Kontoor Brands sales dip 2% to $667m

Kontoor Brands has reported a decline in sales of 2% to $667m ( £528m) during the first quarter ended 1 April 2023. The maker of Lee and Wrangler denim brands said that while revenue increases were made in domestic wholesale and DTC, the company's international wholesale market suffered, thanks to the continued impact of Covid-policy changes in China. Its international revenue saw a 14% decrease to $149m ( £118m) compared with a 9% decrease over the same period in the prior year. However, US revenues in the quarter increased 2% to $518m ( £410.8m), driven by increased shipments in the US. By brand, Wrangler global revenues jumped 3% to $423m ( £335.4m), while Lee revenues fell 9% to $24m ( £19m). It also achieved an EBITDA of $102m ( £80.8m) in the first quarter, marking a 15.3% decrease compared with EBITDA margin during the same period in the prior year. Its Q1 '23 gross margin of 43% also decreased 180 basis points compared to Q1’22, which was impacted by geographic mix, production downtime and inflationary pressures on product costs that would weigh on first quarter gross margin. Kontoor Brands, however, has anticipated its FY23 revenue to increase at a low-single digit percentage compared to FY22, consistent with prior outlook. It also expects its FY23 gross margin to be in the range of 43.5% to 44.0%, consistent with prior outlook. Scott Baxter, president, chief executive officer and chair of Kontoor Brands, said: “We delivered first quarter results consistent with our expectations and commentary provided on the fourth quarter earnings call. “As anticipated, our brands continued to gain share in the U.S. where POS outpaced shipments in the quarter. Increases domestically were muted by expected softness in International markets. In addition to share gains and positive sell through, robust performance in our own DTC during the quarter further validates that our brands are connecting with consumers and winning in a challenging marketplace.” He added: “We continue to assume macroeconomic pressures will weigh on consumer demand in the second half of 2023, particularly in the U.S. However, we believe that our increasingly diversified growth across channels, categories and geographies, enabled by strategic investments in DTC, demand creation and data analytics will generate more sustained, profitable growth over time.” “This gives us confidence in reaffirming our 2023 outlook, despite the uneven backdrop. These resilient fundamentals should, when coupled with our solid balance sheet and capital allocation optionality, uniquely position us to yield superior returns for all KTB stakeholders going forward.”