US' Kontoor Brands' revenue grows 6% in FY22, driven by digital sales

The company’s US revenue in FY22 was $2.07 billion, an 11 per cent increase from last year, with gains in both the Wrangler and Lee brands. US wholesale increased 11 per cent compared to FY21, including strength in digital wholesale, which increased by 23 per cent compared to last year. Meanwhile, international revenue was $557 million, an 8 per cent decrease from the prior year, with the revenue in China decreasing by 23 per cent compared to FY21, Kontoor Brands said in a press release.

The gross margin was 43.1 per cent of revenue, a decrease of 160 basis points from the prior year. Selling, general, and administrative expenses were $778 million on a reported basis and $762 million on an adjusted basis in FY22. The company's operating income was $357 million on a reported basis and $372 million on an adjusted basis, with an adjusted operating margin of 14.1 per cent, a 10-basis-point decrease compared to the prior year.

In FY22, the company’s EBITDA was $390 million on a reported basis and $402 million on an adjusted basis, while the earnings per share (EPS) was $4.31 on a reported basis and $4.49 on an adjusted basis.

Wrangler brand’s global revenue in FY22 was $1.75 billion, an 11 per cent increase (12 per cent increase in constant currency) from the prior year, driven by US wholesale and global Wrangler sales on its own digital platform which increased 25 per cent. Lee brand’s global revenue was $874 million, a 1 per cent decrease (1 per cent increase in constant currency) from the prior year.

In the fourth quarter (Q4) of FY22, Kontoor Brands' revenue was $732 million, a 7 per cent increase from the same period in the prior year. US revenue was $605 million, increasing by 16 per cent over the same period in the prior year, with gains in both the Wrangler and Lee brands. International revenue was $127 million, a 20 per cent decrease from the same period in the prior year, with China decreasing by 33 per cent compared to the fourth quarter of FY21.

Gross margin in Q4 FY22 decreased 200 basis points to 40.8 per cent of revenue compared to the same period last year. Operating income was $85 million on a reported basis and $86 million on an adjusted basis. Furthermore, the company’s EBITDA was $95 million on a reported basis and $93 million on an adjusted basis. EPS was $0.91 on a reported basis and $0.88 on an adjusted basis compared to reported EPS of $0.75 and adjusted EPS of $0.88, in Q4 FY21.

For FY23, Kontoor Brands expects a low-single digit percentage increase in revenue with growth fairly balanced between the first and second half. Gross margin is expected to be in the range of 43.5 per cent to 44 per cent, increasing 40 to 90 basis points compared to FY22. Selling, general, and administrative expenses are expected to increase at a mid-single digit percentage. EPS is expected to be in the range of $4.55 to $4.75.

“We finished 2022 strong, as fourth quarter revenue and EPS came in significantly above our plan. Despite unprecedented macroeconomic challenges, we are delivering on many of our long-term goals, with 2022 revenue and earnings ahead of our Investor Day targets. I want to thank our teams around the world for navigating these near-term external pressures, while setting the foundation for Kontoor’s long-term future success,” said Scott Baxter, president, chief executive officer and chair of Kontoor Brands.

Fibre2Fashion News Desk (DP)