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Mar 6, 2020
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Kontoor Brands revenues and earnings dip in Q4 and FY 2019

Published
Mar 6, 2020

Kontoor Brands, Inc. the Greensboro, North Carolina-based owner of the Lee and Wrangler denim brands, announced declines in its revenues and earnings for the fourth quarter and full fiscal year 2019 on Friday, as the company made changes to its business model.
 

Kontoor Brands blamed its revenue declines on a range of strategic and operational changes being made at the company - Instagram: @leejeans


For the fourth quarter ended December 28, 2019, Kontoor, which spun off from VF Corp in May of last year, reported revenues of $652.6 million, down 10% from $726.2 million in the prior-year period.
 
By way of explanation for this decline, the company highlighted the negative effect of proactive strategic quality-of-sales initiatives involving changes to its business model and its decision to exit an underperforming country, as well as other points of distribution, including select channels in India.

Kontoor also pointed out reductions in sales of certain lower margin lines, along with the negative impact of the bankruptcy of a major U.S. retailer in Q4 2018.
 
The U.S. contributed $516.7 million to the company’s total quarterly sales, down 8% from the same period in the previous year, despite strong growth in the market’s digital and wholesale channels, while international revenue was $135.9 million, representing a 17% decrease year over year.
 
At the Wrangler brand sales dropped 6% to $417.0 million, while Lee revenues slipped 12% to $201.6 million. The company’s other global revenue, which includes that raised by its VF Outlet and Rock & Republic brands, dropped 36% to $34.0 million.
 
Kontoor’s income for the fourth quarter totaled $28.8 million, or $0.50 per diluted share, declining from $51.9 million, or $0.92 per diluted share, in the prior-year period.
 
Looking at the full fiscal year 2019, the company’s revenue fell 8% to $2.55 billion, down from $2.76 billion in the previous year.
 
Full-year U.S. revenue fell 5% to $1.91 billion, and international revenue declined 15% to $638.9 million
 
Wrangler contributed $1.52 billion and Lee $882.3 million, representing 5% and 8% year-over-year declines, respectively. Other global revenue decreased 26% to $148.5 million.
 
The company’s total annual income in fiscal 2019 was $96.7 million, or $1.69 per share, down from $263.1 million, or $4.64 per diluted share, in fiscal 2018.
 
“2019 has been a year of transformational change for our organization, our leadership teams and our employees around the globe,” commented Kontoor Brands president and CEO Scott Baxter in a release. “As we look to 2020, we remain sharply focused on the continued optimization and globalization of our operating model.”
 
In fiscal 2020, Kontoor currently expects its revenue to be largely consistent with its adjusted revenue in full year 2019, while first-half sales are expected to decline. The company predicts that its adjusted annual earnings per share will be in the range of $3.55 to $3.65.

Kontoor’s current guidance does not take the potential impact of the ongoing coronavirus outbreak into account. China, where the outbreak started, contributes around 7% of annual revenues at the company, which temporarily closed most of its retail doors in the country in February. These stores have now been gradually reopening and around 75% are currently in operation.
 
According to Kontoor, the epidemic has caused no material disruptions to its supply chain at the present time, but the company continues to monitor the situation.

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