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Apr 01, 2023
Kontoor Brands Q1 2023 Earnings Report
Delivered first quarter results consistent with expectations, brands continued to gain share in the U.S., and DTC performance was robust.
Key Takeaways
Kontoor Brands reported Q1 2023 revenue of $667 million, a 2% decrease compared to Q1 2022, but consistent with prior outlook. EPS was $1.16 compared to $1.40 in the same period last year. The company reaffirmed its full year 2023 financial outlook.
Q1’23 revenue of $667 million decreased 2 percent compared to Q1'22.
Q1’23 gross margin of 43.0 percent decreased 180 basis points compared to Q1’22.
Q1’23 EPS of $1.16 compared to Q1'22 EPS of $1.40
FY’23 revenue is expected to increase at a low-single digit percentage compared to FY’22.
Kontoor Brands
Kontoor Brands
Kontoor Brands Revenue by Segment
Kontoor Brands Revenue by Geographic Location
Revenue by Segment
Wrangler Revenue
CapyFin.comLee Revenue
CapyFin.comRevenue by Geographic Location
U.S. Revenue
CapyFin.comInternational Revenue
CapyFin.com Forward Guidance
The Company is reaffirming its prior outlook for FY’23 provided on February 28, 2023, with select updates to quarterly cadence.
Positive Outlook
- Revenue is expected to increase at a low-single digit percentage over 2022 with first and second half performance relatively balanced.
- The Company continues to expect first half of 2023 to be driven by the U.S. with momentum in POS, share gains and DTC.
- Gross margin is expected to be in the range of 43.5 percent to 44.0 percent, increasing 40 to 90 basis points compared to gross margin of 43.1 percent in 2022.
- The Company continues to expect gross margin expansion in the second half driven by geographic and DTC mix, normalizing production and reduced input cost pressures.
- SG&A investments will continue to be made in the Company’s brands and capabilities in support of longer-term profitable revenue growth, including demand creation, DTC, and International expansion.
Challenges Ahead
- Compared to the prior outlook, Q2’23 U.S. performance is now expected to be somewhat tempered by shipments continuing to lag POS, while China is now anticipated to see stronger growth in Q2’23 relative to previous assumptions.
- During the second half of 2023, the Company continues to assume macro consumer demand conditions will be more challenged in the U.S., with the China market more fully reopening.
- Compared to the prior outlook, year-on-year gross margin pressure should be most pronounced in the second quarter due to proactive actions in managing internal production, including downtime, as well as peak inflation with our highest cost goods flowing through the P&L.
- Compared to adjusted SG&A in 2022, the Company expects full year SG&A to increase at a mid-single digit percentage.
- The Company now expects a one-time discrete tax charge in the second quarter will adversely impact Q2’23 EPS by approximately $0.10.
Revenue & Expenses
Visualization of income flow from segment revenue to net income