Barbie Is Wrangler’s ‘Fastest-Selling Collaboration’: Kontoor CEO
Kontoor Brands Inc. bucked the U.S. wholesale trend.
It was strength in U.S. wholesale and direct-to-consumer (DTC) that helped to offset declines in the Wrangler and Lee owner’s international business.
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“I’m pleased to share that we delivered Q3 results above our expectations, most notably, with upside to our top-line. Our strategic playbook is working and is why I’m so confident in the next phase of Kontoor’s evolution even as we assume a more challenging macroeconomic backdrop,” said Kontoor CEO and chairman Scott Baxter.
For the three months ended Sept. 30, net income rose 17 percent to $59.5 million, or $1.05 a diluted share, as revenue rose 8 percent to $654.5 million. Kontoor reported adjusted earnings per share of $1.11. By segment, Wrangler revenue rose 9 percent to $444.5 million, while Lee sales were up 5 percent to $208 million. For the nine months, net income was down 16 percent to $162.2 million, or $2.85 a diluted share, on a revenue increase of 2 percent to $1.94 billion. The company expects a 1 percent increase in fiscal 2023 revenue against a year earlier.
Baxter told investors in a conference call that global Kontoor revenue rose 8 percent. The U.S. market saw ongoing point-of-sale and share gains driven by accelerating shipments during the quarter.
“We continued to outpace the market in our U.S. wholesale in core denim business during the third quarter and here to start Q4,” Baxter said. “In men’s bottoms, we outperformed the market and our largest competitor by 170 and over 250 basis points, respectively. And in women’s, our Lee business gained over 60 points of share to the market, outpacing our closest competitor by 30 basis points.”
He said that even after “aggressive pricing actions taken by select peers,” Kontoor continues to gain market share. “Strategic” innovation, design and demand creation investments are increasing denim bottom sales. The company also diversified beyond denim bottoms to include complementary category extensions.
Kontoor global DTC rose 6 percent, and its own e-commerce was up 10 percent. In the U.S. e-commerce rose 11 percent, with Wrangler and Lee each experiencing double-digit gains. While international DTC rose a healthy 5 percent, Europe offset softness in China.
“Importantly, we are seeing China trends accelerate here in Q4 and continue to anticipate the region to return to significant growth in the quarter, up 20 percent plus,” Baxter said.
For Wrangler, “Q3 was as big of a demand creation quarter the brand has ever experienced in its 75-year history,” Baxter said, citing strategic partnerships with Sandro, Staud, Mini Rodini and Barbie.
“The Wrangler and Barbie collection was our best and fastest-selling collaboration ever,” Baxter said. “Inspired by powerful cowgirls, the collection combines heritage denim with bold prints, further advancing Wrangler’s diversification strategies to attract new and younger consumers, while remaining authentic to the brand.”
Also in Q3, the company became the official jeans of the Dallas Cowboys in a sponsorship deal that will run over the next three years, “amplified via an integrated media platform, signage and activations at AT&T Stadium, social content featuring players and cheerleaders, [and] retail promotions in a monthly concert series.”
Lee launched its newest female fit, the Rider Jean, that was inspired by the brand’s first women’s denim line Lady Lee Rider and reimagined for modern women. It took over the Fred Segal shop on Sunset Boulevard for two weeks, and in September hosted an activation at the Ed Sheeran concert in SoFi Stadium in Los Angeles.
Baxter said Kontoor continues to focus on innovation, including the use of Indigood to scale water and cost savings. The company has already met its 2025 water savings goal. And in April, Kontoor launched its Global Design Standards, a three-part guide aimed at reducing Lee and Wrangler’s eco and social impact.
“I am proud of the work we are doing to save water with platforms like Indigood and other cutting-edge technologies such as digital printing, driving towards a future where all jeans can be created using zero freshwater,” Baxter said.
Looking ahead, Baxter said: “We love how we are positioned in taking share within core U.S. wholesale, with incredible partners such as Walmart, Amazon and Target, as well as western specialty. Retailers that align and support our brand’s value proposition with consumers are especially important given the macro challenges around the world.”
Baxter expects Kontoor will have a “good holiday season” because the “consumer always shows up around the holiday season.” He added that the company has taken market share in recent years because it has “elevated” Lee and Wrangler while keeping prices just right.
“You get a tremendous amount of value at a really good price,” Baxter said, adding that the Dallas Cowboys deal and Barbie activation show how Kontoor has “taken our demand creation to another level.”
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