Kontoor Brands’ third quarter saw revenue growth in line with Wall Street expectations, but the market responded negatively, reflecting investor concerns about profitability and cost headwinds. Management attributed the quarter’s results to strong contributions from Helly Hansen, ongoing market share gains for Wrangler, and proactive steps to address challenges in the Lee segment, particularly in China. CEO Scott Baxter noted, “Our third quarter results highlight the power of our expanded brand portfolio,” while acknowledging that lower operating margins and a shift in shipment timing affected the overall performance.
Is now the time to buy KTB? Find out in our full research report (it’s free for active Edge members).
Kontoor Brands (KTB) Q3 CY2025 Highlights:
- Revenue: $853.2 million vs analyst estimates of $857.1 million (27.3% year-on-year growth, in line)
- Adjusted EPS: $1.44 vs analyst estimates of $1.40 (3.2% beat)
- Adjusted EBITDA: $134.3 million vs analyst estimates of $125.4 million (15.7% margin, 7.1% beat)
- The company reconfirmed its revenue guidance for the full year of $3.11 billion at the midpoint
- Management slightly raised its full-year Adjusted EPS guidance to $5.50 at the midpoint
- Operating Margin: 7.5%, down from 14.7% in the same quarter last year
- Constant Currency Revenue rose 27% year on year (2% in the same quarter last year)
- Market Capitalization: $4.01 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Kontoor Brands’s Q3 Earnings Call
- Irwin Boruchow (Wells Fargo) sought details on the impact of shipment timing shifts at Wrangler; CFO Joseph Alkire explained that demand was solid but order flow moved into Q4, with October organic growth running slightly ahead of plan.
- Robert Drbul (BTIG) asked about pricing actions and competitive dynamics; Alkire said pricing strategies were coordinated with retail partners to address tariffs, and CEO Baxter added the brands remain competitively positioned across markets.
- Jonathan Komp (Baird) questioned the confidence behind organic revenue growth guidance and inventory planning. Baxter emphasized broad-based brand strength and digital momentum, while Alkire described inventory increases as temporary and linked to supply chain transformation.
- Brooke Roach (Goldman Sachs) inquired about Project Jeanius savings realization; Alkire stated $50 million in gross savings are embedded in 2025 expectations, with full run-rate savings expected in 2026 and a portion reinvested.
- Laurent Vasilescu (BNP Paribas) pressed for clarity on Lee’s path to growth and the timing of synergy realization. Baxter and Alkire suggested Lee may stabilize and return to growth by late 2026, with most Helly Hansen synergies realized in 2026.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will focus on (1) Helly Hansen’s ability to accelerate growth in the U.S. and Asia, (2) the pace at which Project Jeanius delivers operational savings and margin improvements, and (3) signs of stabilization and sequential improvement in Lee’s performance, particularly in China and the U.S. Execution against these milestones will help determine Kontoor Brands’ ability to offset ongoing cost headwinds and deliver on its deleveraging targets.
Kontoor Brands currently trades at $72.18, down from $81.01 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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