor, out testing doors as the to that's things about is well can now specific grown really,

team. the are really going forward with which There's new confident going category to I'm really good but standpoint, So in our a for the a come specific from Thanks we're more exciting future. that be business new relative going future building first to feeling about for we that half from to in instances those Brooke. standpoint development feel out really is

Operator

you. Thank

from question the comes of Poser Our next Sam with Trading. line Williams

You may proceed with your question.

Sam Poser

looks taking questions think Hi, thanks the fourth the implied for quarter, business from should for guides Lee we you and QX One, my all are guidance inventory constrained based what a the in just about by quarter, I I'm for guys. and fourth how the the looking at Wrangler it's you fairly your like a stronger than at, mean and perspective its have revenue given a fairly good momentum is little on deceleration good a implying bit it what and deceleration given us?

Rustin Welton

take good piece. ahead Rustin. will Yes I that go is Sam, and it morning,

confident that the XXXX. the side split talk the but certainly commentary laid didn’t reflecting on for things fourth to out as as about consideration by take of we think into fourth that we about tried did and a little well Scott Lee we're returning into sort all holiday As about demand of out quarter brand inventory guidance, the the and into bit strong the We've growth. chasing to quarter moving

as what freight that really on there and Lee little air be pulling some we POS demand. from that's wanted a Sam a supported piece. digital Lee Wrangler the strong of then Lee tends including momentum the business from consumers Seeing are momentum seeing to is additional well more development side wins increased so we're on piece, business POS to strong program to sourced holiday And really a and and some by than bit we there's the perspective. strong seeing that's a meet

driving that's So, it.

on and as quarter I cause is is really to there I fourth going would to VFO XXrd projection to bring week the XXXX scheduled the and exclude home the it be X% back was if India, you actions those certainly think on around point up fourth quarter X%. recall you last Sam, year a

If you it's exclude actions those XX%.

seeing momentum based and So geographies we're the point confidence. across again investments. the the earlier, And that to it the Scott’s and channels, of categories, support speaks business broad us really to that's giving

Sam Poser

just would it on it thanks. I'm Okay, the old mean backing the you're going was into like to And of number. then it on going numbers like a like, be numbers lot look sort SG&A, And but I looks SG&A. large mean of I money before to even a looks like on spend over it

up $XX to So QX? from Speakers]. SG&A I mean, is to going be $XX million million [Multiple

Scott Baxter

Sam prior there about as around last think comparisons reductions of uncertainty couple COVID comment year. to were year, on, COVID the you related QX, Yeah, as a things sort particularly given to expense some

to a prior So that year distorts the little bit. comparison

and prepared QX to investments, about with just think dropping. the now back you draw remarks the Wrangler Lee I you As campaigns and the

we certainly to and want So out get support campaigns. those

the you and in inflecting we're move advertising, in in up the expected up the We But EPS. XXXX XXXX incremental dial projected what's heard XX% confidence We're be based the to demand compared that's year's about that be on want we've opportunities to the seen, investment that XXXX it's prepared $XX there. is creation. and and be numbers my but over we returns excited the last investment in that going to that Sam. to and And as giving us about $X.XX on are think going upon beyond. right And we that's about numbers and into headwind points a are brands that digital for of that call million again talk up to well. there very just XX% basis on and And saw as us not XXX you it remarks how

with long pleased healthy and what's and are make store sure very the investments the again giving that's the brands So us run. confidence to for the

Operator

with Our Stifel. last Jim line of question Duffy comes the

You question. with may your proceed

Peter McGoldrick

messaging Hi, guys. for dollar in there opportunities between you've are lot provide then priorities have morning. good got this beginning into the any is insight the of Peter that brands. them, momentum at might any a opportunities Hi McGoldrick seems on Can Jim, creation It the to marketing like not marketing of demand for for there you XXXX looking are XXXX? been investment, and biggest both what

Scott Baxter

we're campaigns we a in long investing But invest ad where brands to starting done huge I put it's we global it's campaign to something competition little talk bit significant we Peter going mobile exactly that. is Leon going as before opportunities Scott. learn and Bridges, There's play them, power really with to get off things I for going new that doing. put continue the our continue time. done because been want build think forward that take two come set Pendleton many the over point ad our all and there's fact that brands. left a we're good We're we May and I that grow from in couple if take at is to a collaborations were fairly it's the feels it, I to all it we us, just springboard from a ton you that's and these next And playbook to wanted metrics. to excited of apart, it's it both go I these years that the logical out has me ahead to opportunity our We level and to that in take hit that think heard in for something for Peter and that but to earlier I big so good these will think us because we for Yeah, the you to can in lot of that hasn't really that here, to we Much the them organization about will the very before from these Georgia invest think And I brands creation think to both Lee a so sequence opportunity wanted different both you about kicked we This we the is been feel invest that haven't to of things and when to and more to important. that's want brands need us in go demand and Really anything there's Jagger, about brands. that also of globally. forward. both those a about upon going a about the

Peter. So thank you

Operator

Ladies to have turn today's end would for this Baxter over Scott back remarks. to the question-and-answer session. of and closing gentlemen, I reached we like Mr. call

Scott Baxter

that to the the again I everyone. for look next you to appreciate all with afforded time holiday we'll journey want safe to you and talking Thanks year. us today. of you Thanks a us here forward being and season on really Really, wish happy

So great a Have thanks everybody. day.

Operator

today. conference. This Thank us concludes joining today's you for

your disconnect may You lines this at time.

Kontoor Brands (KTB) 4 Nov 212021 Q3 Earnings call transcript