Kontoor Brands (KTB) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue rose 2% year-over-year to $670.2 million, driven by U.S. Wholesale and Direct-to-Consumer growth, while Non-U.S. Wholesale declined 7%.

• Net income increased 19% to $70.5 million; adjusted EPS was $1.37, up 12%, and reported EPS was $1.26.

• Gross margin expanded 320 basis points to 44.7% (adjusted 45.0%), supported by lower product costs and inventory reduction.

• Project Jeanius transformation and restructuring initiatives are on track, with $6.3 million in Q3 charges and $100 million in targeted savings.

• Shareholder returns included $40 million in Q3 share repurchases and a 4% dividend increase to $0.52 per share.

Financial highlights

• Q3 net revenues: $670.2 million (+2% YoY); net income: $70.5 million (+19% YoY); operating income: $98.3 million (+15% YoY).

• Adjusted gross margin was 45.0%, up 150 bps; adjusted operating margin was 15.9%, up 80 bps.

• Wrangler Q3 global revenue grew 4% to $464 million; Lee Q3 global revenue declined 3% to $202 million.

• Inventory decreased 24% to $462 million; cash from operations for nine months was $286 million.

• Adjusted return on invested capital reached 30%, up 660 basis points.

Outlook and guidance

• FY24 revenue expected at $2.6 billion; Q4 revenue projected at $695 million (4% growth).

• Adjusted gross margin outlook raised to 45.1%, up 260 bps from 2023; Q4 margin expected at 44.6%.

• Adjusted operating income expected at $385 million, up 11%; Q4 adjusted operating income projected at $105 million.

• Full-year adjusted EPS now expected at $4.83, up 9% year-over-year; Q4 adjusted EPS expected at $1.31.

• Cash from operations expected to exceed $360 million; capex reduced to $25 million.

• Preliminary 2025 outlook: revenue growth of ~4% in H1, with margin expansion weighted to H2 as Project Jeanius savings scale.