Kontoor Brands Inc. (KTB, Financial) released its first-quarter earnings results before the market opened on May 6. The denim company that owns the Wrangler and Lee brands posted earnings and revenue beats.
By the numbers
The company posted first-quarter adjusted earnings per share of $1.43 compared to adjusted EPS of 27 cents in the year-ago period. Analysts had forecasted adjusted EPS of 87 cents. Revenue increased 29% year-over-year to $652 million and exceeded analysts' expectations of $605.9 million.
Reflecting on the company's performance, President and CEO Scott Baxter said:
"We started 2021 with solid momentum, as our first quarter results came in above our expectations. The strong performance in the quarter was broad-based, as evidenced by improving growth across regions, channels and categories. We continue to execute the strategic playbook we've communicated, as structural margin gains support focused investments in demand creation, infrastructure and technologies. These critical investments are driving accelerating fundamentals that are expected to unlock further value for all KTB stakeholders," said Scott Baxter, President and Chief Executive Officer, Kontoor Brands."
Kontoor exited the quarter with $230 million in cash and cash equivalents and long-term debt of roughly $800 million.
How did Wrangler and Lee fare?
On the global front, Wrangler recorded revenue of $399 million, which reflected a growth of 31% from the same period last year. Likewise, revenue jumped 38% in the U.S., driven by both the strength in the digital channel and growth in the wholesale and western businesses. This was only partially negated by planned removal or reduction of non-core programs. Wrangler's profit skyrocketed 148% to $83.98 million. This was more than the $33.86 million reported in the year-ago quarter.
The Lee brand, which is densely distributed in China, saw revenue increase from $182.8 million in the previous year to $250.1 million. Segment profit amounted to $51.1 million, up from 0.97 million reported last year.
As a precautionary measure against the Coronavirus, Kontoor shut down all company-owned and operated stores in North America and Europe last year. This included Lee Wrangler outlets, Lee Wrangler Clearance Centers and Wrangler Hometown studio stores. In China, however, the company has resumed operations with all the owned and partnered physical stores reopened.
Outlook
The global lifestyle apparel company has provided 2021 outlook. The company expects revenue to rise in the low teens range, while adjusted EPS is expected to be between $3.70 and $3.80. Capital spending guidance is around $40 million to $50 million, which includes expenditure to the tune of $25 million to $30 million associated with the implementation of Kontoor's new global ERP system. The effective income tax rate is projected to be roughly 22%.
Disclosure: I do not hold any positions in the stocks mentioned.
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