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Kontoor Brands Q1 2025 Earnings Report
Kontoor Brands reported a slight decrease in revenue but an increase in adjusted operating income and adjusted EPS for the first quarter of 2025, driven by strong gross margin expansion.
Key Takeaways
Kontoor Brands, Inc. reported first quarter 2025 financial results with revenue of $623 million, a 1% decrease compared to the prior year (flat on a constant currency basis). The company achieved a reported gross margin of 47.5% and an adjusted gross margin of 47.7%, an increase of 200 basis points. Adjusted operating income increased by 4% to $96 million, and adjusted EPS rose by 3% to $1.20. Inventory decreased by 12% year-over-year.
Revenue for Q1 2025 was $623 million, a 1% decrease year-over-year (flat on a constant currency basis).
Adjusted gross margin expanded by 200 basis points to 47.7%, primarily due to lower product costs, Project Jeanius, and supply chain efficiencies.
Adjusted operating income increased by 4% to $96 million, with an adjusted operating margin of 15.4%.
Adjusted diluted EPS grew by 3% to $1.20, including $0.11 of incremental acquisition-related stock-based compensation expense.
Kontoor Brands
Kontoor Brands
Kontoor Brands Revenue by Segment
Kontoor Brands Revenue by Geographic Location
Revenue by Segment
Wrangler Revenue
CapyFin.comLee Revenue
CapyFin.comOther Revenue
CapyFin.comRevenue by Geographic Location
U.S. Revenue
CapyFin.comInternational Revenue
CapyFin.com Forward Guidance
Kontoor Brands updated its full year 2025 outlook to include the expected contributions from the Helly Hansen acquisition, which is anticipated to close in the second quarter of 2025. The outlook reflects enhanced growth and earnings profile, despite anticipated headwinds from recently enacted tariff changes.
Positive Outlook
- Full year 2025 revenue is now expected to be in the range of $3.06 to $3.09 billion, representing an increase of approximately 17% to 19% (including a 16% benefit from Helly Hansen).
- Adjusted gross margin is expected to be in the range of 45.9% to 46.1%, an increase of 80 to 100 basis points compared to prior year (including a 40 basis point benefit from Helly Hansen).
- Adjusted operating income is expected to be in the range of $437 to $445 million, an increase of 15% to 17% compared to prior year (including an approximate $37 million benefit from Helly Hansen).
- Adjusted EPS is expected to be in the range of $5.40 to $5.50, representing an increase of 10% to 12% compared to prior year (including an approximate $0.20 benefit from Helly Hansen).
- Cash from operations is expected to exceed $350 million, including the expected benefit from Helly Hansen.
Challenges Ahead
- Outlook does not include the anticipated impact from recently enacted changes in tariffs, estimated to be $50 million on an unmitigated basis, including the tariff impact of Helly Hansen.
- Excluding Helly Hansen, full year 2025 revenue growth is approximately 1% to 2%, compared to the prior outlook of 1% to 3% growth.
- The company expects to begin offsetting the $50 million unmitigated tariff impact in Q3 2025, with full offset over 12 to 18 months.
- Helly Hansen business exhibits revenue and earnings seasonality, with Q2 historically being its smallest quarter and resulting in operating losses.
- Adjusted SG&A is expected to increase approximately 20% compared to the prior year, including $9 million of incremental acquisition-related stock-based compensation expense.
Revenue & Expenses
Visualization of income flow from segment revenue to net income