US' Kontoor Brands posts revenue of $616 mn in Q2 FY23

The company’s US revenue reached $499 million, marking a 2 per cent decline from the same period in the previous year. US wholesale saw a 3 per cent dip, with seasonal product areas showing particular softness.

In contrast, international revenue rose by 13 per cent to $117 million, as both DTC and wholesale sectors performed strongly. Specifically, international DTC revenue increased by 23 per cent (25 per cent in constant currency) compared to the same period last year. China exhibited an impressive increase of 82 per cent (93 per cent in constant currency), thanks to both wholesale and DTC sectors' robust performance. Europe, however, saw a 3 per cent decrease (5 per cent in constant currency) in revenue, despite gains in DTC revenue. Europe's DTC revenue increased by 12 per cent (10 per cent in constant currency) year over year, Kontoor brands said in a media release.

The company's Wrangler brand reported a 2 per cent increase in global revenue to $425 million. Wrangler’s US revenue also increased by 2 per cent, propelled by US wholesale category diversification, including non-denim bottoms, outdoor, and tops. Conversely, Wrangler's international revenue saw a 4 per cent decrease (5 per cent in constant currency) with decreases in wholesale outweighing gains in DTC.

The Lee brand global revenue in Q2 FY23 was down 3 per cent from the same period in the prior year to $188 million. Lee US revenue dropped 15 per cent. However, Lee international revenue increased by a substantial 27 per cent, primarily driven by increases in the Asia-Pacific (APAC) region, especially in China's wholesale and DTC revenue.

The gross margin dropped 290 basis points to 40.6 per cent of revenue on a reported basis and decreased 250 basis points to 41 per cent on an adjusted basis. Selling, general, and administrative expenses were reported at $187 million, or 30.3 per cent of revenue, and $180 million, or 29.3 per cent of revenue, on an adjusted basis, marking an increase of 30 basis points from the prior year.

The reported operating income for Q2 FY23 was $63 million, with the adjusted figure standing at $72 million. The adjusted operating margin fell by 280 basis points to 11.7 per cent.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) was $69 million on a reported basis and $78 million on an adjusted basis. The adjusted EBITDA margin of 12.7 per cent also saw a decrease of 280 basis points compared to the same period in the prior year, the release added.

Earnings per share for the second quarter were reported at $0.64 and $0.77 on an adjusted basis, compared to $1.09 for the same period last year.

“We delivered second quarter results largely consistent with our expectations. Investments in our brands helped drive continued share gains in the core US wholesale business. Solid performance in accretive areas such as DTC and international during the quarter further validates that our brands are resonating globally with consumers, despite the challenging landscape,” said Scott Baxter, president, chief executive officer and chair of Kontoor Brands.

Fibre2Fashion News Desk (DP)