Kontoor Brands, the parent company of Wrangler and Lee, ended the first quarter of 2025 preparing for the effects of President Donald Trump’s tariffs and closing in on its $900 million deal to acquire Norwegian outdoor and workwear brand Helly Hansen from Canadian retailer Canadian Tire Corp.
In the company’s first-quarter 2025 earnings call on Tuesday, Kontoor president, chief executive officer and chairman Scott Baxter reiterated how the company is focused on controlling what it can — a strategy that has helped Kontoor maneuver other moments of disruption and uncertainty such as cotton spikes, inflation and ocean freight disruptions.
You May Also Like
Related Articles
“This time will be no different. We have operated through multiple cycles and have the team and operating playbook to not only navigate the current environment but come through the other side even stronger,” he said.
Kontoor’s global revenue was flat with the prior year and consistent with its outlook. Global revenue was $623 million, down 1 percent and just below the estimated $626.32 million. On an adjusted basis, earnings per share were $1.20, a 3 percent increase compared to the prior year.
Joe Alkire, Kontoor chief financial officer, said softer-than-anticipated points of sale in key accounts in the first quarter were offset by strength in western, direct-to-consumer and international businesses relative to the company’s plans.
U.S. revenue was flat compared to the prior year at $493 million. U.S. wholesale revenue saw a slight 1 percent decrease, while DTC increased 11 percent, driven by a 17 percent increase in digital partially offset by a 4 percent decrease in brick-and-mortar retail.
International revenue was $130 million, down 7 percent compared to prior year. Wholesale decreased 8 percent and DTC decreased 2 percent. The company saw a 4 percent decrease in Europe, driven by a 3 percent decrease in DTC and a 4 percent decrease in wholesale. Asia decreased 3 percent and non-U.S. Americas decreased 18 percent.
Wrangler brand global revenue was up 3 percent to $420 million. The heritage brand’s U.S. revenue increased 3 percent, driven by a 14 percent increase in DTC and a 2 percent increase in wholesale.
Successful collaborations with country music star Lainey Wilson and the launch of the fit-focused line Bespoke has elevated Wrangler’s women’s business in the U.S. The brand aims to recreate that magic on the global stage. At just 10 percent of global revenue, Baxter said Wrangler’s female business is just getting started.
“What used to simply draft off the male business is now a dedicated focus. We are targeting the female consumer and seeing results, giving me tremendous confidence in the long-term growth opportunity in the years ahead,” he said.
The expansion of rodeo culture is fueling the brand’s western business as well. The category saw mid-teens growth in the first quarter and wholesale customers are “healthy and growing.”
Lee brand global revenue was $200 million, down 9 percent compared to prior year. The brand’s U.S. revenue decreased 8 percent driven by a 9 percent decrease in wholesale. Lee’s international revenue decreased 11 percent driven by a 15 percent decrease in wholesale. Baxter said this performance was expected.
“Our brand repositioning is tracking to plan, and we are seeing green shoots that give us confidence in sequential improvement going forward. Our new creative vision is starting to show up in the marketplace. We are driving better segmentation across consumer types, sharpening our storytelling to be more aligned with Lee’s consumer, and addressing challenges in midtier distribution. We are confident we have the right team in place and a new strategic playbook to build our way back to growth over time,” he said.
Kontoor’s acquisition of Helly Hansen is on track to close at the end of this month. Kontoor expects the business to contribute about $425 million to 2025 revenue, about $37 million to 2025 adjusted operating income, and about 20 cents to 2025 adjusted EPS. Additionally, Kontoor anticipates the Helly Hansen to contribute about $50 million to 2025 cash flow from operations.
Baxter outlined a “value creation framework” the company will follow to accelerate Helly Hansen’s growth through a combination of wholesale and retail expansion, strong digital growth and investments in demand creation. He added that he sees a clear path to double-digit growth for the brand in the U.S. market as well as opportunities in DTC, China, global workwear and category expansion.
Additionally, Kontoor’s supply chain and global scale are poised to provide Helly Hansen with “capability enhancements and significant cost advantages.” For example, Alkire said Helly Hansen’s freight expenses will decrease between 10 and 20 percent.
“By leveraging our global operating platform, we have clear line of sight to double Helly’s operating margin over time by both gross margin expansion and SG&A leverage. This will create additional investment capacity to further accelerate top line growth, improve profitability and cash flow, and generate even greater long-term value for our shareholders,” he said.
While Kontoor’s business has become more volatile week to week, Alkire said overall trends have generally improved over the past two months.
On tariffs, Baxter said the company does not expect an impact to second-quarter results due to recently announced policy changes and mitigating actions have been put in motion that would begin in the third quarter should tariffs proved to be more permanent. “As an organization, we challenge ourselves to look around corners. Coming through the supply chain disruptions over the last several years, we put plans in motion to create a more agile organization,” he said.
Alkire said most of the company’s expected 2025 U.S. production volume originates from Bangladesh, Mexico, Egypt, Pakistan and Kenya. What Kontoor sources in China is for the Chinese market. Helly Hansen’s U.S. production volume originates from South Asia, but Alkire pointed out that 75 percent of the brand’s global revenue is outside of the U.S.
“Should tariffs remain at the currently proposed levels on all imports, the unmitigated impact to operating profit in 2025 is approximately $50 million, including Helly Hansen,” he said. “This assumes no mitigating actions, including transferring production within our global supply chain, pricing increases, inventory management, supplier partnership initiatives and other proactive mitigating cost actions.”
Efforts like a sku level analysis — part of Project Jeanius, the three-year initiative to transform Kontoor’s global operating model, as well as enhance and optimize its supply chain — is increasing flexibility within Kontoor’s manufacturing and sourcing operations. Baxter said this initiative has given the company a “tremendous head start” and will help offset the impact from tariffs in a year.
“While we are not immune over the near-term, our supply chain is a competitive advantage. We expect to begin to offset the impact of tariffs beginning in the third quarter of this year and we expect the mitigated impact of tariffs in 2025 to be below $50 million and are confident we can substantially offset the impact of tariffs within a 12- to 18-month period,” Alkire said.
Despite these challenges, Alkire said Kontoor does not see any meaningful change in its ability to deliver full year commitments. Full-year revenue is now expected to be in the range of $3.06 billion to $3.09 billion, representing growth of 17-19 percent. Revenue is expected to increase 4 percent to $630 million in the second quarter.