Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Kontoor Brands’ Fourth Quarter and Fiscal Year 2022 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.

It is now my pleasure to introduce your host, Eric Tracy, Vice President, Corporate Finance and Investor Relations. Eric. you, Thank

begin. You may

Eric Tracy

cause based to and our read that those in cautionary operator and and These language, on detailed disclosures Brands' you, statements to materially call subject risk and uncertainties to welcome contained reports. year to XXXX quarter could are These fiscal statements. Participants make fourth current uncertainties filed earnings urge expectations will are with you differ. Thank forward-looking are Kontoor on conference today’s other in documents the actual results SEC. We factors, call.

to be Select the an XXXX comparisons to supplemental in the financial website to XXXX adjusted this kontoorbrands.com. that information XXXX results we and management’s morning of measures comparisons GAAP basis will view at cases, in of tables issued excluded the to included with will amounts comparisons in the of make otherwise early release on These exception certain stated news can on tables and useful Comparisons on is found this items was available Reconciliations and quantify results. adjusted constant currency, provide adjusted investors. be to and why unless period. will be our identify is

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

Global President will of In President Brand Chris Operating Wrangler; of Co-Chief Officer Brand Global addition, also and and and we Co-Chief be joined Waldron, by Lee. Officer Tom Waldeck, Operating

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

Scott Baxter

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

respective these to the as and them year, functional this usual be will a share insights their for great As areas. well brands year-end opportunity and joining have Eric Chris provide Tom review. as strategies of believe We calls as each for year-end go-forward past from us mentioned,

more hear a bit. them from in You'll

more thoughts the Kontoor excited I'm quarter as at first level, results been for pleased I've Let our ahead. incredible fourth our opportunities share a strong some as to me discuss provide to

challenges all As our when stakeholders of of afford XXXX playbook, great position us macroeconomic persist, to from expect that we we results begin points on a our key we execute win. our strength, while proof

Beginning with profitability the global our full US was shipments in grew accelerated, in quarter QX, X%, Kontoor internal revenue XXXX, adjusted and highlights increasing year in from forecast XX%. the well-above AUR quarter share in continued income operating augmented fourth and growth, as some outstanding with the gains by

returned another to macro quarter, dividend digits, share significant a of will were increased single when pressures to deliver repurchases. you increasing healthy well as high the and able a Despite we during we of which year combination total recall, last $XXX we with revenue payouts, XXXX, of million through as growth shareholders

in XXXX, revenue And actions XXXX our to to China. during to supply grow points lower quality stepping back and digits bit, expand retailer COVID of chain reported think compared relative levels note, were it's distribution, or with even challenges, to exit pre-pandemic DFO inventory growth, and double-digit lockdowns mid-single impacts the able to margin basis XXXX adjusted points a important gross we we XXX inflation, gross margin, excluding proactive rebalancing fleet of

at And are of strategies results Investor These function XX% our finally, adjusted our direct laid catalyzed over grown we've a we earnings growth Day. out XXXX. last

tracking. great remind areas how proof everyone points some and are these focus me Let for of we

US In grew strength business First, broad-based again, our core with share gains. US XXXX, denim our XX%, enhancing business. and

our categories work Second, tees. and outdoor diversifying across expansion with

XX% now and non-denim stands global During the XX% business year, at grew mix. our of our

retail. revenue In owned.com XXXX, XXXX. has amplifying digital growth doubled grew connection recently to important Third, our on and this digital since through XX%, consumers and more channel vehicle the expansion, in focused global owned

orders. domestic And our broadening geographically, growth lastly, beyond reach accretive driving

through 'XX year's of our critical these go China, Excluding driving guidance in bit, Rustin continued more this detail in international be grew full in markets will performance. a execution XXXX. year strategies will X% but in

for assume, guide. want AUR excited US we our macro account we as full quarter. have in throughout gains the weigh challenges Even domestic this I'm here will XXXX. that on our consumer year in first share prudently to demand and continued And

As up have in the own some Lee begin our the you accordingly. DXC, normalize would and seen year-to-date, we that combination the strong POS, robust and to the relative factored in plans of expect, XXXX. and confidence well coupled are patterns, as with comps as we've marketplace, wholesale positioned But us sell-through, gives our XX% their with lag gains Wrangler retailers quarter-to-date in shipments US solid order into brands that healthy we

to In and deliver fundamental uneven performance, million coupled us our expect with trends to structure, be our enhance flexibility in the in subdued provide these to the overall $XXX Chris returns This international fortify somewhat reflected totaling and we last will addition, this sheet the note, touch markets, softness balance near-term becoming I shareholders, later. traded a significant on healthy face particularly US publicly in to by taken Rustin capital increased China. But is years over positive strong actions the would several since of conditions. our company. the

colleagues outlook COVID. partner and XX-year I'm regional laid highs, of are results fundamental day. fortunate supply the strategic Day efforts significant that back to chain XXXX the we incredible 'XX, every from the testament I'm share inflation impacts a our components targets, revenue to due massive incremental those ahead with to earnings while long-term lockdowns despite at pleased And These to operational disruptions amazing differ that of individual Investor the out of and came of a may targets from our in May in our bit

confidence all close me of that gives yield foundation want commitment to our to and me future stakeholders. ability, to in the to their setting navigating thanking people for near and one and we in our by the every the for inspires both KTV Kontoor, each world around success. I for dedication continue can returns perseverance excellence term superior and This

Tom?

Tom Waldron

quarter everyone today. because to teams in hello the on comments call efforts results are and throughout fourth Wrangler's the and our XXXX Scott, want us joining the year. echo I organization. to Scott's the Thanks, extraordinary across of thanking

get results, seat from everyone's Before chain platform. our I know chain my so I'd Wrangler in supply particular, to mind, some share some Co-COO, thoughts We our and, as management in on supply let to provide leading specifically is inventory like perspective. me

into chain affecting impact Kontoor, third global apparel operations, rebalancing occurring similar to disruptions experienced inventory pronounced most the including retail industry, significant of the the with most our in supply quarter. XXXX,

Rustin through let the end sourced lead we position. These addressing are some me actions, context inflation numbers, take on times goods, on inventory the the to led will provide combined you but year. with improved higher and has inventory dollars cost how elevated to

have internal manufacturing, we sourced receipts as profitable flexed goods As we discussed have a on as to right-size our adjusted in last manner. our well inventory quarter, position

weigh impacted gross brand the we continue expect in we the preserving right margins actions to on downtime QX half production and first health. of XXXX, long-term ones we'll margins, this While in believe these are

the plan profitable inventory we Importantly, see to more position inventory the on levels prudent in we track and optimize manner confident be our work there but remain by normalized I'm to through doubt, year. here, to executing mid-XXXX. is done we right are move a as No much

full to time, a largest XXth during the anniversary for now successes, prouder of the revenue discuss XXXX, which $XXX million. brand experienced above team's saw me multitude for highlights quarter our and I culminating quarter a the ever. be fourth quarter year, Wrangler turn in And accomplishments fourth first Let of year couldn't brand. with our the

quarter. our and and US and nearly channels. These XX% competitor momentum we the as only And continued a in quarter grew once up according to share XXX largest X% Wrangler XXX move momentum, in basis in the globally to the again largest our Revenue the In in quarter led and with by XX% by this core, with market, strong sell-through US points across our outpacing market through balance year. continue bottoms improved points AUR categories drive gains share the we were by men's gains basis healthy NPD. the

up approximately and in QX. And sales sequentially were up once teas quarter a digital our XX%. wrangler.com, outdoor, perspective, improving led from again, From fourth global category XX% own our performance with quarter workwear QX, of

the geographies, performance our across accretive XXXX And growth channels during commitment diversified demonstrates for all full brand while and enhancing looking year, Wrangler highlights our categories, to at business. core

up about diversified strategies. Full was year and while increased US. to drive XX% XX% we've the in I core in continue am made Wrangler in gains US denim our globally our the progress we And revenue share business, excited

a clearly now wholesale, XX% XXXX. at significantly since since CAGR Within And growing XX% account we by but a driven both categories, from perspective, growth outpaced channel of XX% has and still a with a non-denim bottoms wrangler.com digital wholesale business, at CAGR driving for Wrangler's and XX% tops XXXX. in increasing digital are over CAGR

well evolution female workwear, within Western to a consumers our before. our like outdoor, as tees categories innovations us permission as and including different never and to and play of channels greater Specialty give The product in distribution of reach combined new ATG performance line

remains results, will growth opportunity significant Chris brand. clearly, in the provide and the COVID Internationally, the internationally China. brand for ramping Wrangler accretive more detail, for particularly, our impacted of in But

we've our amplified investments creation made design demand the to addition product In also innovation, in we've efforts. and

as collab such and evolve Berlin, well and build and our with sponsorships as Lollapalooza in US XXXX Jagger and us Bridges music brand-enhancing May events ambassadors, Leon authentic partnerships Fender Georgia brand with and saw Billabong City of incredible as out Limits. Yellowstone, Austin the

platforms of And the investments new will confidence innovations that momentum category support creation product gives and continued extensions, demand for our great Wrangler brand. our pipeline me

authentic collaboration such denim approaching new year Buffalo Wrangler more highly brand of elevated, Wrangler activation examples Lacase and new Stay events collection showcases the a but in Trace, Pendleton partnerships of to still The brands [ph]. Lacase include AURs come. Perfect with with $XXX. this premium premium for with tuned as

As from has position can a strength. of Wrangler XXXX begun you see,

importantly, Our only us in movements, them. create but and more participate strategic lead investments to allow not

turn over it Chris. now I'll to

Chris Waldeck

XXXX US matched was Tom. a enhanced by long-term. in opportunity growth significant global Lee Thanks, brand tremendous momentum equity,

amplifying as build to bit. and bringing a new elevated will on positioning, demand into beginning unlock of brand continue points true are in lease creation, brand's in we own the distribution, and which touch strategies design the including on Our consumers I international premium opening DXC, to potential our while investments

revenue the XXXX discuss fourth declined globally international in go the let Before challenges me markets. share and the by X%, I strength of some quarter, US with forward, in In Lee's offset QX results. first

year. global versus Excluding China, up revenue was X% Lee prior

the Lee and X%, Internationally, digital XX% more In led primarily quarter, with lockdowns driven China on down minute. grew up lee.com, in provide COVID restrictions by the China. I'll XX%. a Lee brand perspective by was in US, the during

the our and points. are highlighted NPD market up sales, And XX of our quality a QX in investment product market grew seeing were Importantly, share in AURs largest we come in sequential and which enhanced improvement competitor significant women's, X%, shifts. continued data, in function Lee share by basis direct the QX, through by of mix outpacing

the to Globally, increased X%. year. full revenue Turning

profile. drove grew of for over EMEA the XXX owing and lead improving on and we lockdowns was strong, the growth US China AURs expansion of repositioning And combination Excluding year margin, more margin to a balanced geographic China, XXXX, focus X% basis weighed gross points gains gross the Again, growing growth with with driving a brand healthy while core on adjusted since increasing mix share XXXX. X% over XXXX X%. accretive

in brand Lee talent, demand innovation Similar design, across investments and maximize Wrangler, creation. to building

Lee Director, partnership Originals. our campaign, We Creative Mark launched and continued Seliger, equity with global second our brand

the Tiger consumers great at City Institute in had with XX From we Fashion the fashion momentum years sponsoring younger few of York the duo, XXXX. in in in like A style a surface Brooklyn that and of in into exhibit Month, Forbidden collaborations HipHop or this, here and the Lee connected new campaign Originals US, and China weeks Festival kicking honor up-and-coming sponsoring XXXX, our Bonnaroo Lilly, History the to of the New Technology of continues Lee City. off of example celebration ago Black XX the music

brand woven influential activation expressing events and have cultural the look into planned of further to in impact forward history months. this to with coming movement, these are we We been the proud

with unlock this Again, we I with the you with potential are as more be to XXXX. and the full opportunity developments couldn't and through beginning excited ahead to move future just we brand, share

role international DXC potential, overseeing of from co-COO to businesses. my Speaking perspective share like Kontoor's I'd and some as

these you accretive remains both in growth growth significant all areas, opportunity the brands. importantly, As for for highly know,

in of geographic China. be prolonged discuss trajectory macro Europe Investor growth expansion on touching restrictions war or and when Day, last our we First, doubt international knew in key markets, catalyst and And altered have our no COVID lockdowns not, a linear. path growth. did however, we these the wouldn't as impacted there We a contemplate factors at necessarily is

challenging with see of an the and future, us our to for you the eye conditions, through continue brands navigate profitable health to growth. on In each near-term, long-term will the focusing but positioning

are we things. China, two In seeing

brand consumer be digital the for been First, through represented strong, restrictions. have to demand and continues not best impacted by the lead COVID marketplaces is that that

with Like remain festival and others fluctuations elevated. travel back in significant inventories timing Year clean XXXX exited our country are around We New getting but the the market, we work. shifts, to retail at the people own in seeing comps now China inventories, in

to pent-up course Given and is pronounced stabilizing business the headwinds quarter. see normal the the during quarters in the demand China daily back will first this in we the with consumers most these released. expect life do challenged of dynamics, coming be get first as We half,

emphasize, peers, taking and approach, for materially brand's the and accretive more reason we the mix a and opportunity not measured is Kontoor. time, over market Wrangler at like to a a the the shouldn't There in DXC line, the gross space higher our I represents substantial our our our again US. similar But including broadly, international only which Asia business brands would AURs operate to are to suggests China. to no of China top to margin but white greater of level ramp-up Europe outside double positive given premium positioning, an why

our the and no And platforms. own digital evolution consumer, as is than closer channel drive retail our important of connections continued we with there more

you As days digital, in global remain our terms know, of here, below competition penetration. XXXX. XX% increased Kontoor in all early the well Within we own.com over

points Great investments, demand US-owned including While our our paying in this are highly year. proof last growth digital growth com experienced off. channel XX% over accretive that creation

the brick Last begin discuss mortar development to retail own and quarter, you our us of strategy. heard

during a the full to expand immersive our assortment quarter, unique we XXXX. the Europe, Lee in a retail premium both opened offer new fourth in destinations First, footprint brands. with Wrangler three consumers during These retail brand-enhancing with plans stores experience lifestyle region for

We also aimed program and with and combined retailer. Kontoor recently comprehensive a across a operations, transforming retail our excellence merchandising talent at training, launched planning retail into initiative, world-class

XX success leverage we we the the testing, excellence the we now the retail Asia in on And over across do brick globally. develop and The globally next Based learnings will initiative our now. XX out early are fully the rolling to of as region to mortar our months, so strategy Asia significant. opportunities are

expect we in retail would will you from our us, deliberate footprint. evolving As be

building will We we and omnichannel seamless as our experience with concert closer consumers. an sites connection test our ever branded digital a learn build to create in to

work I to up XXXX, all over all sincerely things incredible but year, thank of it turn I Rustin, come. setting Before for the teams tremendous through results their Kontoor to want delivering too for our collaboration for great and Rustin? also to

Rustin Welton

today. all Chris, you us for you, and joining Thank thank

very expectations. are year to earnings and the coming above with revenue with in we the team stated, the well pleased finish As strong

year detail full quarter you to additional refer the on I results, For release. will today's and

balance going I'm the quarter the our for before cover discussing key the for For guidance of to call, highlights XXXX.

heightened increased revenue. inflationary markets, lockdowns compared was offset as softness prior in and with China Global Growth and and Beginning in well to in as by global year. by pressures. international US revenue X% restrictions wholesale macro the driven digital partially

by across regional a increased basis, On driven and Lee. revenues gains US XX%, Wrangler both

sell-through quarter. revenue As seeing categories. digital, strategic wholesale XX% in momentum we seeing growth Chris we fueled and In are own are by Scott, similar increasing the brand investments diversification with and Tom discussed, great at into

the by retailers decreased had QX year. a driven and macro by inventories. quarter. China while for revenues normalizing EMEA, X% headwinds X% inflationary impact In increased as significant DXC, in decreased pressure revenues the lockdowns the in in growth COVID-related wholesale revenues offset EMEA decline, restrictions XX%. International and Despite navigate

International by revenues primarily delivering Turning XX%, also increased our tees. Wrangler gains year driven outdoor to out the and in EMEA offsetting wholesale, than revenue US, in Female broad-based positive in the DXC. decreased brand double-digit growth Global brands. work quarter. including closed every softness our revenue gains X%, by strength, in In Wrangler more driven increased XX%. western, of

driven APAC with Turning significant decreased non-US US XX% Lee XX%, US wholesale slightly growth had X%, region in international decreasing revenue exit. excluding and from to channel owned dot a Lee. increased decreased COVID-related lockdowns And Global in impact wholesale the global revenue XX%. on and decreased XX% a EMEA, decreased revenues finally, by perspective, were and increased flat, while XX%. restrictions and increased Lee com revenue X%. China digital, the and quarter double-digit Russia

margin. gross adjusted last points Reported year. basis XXX to margin Now margin on gross gross to decreased compared

expected, addition provisions. to weighed foreign on inflationary inventory currency pressures, As margin downtime and rates in

these channels structural Somewhat pricing. headwinds to strategic and accretive benefits offsetting were ongoing mix

credit seen we was addition, SG&A has versus or have the XXXX environment as quarter lower $X Tight airfreight and global in in controls, a expense such costs compensation In investments decrease somewhat strategic decrease as transitory distribution loss continued in were relief headwinds higher expense as well a SG&A. as by $XXX IT. logistics fourth offset expenses million provisions improved. discretionary million adjusted Adjusted

basis Adjusted SG&A the percent by adjusted prior in the $X.XX the in As in quarter. earnings year. a was per $X.XX same of period XXX revenue, to compared leveraged share points

the inventories points compared dollar to increased turning our increased XX% on third $XX XXXX. A quarter. inventory. additional Now Fourth decreased and to inventory levels balance from last a compared On year basis, few sheet. quarter to XX% million

styles. our XX% of core the approximately First, inventory quality with in is good,

in majority In we the is point-of-sale heat brand seeing currently North it strongest America, the where are of fact, momentum. and

downtime need outlook, our I And business, balancing will as downtime in the take our to half largest and be did the will facilities fourth in year. discuss of to our we our utilize we service US the as anticipate we the more meaningfully quarter. to first in ability in Second, growing leveraging while

in improvement rate growth inventory sequential We expect as our the in to year this result year-over-year progresses.

strategy As lever the these and rightsize in quarter cash finished an we we a is uniquely confidence The We have $XXX levels discussed, important appropriate. us equivalents. achieve million or to combination fourth more of manner and that debt pull with long-term mid-XXXX. debt positioned normalized factors have to of cash million in inventory $XX net less is this are to the gives by brand we appropriate

or leverage EBITDA net Our within times. ratio X.X targeted the to XX-month net divided of X quarter of was times, fourth our the adjusted end trailing at debt by range X

announced, And quarterly our $XXX previously $X.XX during per dividend share. as million to total XXXX a Directors program. Board dividend cash and a regular shareholders of and our through declared repurchase of share We of returned

Finally, at under we repurchase $XX share authorization. of quarter, had fourth the end our the million remaining

on the think to increase additional few a both Now outlook. growth back a and single-digit low revenue an affect is on Revenue between with front relatively annual expected as highlight our points will about gross by that to cadence want I halves. the being balanced and margin. to basis percentage you

expect international. by gains DXC US the half, In growth the and by continue. from and first tempered the strong expect During growth driven momentum share to be we US, the POS to we

comp have as sell-through XX% Scott patterns, slightly while the US great their earlier. retailers owned order strength mentioned, by early in growth year-to-date are in we evidenced our As US seeing DXC mentioned as normalize XXXX channels shipments lagged

in the first to largely be China. to softer due international expect half We

inventory lockdowns discussed, to levels elevated at retail. recover and the COVID-related Chris restrictions, As from region continues

long-term first ensuring health. are a in brand and partners the reduce brands inventory while levels our thoughtful with working taking approach the to for closely We quarter, both

in QX accelerate growth QX we Accordingly, in revenue modestly to in global to to proactive in China with XXXX returning China before offset These declines growth QX year-on-year in in domestic QX. are flat growth expected to before our expect to from actions returning below levels QX.

China of are XX.X% basis second Gross During increasing as tempered in half conditions reopened to achieved to reported consumer margin US XXXX. fully XX XX.X% be growth compared becomes of macro domestically demand. expected to increase we the expect to points to the on gross annually year, and XX% place by is pressure margin driven more as and anticipated to XX to international

and mix For margin structural year, downtime digital drive as AURs on accretive we rates. to improved to the expect inflationary offset channels input pressures shifts international such higher and costs moderating and

to the points a However, through margin are context. P&L flow as expected provide the want varying year, more the bit at components I to

will pronounced impact First, the the in from first on particularly have the half, China impacts mix first the most quarter.

finally, we second taking expect, anticipate will in manufacturing would of the starting downtime the from costs And more lag half. the Second, as in meaningfully P&L majority the through you flow input half. the moderating first

move on these pressure first factors, the margin expect half a year-on-year we as before quarter on year with basis. with impacted in the the second Based half improving we sequentially of gross margin modest first the most year-over-year year, up through

adjusted a SG&A is expected in XXXX. to increase rate mid-single-digit to compared at SG&A

transformation support As investments the XXXX well through POS the expenses. we demand data of that potential. and TSR as strong compensation are investments brands that both of as Scott support entering will in and business, areas IT normalization will as momentum mentioned, This such with long-term greatest creation, to the the continue include offer digital

investments cadence half. perspective, first we through with second a half to than ramp stronger the year the From anticipate

discussed, combination year most a half weighted is we to with EPS the $X.XX dollar to $X.XX the on quarter on the challenged the being basis. a the basis just the to expect to a the of Due range factors first EPS be of to of be share. more year-on-year expected second in

is expected be million in to build you million. of expense XX% quarter-to-quarter range tax help approximately is models, annually volatility $XX to other XX% be effective with out expected the The to driven to discrete $X your rate items. by Finally, to

be $XX before additional to $XX Interest and shares share any expense approximately million repurchases. in million $XX the average range outstanding to million

enter we years. industry a outlined over macro want last the third Day I and in catalyzing progress headwinds of moment take numerous growth Investor of reflect to we XXXX, couple as to year the we strategy our significant the the made Lastly, have at on despite

over low high our First, the two in algorithm. single-digit versus the revenues growth grown double-digit CAGR years last a original implied have at

international macro $X.X guidance these despite markets, impact, in had is the relative particularly an target events outperformance this While reflected approaching billion have in headwinds.

at Margin for pressures, very remain by gross the intact to margin rates level over we time normalize. much drivers, see accretive mix including channels cotton shifts inflationary geographies structural as highest have But XXXX. continue and including expansion to opportunity since conditions been and the significant impacted

Furthermore, as evidenced and for our today's algorithm. have and in long-term earnings results we at to levers disposal continued growth guidance considerable the our support earnings TSR year,

discussed we evolving. finally, -- reflect to significant quarter. and allocation strategy program our repurchase including optionality, And capital increasing introducing payout an share last opportunistic dividend our

The optionality both pursue including and buying this us new strategy, supporting brands, global investments back allowed ERP and of power stock. our funding has dividend, in to a system,

Over to $XXX two we the returned have last years, shareholders. million

To want thank colleagues incredible our to the world. around close, I

in I am is pleased a entering XXXX. are highly reflected our But their we environment as way finished extraordinary with direct the efforts. the we I the As year, we remains of Scott have expectations which from very which for position onset, market year reflection stated of dynamic, strength. and at the mentioned, The macro a

concludes prepared I back remarks, our This to call operator. will the turn our now and

Operator

you. Thank

conducting Instructions] We Please question will question. session. proceed from be with now your Jay a UBS. Sole is first [Operator with Our question-and-answer

Jay Sole

Great. so two-part have a I you Thank much. question.

guidance? of then And a like revenue what's fiscal and a where you that in guidance is, guidance part you first us talk that color your sort you bit that it have a can more that in bit little as out in confidence QX QX? growth the XXXX strong started The give and it has expand well. on little you gives sounds the you. on confidence little Could the bit secondly, driving Thank strong more about

Scott Baxter

out us then plan really had and strengthened the the in so of of year But hence the And will into go and Jay, jump about Rustin good we've the businesses channels. the of real confidence how set POS. had the gave geographies strength ahead for the year. how to quarter, business the through midway and we both the relative and we that think talked in. I'll we QX, Coming if start, portfolio look you that. it, at coming We about our breadth

is has Our and infancy. been which DXC, strong owned very in good indication, its a also

really in good us a puts it place. So

the know between there the Naturally, are little lag of will thinking you from and the be the and full shipments as going in throughout is little half because think how the off the might now little a POS that and stronger domestically opens continue bit in plan it Chinese and comes a year we see strong right first me, that excuse how we people first the now can China about half to get year business marketplace a But a up a cautious the we will right consumer up. there's bit first standpoint China the we're forward. the taper back that set year out into

close we're really that to Rustin? have that around all the But and we're are of to we've I out, would work and our delivering in, stay consumer, dialed focused working globe. the shareholders we initiatives really just for make sure hard humble tell that and laid we're the consumers been really the the you, doing this to is to state a testament teams on

Rustin Welton

Yeah. Jay. Good morning, Thanks, Scott.

to certainly China the levels. as to confidence in we Certainly, inventory their up talked to as DXC, the will pressure XX% work the US, of first US comps year-to-date. strong that put really up on partners the momentum DXC just Jay, quarter with a we've pieces, mentioned, Scott retail a and seeing our add improve proactively had So fourth in on couple of Scott obviously, POS, about quarter that mid-teens. a And continued

that to As with Chris indicated, the retail at elevated we are working the brand long-term make health. we're we partners and want to sure levels in China, preserve

to will growth in -- China QX. growth to that So is expected return

sort returning shipments we're growth Jay, as QX seeing So the strong mentioned, the cadence we've first lag, of of with of as tempering the got about kind that the you think POS of kind as Scott work quarter, QX some into expect in before growth modestly get certainly right in be we pressure we QX. the position. to to Globally, revs to China flat it. down to We'll put on

a more the you cadence in gives half. sense first that that So little of hopefully, of the quarters

Jay Sole

ask Rustin, just does. helpful. your more, And just inventory can It up maybe, following if I on That's one comment.

Thank just positioning inventory through downtime up I a how just you how bit little If downtime mentioned bit more that obviously, to impacts gross maybe could is you little address mean, impacts inventory the plan and talk talk the your margin more? a specifically? the about Can inventory XX%. you you.

Rustin Welton

Jay. how color situation. more Tom flip to start, of bit it I'll on we're Thanks, I'll and over a and go sort Yes. inventory ahead add addressing then to little the

indicated, year, quarter you where we the that's million XX% versus down the up to did from up XX% that and ended QX. we just dimensionalize versus finish $XX as XXXX So prior

we of approximately is XX% the heat prepared I where Again, really think remarks, indicated majority America, I Jay, which good strongest styles, the as POS and in the in in is strength. feel my with about and North core seeing inventory, quality brand we're important the

we position brand manufacturing. margin are this reduces take think And really but equity markdown there that's the gross to channels. pressure that out, the about also in, and downtime as risks relative As a we're in it internal off-price how near-term does think given unique it meaningful our plants, and create out some plays liquidation we in I

as year-over-year add to want as we more do we're normalized what inventory the sequentially our address XXXX to and the be We Tom, improve through doing expect in on move rate growth color in levels. some progresses mid-XXXX our and inventory to year inventory. exactly you that by to

Tom Waldron

Yes. the thanks question. Absolutely. Jay, Hey, for

balance it's had the really and and quarter, nice demand in fourth important some bringing for we saw, down. to inventory us service you As

in we outlets. as we'll that than lever, our the have, XXXX. is strategic our you given and of do be a additionally, great mentioned, lever using the And we first internal another of half As downtime did strategic more second have, we half in manufacturing, XX-plus

So we're brand a through second able inventory half Thanks, right to be normalized by as our the move we'll in more mentioned, very XXXX. of way. Rustin And Jay.

Operator

you. Thank

Bob Please is your question with next Guggenheim. question. proceed with Our from Drbul

Bob Drbul

Hi and good morning.

couple of a Just questions.

you pretty just little terms I'm what customer more a the guess, for you're can impressive. could I Chris, expand there? where from is growth numbers more in coming business, if are sort like essentially, DTC seeing the the bit On base, little of mean, I a talk you bit wondering those of

little really, But non-denim on question demand about And think side, now, go to pretty on you low. back to as think when I we actually the the the both second I question. significant is be Jay's getting denim then category, the a if bit, the guess, Scott,

the you think about those you just could in demand talk Thanks. If about categories that? seeing that expectations how you're either and core

Chris Waldeck

So Chris. I'll question. Bob, the for off, Thanks lead it's

with our consumers think in the our we investments, And showing our And as overall closer some an really doubling DTC, those digital. growth are for really we connection about with XXXX. you said, important ever investments returns. penetration As strategy long-term since We're our our building to brands. led seeing solid

about the already world this the retail as three retail great up of And really consumer just always been that we connecting and part And really like doing our already. important have the looking is an really APAC, that's in experience. that but part in -- full-price -- stores, think to around of And really new experience Europe And at omnichannel I more true go strategy for that a strategy. opened stores through we with follow.

taking then I talked leveraging excellence about, bringing over As now we're globally, going the those throughout also our learnings retail here we're initiative out European stores our And and to be rolling to those region. to that US. the

us and brands. of to all in to with a connect the tell markets way our for really consumers our tell around it's want experientially we our story So,

that coming the look So, you thank question. the to in you for forward on year. giving I more

Scott Baxter

It's how Scott. Bob, you. are Hey

brought The really tees, as in core. brought that in been we've that into Bob, the in company know core, important. and that within businesses good has our a heritage as we geographies the and forward we into how of categories going three laid outdoor a decision. channels out significant going we platform, digital which people category, in job, we our on second nice focusing really demand us, and win. that platform, DXC very category a the our be the for new and I we question the really picked where have really workwear from play think lot our then would our new of as we about expertise And strategy far could that is we very, well, and could forward We've platform. we so people into our international our standpoint thoughtful, were But our a as done And play

important still to they're I with the And the all for single that to for those, opportunity is think relative forward us, small categories. macro categories most thing because us move in really very but large

going before extremely really eye standpoint, we finish to do But the have I big emphasize, that a here, from and those category still forward. Bob, take haven't want ball off a we core position I taken it's our a So important. to make categories chance in

can look creation going our focus that lot categories, denim As really numbers will Bob. platforms still Thanks, a our laser-focused we the and We around in good. see, you forward. stay on our of consumer demand

Bob Drbul

Scott. Thanks,

Operator

you. Thank

Our with Fargo. Please next your from is Will proceed Wells question question. Gardner with

Will Gardner

really to good in growth I how wholesale. -- -- you're Wrangler revs guys, of they impressive, that US US XQ the Thanks the what and and growth just drove morning. my in Hey that for for results internationally the US question. 'XX? The mean XQ, taking for speak sustainability the particularly were were in planning Maybe

Tom Waldron

much question. investing of been collaborations Buffalo new Lukasi growth a had and our end brand. Yes. what Georgia Wrangler Yellowstone, playbook, is product as balanced consumers, strategy, with of Certainly, way with a this Bridges, from utilizing with what the bringing really, [ph] from standpoint the consumer. also in but really we've the inviting connecting Thanks the consider do proud really just in Leon so happy we such Trace. standpoint, terms beautiful a really very as creation in the for core executing then demand we Tom. brand Jagger, and an able This brand, we're doing May advanced to that We're behind to life I'm

More to excited come the We we're will forward. about momentum move that. terms do to continue really brand we as XXXX, on in into collaborations of that but

Will Gardner

perspective? 'XX planning the And maybe business how top into just you line from a are

Rustin Welton

Yes.

in So, jump there. just Rustin. it's Will, I'll

as Scott half drive we're half, kind you as that by conservative offset international taking about front consumer think international it the the expect back kind As bit tempered to about a and fully approach US. partially growth of on by that then thinking is about more US little certainly get you of and pressure of then the halves, more by talked indicated, we're driven to half macro flipping a we growth almost as which as in back China and conditions, really his opening increasing reopens, prudently the demand in remarks,

sense halves. the a gives a bit that hopefully, of you So little of

Will Gardner

it Great. you. on. I’ll pass Thank

Scott Baxter

Will. Thanks,

Operator

you. Thank

with is Please question. Brooke Roach question next Goldman Sachs. proceed with Our your from

Brooke Roach

sales embedded maybe in reopening guide. for Good margin morning and you in and much could you've of get proportion back what's thank you I Brands country? you opportunity from What was unpack from expectations our so basis and question. reopening operating what taking in the dollar your to a wondering the the if like XXXX Kontoor as from China and were levels for normalized China

Chris Waldeck

is this Hey stores. a Brooke, the we we're brand. consumer restrictions that the where in demand clean exited through and I'll the Lee specifically for that us, like with our strong, encouraged Clearly, COVID that we headwind and it's XXXX by restrictions channels seeing is in off. had digital wasn't come Chris. there mandatory the What for brick-and-mortar inventories and there QX was kick in was brand I'm our

we're That's the be issue that elevated. challenged, most to half of remain retail be but quarter. was a we inventories expect in we just our The think first first more why the could dealing bit really

long earlier, partners. said Rustin really with We're here. closely playing we're our the game As working

But them, believe the monitor are in that with for going really long-term accretive this we half conditions to geopolitical out invest is in was the through team of business plans last region really this going continue the highly to back the growth laying and brand just there assortment week we're and for us. And Our year. the the really out there.

So opportunities we're ahead. the excited about Thanks.

Brooke Roach

much. I one could And on US the ask if so just follow-up business. Thanks

deceleration your strength realizing with back have capture that Wrangler, that right Investor in the in half of the targets market does share with Thank the outlook? US your embedded year? long-term Day of now, square Given How the can in that you. that you the you growth fit you're particularly underpin that

Tom Waldron

things co-lab KC sure you of in that investments XXth in continues. our business think advertising, we've the the from standpoint, we we're did brand what macro first Yellowstone, standpoint, from a then continued Luke Brooke, think the doing strength [ph]. Wrangler that quarter. and Wrangler and that investments done incremental in quarter to go about make some Incremental has about into you Trace, a our ahead fourth from Well, anniversary, the And Buffalo

the then our And to about marketplace. think the value brands you bring that

incredible So point at very value price is afford in trusted consumers employees times, uncertain and can multiple channels it's multiple still Wrangler our and brand, of a times easily. in a geographies, that

looking think sure our a we've at being ourselves in So marketplace but the positioned very accordingly. that to we broad and macro are set the make way well, we really and specific we plans conditions

Brooke Roach

it on. Thank much. you I'll pass very

Operator

Thank you.

with is your Williams question. Please Trading. proceed with Sam question next Our from Poser

Sam Poser

non-GAAP guidance, Good question. just my morning. that I The Thanks is handful. guidance taking a you're providing to for have confirm?

Scott Baxter

No, it is basis, on a Sam. GAAP

Sam Poser

into numbers So foreseeing now? the right adjustments that you're are there

Scott Baxter

guiding on we're why GAAP basis. That's No. a

Sam Poser

Okay.

You which sorry – your given the probably around to – at, thing XXXX. – running thing what levels, forward end weeks be best normalized the With It's inventory is probably were at XX% supply? the happened would to best XXXX, what the given that. the about best sorry look the look of in – of given

right -- weeks supply which that So because is what improvement numbers, around the like on would quarter? around forward normalized be it's of XX% from an now, my XX%, last

Rustin Welton

currently US at. – needs the of the we're sits, Sam, is, servicing as also Again, where Yeah, market. sure specific trying balancing point, into from to elevated the the we're but make right hitting think levels to the on I'm of going I with bulk you're that which reducing we're inventory not that's sitting of where in the the these guiding Tom sort inventory supply, get indicated, weeks

So we as we on XXXX. that year-on-year intend throughout to improvement continue growth to move sequential forward see that

Sam Poser

write the yours, wholesale, – retailers based fill-in to, overall And their the I were unwillingness inventory, of can't – inventory is the denim. Is of a you, this demand. the guess, they right, orders the result not that overstocked necessarily prime heavy Lee or we Are there, and on fill in pants or are with US? and in Wrangler they with in heavy

Rustin Welton

comment that of kind disconnects hit where between a his shipments. in the think really about balance, I that won't sure we're really a times But through that and come talked brands on get the and are have Scott POS consumer delivering earlier, the and bit we're I for Sam, focused in And that's making And you shipments well focused here up catch known and we're we're are indicated, POS. as specific moment. Tom as remarks, product indicated Chris Yes. little inventories. that but you in retailers' really, seeing the certainly, time, you better But POS what at that prepared and strong over POS. great value where their that remarks, sure selling on compelling making it there on the

Scott Baxter

Thanks, Sam.

Operator

you. Thank

Our is from next Please with Duffy Jim with question question. Stifel. proceed your

Jim Duffy

start, a I'm Thank to question. Sam's going with to you. follow-up

it'd very hand inventory us weak to on your levels typical relative where for be at that certainly, in we're or the inventory us thing. channel the that's where retail, US most trends inventory Just can and position something look investors, like to represent more stands POS But to you at a view? give market, important specific curious as the maybe

Scott Baxter

about is that Well, gone what really on working we I that ahead our We're very tell hard would say, you, that talked or Jim, Jim, that specifics. would we I are haven't really But contentious. published inventory. in and

here been the going last the to standpoint, of weren't full happy and upfront we've do a to about It's that we think continue company-wide from I very a down. quarters, we're been about fact been couple attack that and that. with we've getting it serious

and and allows us really they're good, I'm – perspective, you retailer a pretty know, our the from make inventory in make right? sells plan as digital and wholesale own and can and comment. But platforms in our ahead ahead things have together, good our a with place owning they're put don't doing to to react. just in good to I happy to can't control continue we we're to sure going position we're a what to customers creation So make fairly go manufacturing going But to going retail continue demand of is the we we know, with inventory. and or do to all things that is, that facilities continue inventory how owned our to and and win. standpoint, One both that go good behave business our put that we ourselves making our sure the

Rustin Welton

Jim, QX shipments. little to certainly, couple and I And points But we're that retailer inventory it's important Rustin. of focusing the And I well think do certainly, in on sell-through, a rebalancing would US took again, not of add has a out. place just call bit – QX sort chronicled. been there's

was on think important. So is year of terms but in quarter-to-quarter or in there QX the based shipments volatility sell-in, in again, QX full XXXX the and really on focusing I particularly actions, retailer

with over Wrangler So posting US XX% and up wholesale XXXX our business growth. in was XXXX, double-digit both Lee

fluctuations So have are we're our in peaked in I inventories the they that retail between POS And again, investments earlier some from near-term working. in But confident you year. and think seen brands come have strategies shipments. and where the the clearly, may down you've

Jim Duffy

retail wanted represent to of made retail presumably portion then number going back And infrastructure. with ask about will fit investments As investments in CapEx those capital greater Rustin. How recent priorities? retail. I think forward? in a Okay. behind budget Thanks of does your you've history, allocation to I With you, a

Rustin Welton

Yes.

think a $XX there. important with stores our branded Lee stores digital, moving and to investing IT remarks talked his sort bit really hitting up about full of opened continue Chris And we as think fact intend out to to million upon dual data-driven along elements the like our in continue that talked little year assumptions like of additional that I for we prepared in roll bit, in evolution additional company. CapEx some the for retail you're little Europe we that $XX a in thoughtfully about areas So to Wrangler forward, CapEx of we XXXX guide. million three Jim, the and

kind where allocation, and this times, that's think about it think the talked increase But little if quarter. optionality us I really we broader approved. you've So, critical uncertain this draw a many we I a approved really capital that important back X% of Scott you talk more out. environment. have in coming is the last the increase heard CapEx we The to certainly is and about dividend Jim, bit

the spin. repurchase activate other And in year couple $XXX since returned $XX to years million certainly, last with again. in a We two in million XXXX, And in and there. million XXXX points million $XXX returning $XXX meaningful repurchased you of last a the shareholders saw us way over shares program data share the and

allocation we've this So cash the really invest that many us about the talks to whether or the and to talked options capital I again, that's via and optionalities it the continue brands at times generation the IT, to think really which or aspects but gives for with the look of it also to digital capital we've allocation stores, continue capital share got in around dividend repurchase. model,

Scott Baxter

Jim. Thanks,

Operator

Thank you.

from question questions. Wells is next Our proceed with Gardner with Please your Will Fargo.

Will Gardner

guys. Hey

jump discuss and CapEx from year piggybacking Just around last XX%. in you some to history or more just looks kind jump the of It it's like relative is one follow-up big just to off Thanks. a as question. this color of Can give well. Jim's us

Scott Baxter

of largely with side about business of history, kind me that in our because, our to you couple this of we distribution. and back were of on X% when A plants the relative go mentioned Yeah. of things, rise CapEx around the and Will, let business certainly, kind pre-spend manufacturing

about, the in as ERP and significant going brands You invest we're with global heard the new the to days capital capabilities. the investments Kontoor spin-on implemented from Certainly, continue to talk us how system. early we

X, investments XX% retail It again, really in Chris out talked said, by to about, to we CapEx into items driven those number, XXXX. and the of capabilities. those to the from as as is Horizon start more build XX% expected we But shift starting moving

building some of stores the of IT of well new the So with out think and as side capabilities those stores as the growth about digital opening globally the the business. omnichannel on

that are health long-term right those we're of to -- continue to going to just the the investments make we're business. for again, CapEx going And

of as So gives a drivers XXXX. X sense to the of Will. bit some move hopefully, little of continues a our Thanks we that unfold here you Horizon as into

Will Gardner

you. Thank

Operator

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

Scott Baxter

thanks week. to XX And appreciate employees today. think, a your great around we say I the And soon. you I Take of in care. company. a calendar just days we now short look talking I thanks forward -- all to of our XX forward look world. everybody way, works wanted from to joining our for everyone. as Kontoor to And day really support the us to all I talking to Thanks, to you out that wanted wish and but a you great for

Operator

conference. This today's concludes

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

Kontoor Brands (KTB) 28 Feb 232022 Q4 Earnings call transcript