KTB - Earnings call transcript Q1 2024

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Operator

Greetings, and welcome to the Kontoor Brands First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce Michael Karapetian, Vice President, Corporate Development, Strategy and Investor Relations. Thank you, Michael.

You may begin.

Michael Karapetian

Thank you, operator, and welcome to Kontoor Brands' first quarter 2024 earnings conference call. will statements. call today's on make forward-looking Participants These subject actual to based on results and are current expectations uncertainties materially statements differ. are to that could cause filed These the in are documents uncertainties SEC. detailed with disclosures to read factors, and reports. We urge contained our those you in cautionary risk language other dollar news Amounts referred release issued this morning. adjusted that call we clearly be on will was to which often defined on an today's basis, in the earlier

amounts be measures be Baxter; presented release, Chair, is dollar an call on in Kontoor to tables adjusted the financial call Alkire. noted, referred on Brands' currency view which can in exclude on which today's Chief is our to news in GAAP outlook and Financial impact currency, Our rates.Joining Executive website useful will Scott These basis.Reconciliations included amounts of excluded quantify of changes at Officer, provide adjusted exchange are and items Joe found and available President, today's translation management's supplemental Chief this the foreign investors.Unless why this constant kontoorbrands.com. on of to in identify me and tables is otherwise Officer information

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

Scott Baxter

Thanks, today's to Mike, and everybody thank on call. you joining us

a unpack first, we strength will me organizational made We confidence will February, through full in guidance.I Joe the quarter, broad-based a saw gross combined step but announcements to better-than-expected gives our to start with let in raise highlights and with from March. earnings. the outlook improving are upside our with we us in but visibility our pleased start provided details, the the year. year in bit, our margin to revenue, the Compared relative

to As efficiency; part speed the growth Waldron platform; things: free last of these and commenced global on up is Tom investment project we to create increase focused we COO. appointed accelerate increase Jeanius and capacity been first, organization actions, our multi-brand profitability.As second, driving Project simplify X quarter, This to transform organization. a has multiyear have discussed best-in-class third, and

our Chief President Brands both and Global of have leadership team the joined brand during have the Chain profitability every chance You've Wrangler basis Broyles reported with drive next improvements position, points. Officer. an we EVP led 'XX, before. growth hear had year-end and return has teams Ezio, the that demand are and to drive strategic momentum our executive to who incredibly Supply expanded from go-to-market and revenue calls. Wrangler. is and role, have to leader, like by product to In success from Wrangler our talented Lee Ezio a our From Jenny me 'XX The at will creation Garciamendez team. place who new never in on and of record has at from operations.We strong and a organization, creation of and track mid-single-digit He XXX elevating Wrangler's throughout grown and Jenny for Congratulations and has a quarter. highlights I let Tom profit am over journey.Now will elevated to value CAGR amplify across EVP the to his margins commercial continues both also touch platforms leg brands the playbook confident our global to proven Tom to

with the are the Wrangler Wrangler's the and expected, is impacting term, the business winning marks denim. of grew quarter, support real according the brand. gains basis Wrangler beyond this to to eighth consecutive Circana. are we pressures our market near strength quarter of To wholesale continues proof in as momentum, global consumer.During DTC for DXC outperformance share diversify business X%, While longs point-of-sale gained XX points, and share points market of This denim the

finally, more new returns.And fact, track this performance and in into and business. year, higher ATG brand ] Utility have become strong helping and organization product us global also growth largest collaboration on bottoms, of $XXX And a insights part large more denim had Lainey the in advancing team research to categories.Outdoor penetration investments of reflecting to data-driven targeted align to successes half as allowing Chino collaborations. development and in our success the capabilities, like are a we the the great growing and collection this first creation sporting as of double-digit efficient distribution and to leading to habits outside behaviors. into capabilities is year [ example this our another later we that the are evolution consumer fall, for launches category, with buying how specialty elevating launches of based the The reads such great organization, pants Kontoor's of on are early as we which pipeline ATG track of our expanding investments history. with in have on supported is of approximately behind-the-scenes becoming the we a changing platforms demand channels now the to now is drive a are work one goods Wilson's and newer consumer outdoor new a date. million we outdoor.We Wrangler an In better cargo, generate making fastest-growing This Cliffside approximately example, is by is like is business further which is are

consumer. bring experienced official Lee softness Wrangler, brand with great Awards and our momentum of is as and throughout the at the demand the second deepen that are reaching investments We are wholesale, are denim which tightly creation STAUD fit levels. a helping consumers.Turning are building younger ACM very inventory we amplifying Similar the year where continuing connection our And events sponsor. examples at newness, are how the also These with retailers Lee. balance with successful we female while we the collaboration to together to Stagecoach, with to of the right managed in quarter,

conservatism new for reach, and X/X is of brand's our genuine And our campaigns. impacted seasonals. and distinction These men's innovations we from translating we our men's the by being on focused U.S. collection female, market. the we side, our seeing now business expanding to supported was platform heritage the share is iconic comfort. account continue in growth As with platforms point-of-sale. said, discussed consumer.On This our shoots and rider on quarter, innovation the advance to younger green within our at platforms by gains female last also That business are equity while and

in us During as increased XX several and U.S. measured X%, share market ahead, denim that give longs quarter, the Circana.Looking POS gained initiatives confidence. have the by we in basis points,

improving our are development enabling First, expansion. category product capabilities

the Our Lee been the has in Golf for launches range success innovative year are male growth quarter tops a broad fabrications story great is of business double-digit a that appealing and track with strong on deliver second consumers. to to

crosses developing. the foundational sharper of bottoms Lee will last performance.And this elite potential non-denim excited office work tops growing comfort second the this and years. launch This category, innovation aesthetic. with with in we focus are new This in be to getting year at significant Lee's about simply does platform outdoor this we We is and multi-brand are positioning significant getting is of part in of brand most the that and denim as that but will and part a addition half not the our are combines true not later pipeline our platform x world-class a marketplace. a price evolution.Second, for point of exist level the level least, the for year is

are and development. with refreshed consumer conducting assessment ensure to We our end-to-end an brand segmentation, investments product alignment

spoke this the years turn ahead.Before pay Joe, to me the the both in significant balance We on brands. improved dividends Since I with for it year. close in February, of will has are over point-of-sale a perspective let we confident

We to gross our channel gain wholesale The expansion exceeded expectations. margin balance have found has and continued better share.

prior to We than we in generate XX% inventory levels.Combined working operations our from million with more progress the our $XXX position, down year. also quarter ending profitability, further expect now this made better-than-expected below cash year

As including planning during fourth $XX to improve, our start term, a share in under authorization.Longer repurchases optionality capital million allowing us expected underway with result, the quarter, million quarter. is in shareholders to well Jeanius Project million allocation continues $XXX our the to $XX new to return impacts

an will We are have to environment of of million a higher end profitability structurally the drive the run our position. annualized of That growth of time.While over which we sight capacity line none to million in to operating investment our ceiling, remains significantly from increasing raise dynamic, guidance. the our $XXX near-term savings, offensive are profitable more included rate while $XX

drive the the to off have on to better-than-expected strong I for are balance and path stakeholders. a all a visibility we am value are Joe? improving start to creation year. We confident of

Joseph Alkire

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

Let providing quarter me late provided on in outlook February. first we by start relative results to our perspective the

stronger were than earnings by revenue, gross higher cash expected, driven and results margin, flow. Our

gains to driven continue levels modestly than at share stronger largest inventory and lower combined costs with in our mainly retail in And points product brands and Overall, expansion repurchases by the $XX to market when margin further favorable the drive the was through evidenced late inventory Our distribution of expected, and we're optionality, improved POS to more capital and mix. quarter.Gross share cash the of detail. reductions as supported and unpack year.Let's with in returned the million our in generation pleased by robust quarter. start cash allocation shareholders quarter dividends

sell-through strengthened, improved we a modestly better and sell-in quarter, at as as First, replenishment balance order saw we between inventory levels patterns the POS normalized. retail and and progressed through

in as to assume we recall, conservatively. either inventory outlook, we POS you or If business the levels improvement plan continue an did not in our

drove expectations benefits were costs gross the impact of realized our impact exceeded from and margin will the by assumptions, the to of our expectations from results which and in the expansion timing to quarter.Second, quarter. driven Relative is revenue structural meaningfully So mix. related pricing, above these the margin begin we and our the in our second lower upside majority majority a more also gross smaller-than-expected product

now has in and XX.X% in continued profitability XX gross through working cash visibility drive and improved margin year to including margin inventory. improved to ago, we decline our capital, reductions high strong gross full generation XX% net Our reached match of to our adjusted a relative we expect in previous days XXXX.Lastly,

and in higher through driving excess through working rates supply demand improvements opportunistically inventory supply are efficient fill execution chain and matching. our more We

in visibility, year, based outlook.I'll on take better-than-expected full quarter growth revenue outlook planning Starting offset growth Global We X% additional by continue primarily approach a X%. of flow earnings a conservative but Retailer continue digital improved The term. our U.S. gross management in first, in review cash XX% by updated the with actions deeper to dive first details margin, decline results impact and wholesale, decreased into our our to the moment, inventory but brick-and-mortar. near quarter and in the raising was Wrangler. DTC, growth first let's results. and to driven we are including business our year

However, and POS, underlying brand evidenced ongoing by strong, improving remains momentum DTC market strength. share gains as

new success by and the the capabilities brand's reach we in more new to in continues product as our than momentum diversifying is scale, Nowhere development business, ATG, Outdoor evident led into advance categories.Wrangler's consumers.

macro X%. expect global International at due Wrangler in bottoms. decreased year. to the remains rate XX% During grew non-denim grow is we denim challenging non-denim Wrangler And a bottoms pressure XX%. now revenue and business European this under including the business, outside to Outdoor wholesale Wrangler quarter, outdoor, categories tops digit the first conditions. of of mid-single Nearly

However, our this digital X%. stores DTC in platform.Turning revenue by supported owned was growth, decreased Lee, investments and global to offset by partially double-digit

the impacted having As in brand above expanding quarter. our expectations.Similar negatively business the expected, Lee U.S. beyond a said, particularly reduced denim, in Lee tops. to was and Wrangler, for is shipments the revenue That wholesale decline seasonal in success

tops quarter, comprise over business. of the XX% XX% the grew During now total and

of for in the and the further growth uneven, strong our work balance declined revenue continue market the Europe, of and by expect quality network. to to X%, remains In pressure. ongoing macro international In year.Lee We retail decreased the recovery as X%, these improve health X%. driven revenue declined we revenue categories APAC,

product anticipate went lower earnings initial We partially growth Inventory $XXX gross were the full lower disciplined adjusted in and $XXX to decline. to intensely of XXX share with mix XX% quarter.Relative drive effect we in from of greater-than-expected our million exceeding DTC on demand lower management to to to our our continue of year.Now margin. And enhanced the gross impact to expectations XXX growth prior $X.XX, and to to compared partially first million points freight. consistent net $XXX decreased points.Adjusted in was which in to million net the This Adjusted for approximately balance creation, by offset costs addition was turning smaller-than-expected resulting basis sheet. debt per working cash supplement adjusted from $XXX input capital remain distribution driven XX% in expenses allocation a million. expectations, by by and capital expanded focused late framework.We in a the our was and long-term on pricing basis offset of and year.Turning favorability and Investments actions, of less in quarter earnings improving finished the operating support margin XX.X% saw or of cash strong debt benefits by technology cash generation hand. We with into channel SG&A pricing, gross APAC expense the targeted costs. margin mix expectations our

by X.Xx adjusted divided regular current our under targeted Our $X.XX share. previously debt the dividend quarter, quarterly of net as our cash within $XX a stock net XX-month Board authorization, million our range.During announced, trailing our of we was leverage EBITDA declared and ratio, repurchased per

still trailing to on basis, billion, to Finally, of X% be XX%.Now reflecting range a in decrease our Revenue our increase an $X.XX is invested expected X%. of $X.XX capital a return of turning billion was to on adjusted to outlook. the XX-month

We and retail POS Retailers us. in and saw we the year a how the better-than-expected by the remains year? pressure the about in as the posture, on conservative remainder we year consumer, globe. under continue are to business at conservatively the we environment, thinking resilient, and still of our improvement of are levels plan the both cautious across inventory we quarter.So of the first ahead remain First, the are majority encouraged the to the while start with around

platform, We second new year. expansion distribution robust in half businesses, the creation positions continue growth as platforms POS digital improvement and expect reflecting of in gains, visibility our the product and to our in And for segmentation the improved including to in well inventory investments demand expansion or more balance innovation ongoing as we overall retail of DTC a tops business, we pipeline. our the have good assume no category of outdoor year.Second, and meaningful

to Taken half decline we mid-single-digit the together, to anticipate continue in the followed revenue a first second at growth mid-single-digit of half by rate, year.

stronger outlook year-to-go period.Moving growth gross to on from improved quarter, of approximately are for X% our Beyond first and we we margin. the revenue approximately first Based expect visibility, to range the our XX.X% our of quarter results XX.X%. raising prior XX.X% to

outlook basis adjusted the expansion basis XX.X% updated more represents out-of-period XXX to compared assumptions. margin increase an excluding In previous of the XXXX, now points Our charge. gross our basis anticipate of margin than of we of points half first margin year, outlook than in compared more XXX the outlook points.Our gross the gross includes XXX with duty of following

basis the from to to term, This XX XX year. we scale First, to on continue, we expect approximately the points DTC structural as mix. contribute continue points with drivers on fourth to visibility basis costs we full expected costs benefits we Longer sourced the and is benefit will of good and on the quarter manufacturing international.Second, mix have third into into product. input of locked to quarter the

ability points costs.And to of over for XXX we these point. supported our the impact year time, in inputs our increase details high is benefit Sea. visibility disruption finally, balance Red proactive X our but lower And assume have the from footprint, actions from anticipate pricing by has on when chain year Jeanius, Our in and at our basis to that a expansion additional by coming promotions I combined modest gross the with share we'll expectations beyond less optimize from low Collectively, drive the to negatively supply the the previous to expected over margin Project improved. the confidence for are margin lower expected headwind to mid-single-digit rate. still product than quarters.SG&A of we a

income We our the $X.XX. expected as Full to X% from and from to now This technology, previous $X.XX $XXX $XXX XX% prior we to about in make to opening In excluding duty will $XXX stronger year, the of is compares prior in $XXX now growth.Finally, prior EPS to operations expect is our development compared of platforms million.Before to This of X outlook approximately tax ability our prior from higher to a expansion to deliver result questions, outlook growth million.EPS the as DTC negatively to like cash XX% to rate impacted outlook to cash to X% growth. reflecting prior the compared range mid-single-digit of duty reiterate out-of-period representing range capabilities to by the expected previous in now and excluding million, $X.XX, growth expected charge. be in increase our percentage of expect have growing million compares operations to our exceed compares approximately million, EPS I'd be compared our a support a half is now exceed creation, $X.XX, the EPS levels. with up quarter, This will the of at as growth XXXX $XXX for EPS second it outlook to EPS year points $X.XX objectives. to primarily adjusted rate.First million we product consistent earnings charge. confidence our well we of for demand to of year continue innovation category range plans.Operating of $XXX be year, in representing the to to investments X% to to

of optionality. our continue profile to share generate accelerating, track fundamental are strong sheet, from in We the us business cash significant market the and off allocation operations start on with which are drive are our winning this to considerable to year, better-than-expected and gains.We combined with brands the provides balance a year. marketplace The to is capital

We confident of for a our are in strength, I turn I our and position to superior am the remarks, operator. now will returns all stakeholders.This concludes operating and from to prepared our deliver back call commitment

Operator

Instructions] with Our [Operator from first Stifel. Duffy line come the questions of Jim

Jim Duffy

margin parts. I your like pardon asking the more further here. to evolved in a morning. my and voice, revenue but saw was the full late on upside quarter POS just I to through of you and increase a wanted gross It the the perspective March, for start year doesn't quarter, revenue has there better the fraction fighting and improvement retailer Good since are some came on by wanted in moving and inventories start, in year the pass sounds a thoughts the earnings cold QX how upside. February, for earnings

So seeing QX cautious you're and that's more I'm from making half you partners the channel there something back the is curious, on year? of hearing or

Joseph Alkire

want Jim, the provide I'll to and Hey, Joe. environment. morning. then thoughts It's good may some Scott start, on

So in outlook customers $XX largely driven This major yes, beat the was POS March. driven by largely by retail our U.S. improved we the inventory QX. beat levels and approximately million, at in We by

a are actions the in the which is behind costs quarter in We've QX the drove the year That a now, the business the distribution the standpoint, being just But business mainly balance driven assumption the our got visibility. our balance gross of got XXX year I'd across new the confident.And we're From of outlook for light nothing raised a again, perspective, in we majority this based for gains. planning increased in margin to plan.Look, good revenue full from we've positioned largely, accelerate of impact year bigger pricing overall our original We of conservatively product quarter.From here, a was largely So the that expectations environment. us also in by my gross year. lower the as programs the the versus highly upside February, year, basis we result fundamentals to environment QX. from the we visibility we're raised into for the by from the our toughest delay which first margin stronger-than-expected the cautious said modestly the half, balance and small implementing, as say year of points. we're standpoint, seeing and a we're outlook, the and on due that improvements an on full the above about increased of

Scott Baxter

add rest from Really better balance little would bit Jim, just in than an the got big some little And the QX. we a well a I customers that pretty bit that through and We year. good. worked from we've it thought about. Joe channel about our category that we're for programs environment, do both itself that that nice inventory standpoint modestly We mentioned, of excited talked remain optimistic the have

go but forward. hit a I make that So ahead we bit conservative, going our want sure little to and commitments

Jim Duffy

Joe, A this Can guide, good couple the really on year progress the of QX of flow inventory in related you about the operations context was questions guide. meaningful. reduction in cash inventories. speak the full the from in

if the reinvestment increased that I'm give headwinds you curious later flow ops Is us by year?And seasonals categories some behind from just you? -- Are have cash million. about on normalized? business assume seasonals also update the Does could You in an the headwind the those those business. in $XX from then, inventory

Joseph Alkire

the Yes, seasonal. can Jim Scott I'll start and with inventory, take

inventory progress. an from standpoint, good yes, So really

decline. quarter largest year-over-year The be will our first

minus I day as be about in we year, to XXX balance sheet. be into somewhere say whole, of pretty inventory. we XXX cash But the contributing state is year, as Jim, for range. continues to our growth declines much a some steady flow. that the for grows of days expect that for This plus But on inflects have the in balance would will will the double-digit inventory ] in inventory yes, lean cash.Overall, [ to a -- We somewhere or back second the contributor range. the us half, still low the the

still balance to is feel of terms considerable a that core. good point. in we'll But in amount inventory, still we at that release some somewhere cash there's XX% pretty sheet XX% the on of composition range So our of

is shape. in good inventory the So

Scott Baxter

this XX-plus cool riding and seasonal on the part of But It's weather down Then area of and we Jim, sudden, little here and right typical. patterns After now. play geographies, comments wave seen position. this a like and this really our bit and couple really this all We a of product little think our we up We've hot was distribution. hot very no of cool and We've yesterday, And like before, this seasonals. of and supposed that all a because got it's of are We the weekend, been a geography where to just so in years kinds before. just bother get the like at year. us. good our we're really beginning spot. it a really We season issues. doesn't really through

Operator

Partners. the questions Guggenheim next Our from with Bob of line come Drbul

Robert Drbul

New Scott, And XX in today. York

So finally. it's happening

Scott Baxter

it There is. it There is.

Robert Drbul

I there's the optimism about lot around. talk category focus And to expand about. should Which we think just [ sort just structural the how have should a are growth -- couple would of and like needle them you talk and bit things when one most more and be which talked of up, you movers really that ] like on you then That just you ones on have guys a really be you size that? of about new the that helpful. I'd a organizational about Can focused just on? expansion. you're we Can a So making lot changes

Scott Baxter

finished clone XX and COO we structure, we X if for -- successful after the we that of versus spun And want years, weren't at things remembers and slowed things Sure. to and you.But have down ERP model together a quick being and it did we want that did, where have the it decided have everyone many but down this the that go plan to you exact kind of ahead be. gotten questions. to what where we a months, probably decided we a and as we Thanks, of through, and our when and to then so exactly and it go sooner to would be. we're and needed what the was for do had company position off when part you be We it need Bob, we do was to in place, you spin-off same know work but growth always we pandemic, lot you to a and to have

we to structure in needed the our in done Jeanius, Wrangler. time our has the and COO this and had finished with put streamlines of And a be So Tom place we decision rolled ERP, team successful.So tremendous making, the it to in was what Project he's success out success in success. putting the role perfect Tom organizational breeds amount

that done exceptional And to X chain excited really supply elevated we're our the put So ago, Tom position. operational in job about piece has then years too, piece, took Tom there. and an

Jeanius part standpoint. has want be. think, to the So us moves our I a instrumental we're decision-making those, from more combining to been our in organization moving doing It's It faster. of much we what success.So now is streamlined. It's

one though, to Wrangler is lead right?They from do they to go-to-market though, and fact we back-end what at come a are we point, collectively a standpoint. really that the team have But I want synergy we X funnels really, a also that it's team standpoint, to separate combine savings but some think make But a that happens, everybody a standpoint, back cost helpful. piece Tom. up together teams, and standpoint go-to-market up that end, have I does from on Tom a thing we is that realize, the from the go-to-market have that sure separate funnel that and

at standpoint, million, significant things part of want accelerators, it, our $XXX in getting a from kind you out and better. years, thinking learn the we're and all new to of in more you you project lot but the accelerator outdoor, background how smarter that's tees. which yes, to the the last at outdoor outdoor [ that's a Jeanius ]. ones a the like really still and the talent, from category some you are and And be But we going spun, and although to about about about it with go product gone categories product us.We're who time, a we and So an We work there it, think learn we in last and in is definitely entered few in X hired we better to over like we we've our way, work.And been some your we've coming then years. million for we've When were just entered work entered outdoor we here to consumer, about, looks talking and degree. talked market entered and that we about $XXX

I feel really, that. And been really So good really has business tee our about nicely. accelerating

about think now, we a those So is us. little bumpy for work X.Right

So that we to we tailwinds still just for it that the through love it's structural that work in place but long we're that for going a It's needs term, us, think a business big And we'll as for get that to already. be, company a is and be channel in to us. continue and channel. that real got a it

that's we about focus I those from excited enter. newer kind that we're of would too. emphasis where So that, and But categories

Operator

Sachs. Roach next from the come questions with Our line Brooke Goldman of

Brooke Roach

but Western as the for on customers? a you today, that pricing of could hoping put on the market. view been growth outlook the the April denim are your have you've and of And lot give any business the cultural you have optimism non-denim accelerating I you POS, place seeing some recent talked changes health new of was Scott, of a you and result Have recent that in the us categories at of benefit from about the the seen growth key moments. U.S. your in some

Scott Baxter

question. the Yes. Brooke, for thanks question. No

us, is critically We been has business the denim to it's And our we important in the world. obviously, call core and business. we in significant of that see casualization fashion, and it fashion, a have

the that into globe. of happened. like right to. casual. then to went things they probably said people in to used around way People or stayed perfect dress normal, and fit continuing we And be the just casual that a we'll was really the never One through It casualization was that out, interesting we we through went that really when people pandemic. And this came return we when

feel coming here with half in big some about we've we the talked categories exciting our the core a So then new good is distribution about. even that which that.And for of do really year, retailer denim second we pretty have

Western, that you we've and first and about remind I then really great one a think try is been that couple on MWZXX. the and And the when you things.And Western. trend that go since been jean, our So working thing to time, we've always when people those brought X for to a long Western are out loving cowboy we we XXXX

about the think the you think about about you you tops. the think you Western, and thing cowboy, about that mountains, think If Wrangler about lifestyle, think first Wrangler you jeans is

a years just to So ] are in business, for and time this really the to it that grow, to now, what it now many what been little is nice.And country. bit have a us it's that the and interesting, but first And really we -- think for a Europe which as it's stands and so it's part the of for some [ interesting that, hit for people Western it is we spiritual starting continues us. part for long of stood I piece did time, ago, really many, West huge many, be a too, for, and

we'll shoots Miranda the out happens products that don't So here market in that's new we we're ] some Lambert over in enthusiastic about our we about [ jeans to everybody song seeing new just Western debuting in came or respect I know that business, and green saw the European if heard and to today. Wrangler bring But what there. continue area.But see are

I winningest Award think the ACM all-time Miranda ever. and winner is

things that as a interesting completely when happen, you us, pretty and And show for Wrangler organic goes to just people it business, it's like that that about they company. they're think first. about So think Western

Joseph Alkire

specifically, continued versus the little QX. But April on reflected April ] our just into month. saw did dramatic, Brooke, [ that It Now, here, a little That's course outlook. a first in QX. Nothing was of softened all that's of couple the nothing sequentially us. and it over of POS concerns days actually bit May the softer we improve than

Brooke Roach

weaker continues was Great. that And little up appears on just we I you would expected. Europe wondering have international. be wholesale provided than and for to in those forecasting relative could It a if if I Asia could follow DTC to you the for both in the remainder February. your are markets Europe outlook and growth discuss in year? What of for wholesale

Scott Baxter

a down, and to it that that ahead I'll kick folks. and yes, here business economy lumpy. kind we've go But up Brooke, then lot you're right. pick start Yes. bit over We're of riding been of little is over other like to there time. Joe. hopeful that, and certainly up still Europe is and a starts The

that and work new really there. some from ahead our our we got help still And resonating under is that global development standpoint, are accelerate significant way, We things person. beneficial.Our pretty go in product good the Jeanius team should one as Project seeing product a ground on a are and we've a global

happens do to throughout think the do to in need truly, steam we're than the but 'XX. improve, economy that, I optimism, the and we up some going strengthens year. So it's more 'XX pick and have see that But bit we in a hopeful of little rest

Joseph Alkire

Yes.

we of terms and just planned I we plan, point Europe came made in both through earlier, little a actually pretty this to than better conservatively. Just the the Again, year, our QX business Asia. Brooke,

we're be will So no real the Europe thinking how in about change Asia. than terms tougher of business.

growth full half. pretty single-digit you've regions the we that, much Within which from to from Asia, stronger seen a DXC, expect range expect second basis, still consistently. more growth in on that stronger in we both high year mid

Operator

come questions from next line Our of the with Serna Mauricio UBS.

Mauricio Serna Vega

on some terms is understand, full And margin the like QX? guidance?Second, just in to in again, gross mentioned contribution launch expansion explanation could the much outlook -- wasn't to if or just the and guidance like being through you the I similar gains in that's any that second the contribute the guidance, in case, think distribution sales wanted provide shift that, really flown you you do there roughly sales confirm year on sales from new from like denim, sales like that QX, growth? shipments from you're not the Wrangler to if that year to beat, on maybe QX the why from thinking Yes. QX full to first kind to getting of type what or could bridge sales of your half interested of channel of like particularly how the much how about

Joseph Alkire

Hey, Joe. Mauricio, it's start. I'll

specifically, first the the we kept guidance on it half So same.

We bit say full a first we're a just the the just no real given for no change change. outlook at least or but change. no little year. revenue So half environment, cautious I'd being raised standpoint, from real

[ assume gains, as not top to any is improvement either held POS year continue DTC really expansion, the or on down levels We back half trends the inventory any assume retail.We we the X% X% real line the or all China. to up and category ] well, growth in improvement in in non-comp at distribution

there's So to from for really line quarters, some the full significant top a year. the been our year. There's no standpoint, nothing the context the change between of movement outlook but in

Mauricio Serna Vega

And in but mentioned quarter. more what didn't saw any China a little that And you it. this talk I [ a you just you see the bit about release, Could then Got maybe usually, ] quick on comments the think year, meaningful shareholders, return also should think have about with the and dividends this repurchases. optionality share in we generation we you of how flow should for that cash of terms to how in like terms about follow-up.

Scott Baxter

to standpoint, and partners Scott. a and I our there. thankful them our job our to to work -- very inventory, want which team for an clean did we From this, ahead start. spend they it's be but Mauricio, 'XX really outstanding to some China time I'll up with Hey, and go took

levels little that China than really everybody slower think came else. does, of Because if remember, appreciate out a clean. really you bit So inventory I get everybody and the pandemic

of of these issues, we go inventory as of kind it. a they're So kind tailwind through

nice really of engaged needed did resource be fleet it's over a and Teams there in the and years, about there.Now work XX% a done. over significant that is We we're X lot in So and there, we're there. work fairly of work but in that. done about insight which lot our going work refreshing really to heavily next good work

the of speaking newer that and So live a consumer we're a start thinking really forward.Some which in we're process powerful to really interesting and really really, become going we're place, that streaming from over speech there, as things good standpoint. have the into leaning the about we platforms,

where consumer that migrated has that's kind So a of bit.

great would very what doing it, little And doing.But really a just of 'XX we 'XX. product we're some there I bit that way then tackling time So Mauricio, now, things where say, difficult little we doing and bit those blocking back we're are we right and like some a of the of building that a as through there are come and in and is do.

a in. allocation the there.And front kick us. So start well. look creating go forward then cash. We're to fabulous of be it to and options We've position over of got future in doing cap to is I'll ahead The lot business Joe. is and It a

Maybe M&A. we standpoint, you. we From I on comments it And M&A an paydown to something not that we look new You really a that surprise in want we to significant a do to our ahead said investing to before, we're position $XXX the do a under have make quarter would few fast payback. of this went very, can that. we're Anything very you dividend anything a -- said this we're back do ] stock businesses.If pay, get. going million I dividend, saw and back very it and we we would would addition $XX program immediately look of our and I've in that [ do million accretive, M&A, we years, for in do, bought that good we for

we're prudent.Listen, environment, we're in the what's a difficulty on not best too, to that position. good the count for about in we're in position now, There's there's serious sector, very a really we So continue that making and really right sure in do in We're of And strength. our difficulty that we're stakeholders. but shareholders position.

of So things from is strength, we look position at can really which important. a also

and ahead shareholders.Joe, So gone done we add? company. far as the we've good cash it we and we're job, as And we've as anything really how about that giving are the a back to prudent a really to where feel generating,

Joseph Alkire

to Yes, repo share you've time, committed M&A. We're prioritize Mauricio, and are standpoint, unchanged. the and to from growing dividend in I over reinvesting the first. would then business got a say the priority priorities want We

accelerating. in stock million stronger. repurchased We the $XX quarter. $XX outlook. sheet is of repurchased the Our cash The first flow million It's is We in raised We strong. the quarter. fourth balance

our So plan. opportunity more an we're strategic to stay active, for as environment to disciplined. do is M&A it's We us, we're capital like you We putting think but work.The know. going

invest And say I'd so, the Kontoor today. relative high bar in can to is we where

and flexibility further again, supports given lot position just forward. in Jeanius Project going optionality our a of So we're the

Operator

Our Paribas. next of BNP line with the come from Vasilescu Laurent questions

Laurent Vasilescu

the for and I China. how And to out Last great. quarter that I year? are follow accelerate. up China for Curious to expecting on in performed on be question Mauricio's quarter, fourth China grew to the know China quarter wanted called [ China still will believe] this year-over-year? you the transcript actually XX% That accelerate throughout would would

Joseph Alkire

Yes. Joe. Hey, Yes. it's Laurent,

a in double-digit little for was little year. of increased Digital tougher. rate. full down growth a was bit quarter. still the our expect a China So Brick-and-mortar the was first a ahead little We plan. It at

year health As you normalized inventory, presence a versus the to continue larger standpoint a trends a we our quarter. on pretty improving levels of work in and know, were and at traffic partners. from difficult just ago. more we're the levels are back I'd retail improved in and market has Inventory much brick-and-mortar say Lee the of retail much quality

change. a pretty for So It us no real opportunity remains significant term. long

Laurent Vasilescu

out, then next what $X.XX color income? the audience should over to so we quarter of little adjustments manufacturing network. bit the internal production adjustments. can to transferring The more your call provide ask and get wanted GAAP footnotes assume about Very roughly means? you Joe. helpful, within the per And Maybe a could selection I XQ quarters, this And streamlining we model X the net to

Joseph Alkire

into have margin Laurent, costs I'd Hey, quarter, quarter on spillover That the the Mexico. our we the of charge quarter I'd appropriately, we Jeanius to supply quarter, costs forward, last minimal, as onetime activate going some we'll be last so outside and Yes. and fourth you majority in exiting in say first over of a the couple say any. which on if it our gross was related.As really in first or of a Jeanius consolidating was quarter disclosed the Project restructuring saw related were But manufacturing yes, quarters. the from the impact disclose line next more to pretty the we'll bit took chain. that expect program, cost we onetime I'd of little Nicaragua what highlighted of the onetime

business should to the much you forward. So for cleaner start see going picture a

Operator

come the Will from Our with line next questions of Gaertner Wells Fargo.

Frederick Gaertner

sustainable talk So the you is the impact product past think want how to costs, I year? lower just about that I this parsed this out year.

Just -- a maybe those lower costs? what's talk lap costs product product little you those bit about once to happen going

Joseph Alkire

Will. Hi, Yes.

loaded for half from product half. than So we costs. benefit points lower more back That's front basis about year said XXX the

But we the our a As get margin for over expansion. basis outlook the to implies those. half gross start whole, XXX to lap second points of we'll as quarter, fourth

for That basis we to But think over XX evolving going that XXXX.I'd points do which supply more pricing, come additional us. the change no else, us have reason next that's layer on model for for few our in think I'd algorithm say would points structural you somewhere Project that just there's have that XX chain. will is on but say side, we basis the mix, historically. to forward, forward. about margin as just That's the quarters. And time, neutralize to gross some say So we been our structural as gross we that cost, I'd over think range. margin tends basically everything FX opportunity on why Jeanius, about going our

Frederick Gaertner

category what's is with driving new driven maybe talk getting expansion? bit retailers? a this new just is about you space selling And core Or that? I -- Or into what by share Are Great. gains, more shelf existing the little it you at product? doors retailers? mean, Are

Scott Baxter

what's great this Hi, tell Scott. Yes. a I'll product. is you exactly Will, doing Will,

the Lainey STAUD fantastic that you those and combine collaboration with new want. we're Wilson Lots and that what's It's -- things to designing going our just continued, new we've adding company. a and a really team building Our enthusiasm of is exciting brands, at doing, consumer that's time. driving products it's things both just product And just brand. our on great that about here of that like consumers excitement our and our collection, to just lots

again, a it's So I simple to back formula. fairly go it,

really You great product. build

well. really it market You

a product We well. and You It's your sell fair people great our price, our love combination treat a a consumers us. brands. very for lot value at of really

Frederick Gaertner

expanding of a more you So Or existing is little you it more just into it bit -- kind Can color new doors? sellers? give are is there?

Scott Baxter

that our into about, half for this expanded the a then is of we're little have we've going customers. We've and part of have that reason year, second Sure. existing retailers in Yes. new revenue, And bit to that sure. the we business new both talked customers do and some also in at acceleration new which at a some little happening is

of like earlier, And and and some are working we about outdoor new too. really they're new tees up that our areas distribution, talked picking

a is it So of of combination those. all

Operator

Paul Our Barclays. the line questions come with Kearney next of from

Paul Kearney

think half longer spend answered, Most should making the the talk line? innovation and can term Where investments been we them of that you maybe on about back how marketing? but for allocating have are launches? channel the about SG&A you you're And

Scott Baxter

to of spin, that. we've going But on Paul. good do think We've how since marketing a been important have very our actually the I and we nice We -- really morning, forward. done job intelligent job done nice done we've thing a is most accelerating really spend that the continue

golf wasn't before. how also average consumer. playing really our that's found let our here long And of through is consumer ERP consumer give new we consumer recently, things the great really Wrangler here than male ago that one me When that our and both out you example build to groups worked.We which focus. very it insights an think us of us ahead for and go and that's Lee out built system, a robust new Lee, the not gave opportunity new our group been insights I our important watching for insights more really is consumer

already. kicked market in went with golf we the to pant it marketplace, way. opportunities ahead ERP system forward. went example looking and the we're consumer a been our off nice it's that's and of utilizing these short, really and how performance actually and going a with a pleased different really great We've kicked that So Lee But new investing in new just insights off the of at in and

Operator

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

Scott Baxter

and you thank appreciate forward just wanted for for a all and base we'll participation our and about in July company up you certainly you mid-summer your have thank Folks, about beginning wonderful in touch everything summer. in of to But to the our thank you your today. and soon. interest today, and again, with we on for talk date to talked to getting progress you we'll look And I that, questions, your you and

Operator

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

disconnect may day. time. rest You your this at Enjoy of the

Kontoor Brands (KTB) 2 May 242024 Q1 Earnings call transcript