Dive Brief:
- Kontoor Brands revenue dropped 8% to $670 million in Q4, and full fiscal 2023 revenue decreased 1% to $2.6 billion year over year, according to a Wednesday earnings release. Kontoor had previously predicted a 2023 revenue increase of about 1% over 2022 numbers.
- Wrangler revenue for the quarter fell 10% to $461 million from $509 million year over year, while Wrangler’s full fiscal year revenue remained almost flat at $1.8 billion. Lee dropped 7% to $206 million for Q4, and saw a revenue drop of 4% to $843 million for the year.
- Company-wide, U.S. Q4 revenue fell 11% to $538 million, and U.S. wholesale dropped 12% for the period. International revenue in the quarter was up 4% to $132 million, driven largely by a 23% boost in China.
Dive Insight:
The final quarter of 2023 came in contrast to Kontoor’s Q3 earnings, which saw its Wrangler brand revenue up 9%. That quarter’s revenue was helped considerably by a collaboration with Mattel’s Barbie that Scott Baxter, president, CEO and chair of Kontoor Brands called “best and fastest-selling collaboration ever.”
However, the Barbie boost wasn’t enough to help the North Carolina-based company overcome an unsteady economic environment, particularly at home.
“Our POS performance in the U.S. outpaced shipments in the fourth quarter and resulted in continued market share gains,” Scott Baxter, Kontoor’s president, CEO and chair said in the release. “However, the U.S. wholesale environment was challenging as retailers managed inventory levels tightly against uncertain consumer spending patterns, which negatively impacted our revenue. We are pleased with our execution and the progress we made further reducing inventory levels, accelerating cash generation, and driving strong gross margin expansion and returns on capital.”
In its earnings, Kontoor also announced its Project Jeanius initiative, which the company said is focused on “enhancing and optimizing the supply chain, reducing operating complexity and integrating the business across global shared services.”
“This is one of the most important steps we have taken as a public company and will transform our organization from the legacy structure required at the spin to a best-in-class global multi-brand platform, while unlocking significant sources of capital,” Baxter said.
The initiative is projected to generate between $50 million and $100 million in combined profit improvement and savings, per the release. Kontoor said some of that will be reinvested into the company to boost growth. Impact from the initiative should begin in Q4, “with more significant benefits expected in 2025 and 2026.”
Looking ahead to 2024, Kontoor said it anticipated 2024 revenue in the range of $2.57 billion to $2.63 billion, which would reflect either a decrease of 1% or an increase of 1% over 2023 numbers. That outlook “does not yet reflect the anticipated impact of Project Jeanius,” the company said.
