What Happened?
Shares of clothing company Kontoor Brands (NYSE:KTB) jumped 16% in the morning session after the company reported a "beat and raise quarter." Third-quarter results blew past analysts' EBITDA and EPS expectations. Looking ahead, it raised its full-year EPS outlook. On the other hand, its full-year revenue guidance was underwhelming. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes.
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What The Market Is Telling Us
Kontoor Brands’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. Moves this big are rare for Kontoor Brands and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock dropped 14.9% on the news that the company reported fourth-quarter results that missed analysts' revenue and EPS expectations. The topline growth continued to decline in absolute terms. The company called out the challenging U.S. wholesale environment as retailers were conservative with their inventory management due to uncertain consumer spending patterns. Similarly, its full-year revenue guidance missed. To improve its financial profile amidst a challenging demand landscape, the company introduced Project Jeanius, aimed at delivering between $50 million and $100 million in gross profit improvement and SG&A savings, with a portion to be reinvestment in growth projects. Overall, this was a mediocre quarter for Kontoor Brands.
Kontoor Brands is up 40.8% since the beginning of the year, and at $86.85 per share, has set a new 52-week high. Investors who bought $1,000 worth of Kontoor Brands’s shares 5 years ago would now be looking at an investment worth $2,286.
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