For the fourth quarter, Kontoor Brands reported revenue of $732 million, an increase of 7 or 9 percent in constant currency over the same period a year earlier.
The company said revenue increases were primarily due to strength in domestic and digital wholesale, somewhat offset by declines in international with the continued impacts of lockdowns and restrictions in China weighing on the quarter.
For the full year, revenue was $2.63 billion, an increase of 6% or 8% in constant currency over the prior year.
The company added that revenue increases were primarily due to strength in digital, as well as strength in US wholesale offset by a decline in non-US wholesale. with the continued impacts of the lockdowns and restrictions in China weighing on the year.
“We finished 2022 strong, as fourth-quarter revenue and EPS significantly exceeded our plan. Despite unprecedented macroeconomic challenges, we are meeting many of our long-term goals, with 2022 revenue and earnings ahead of our Investor Day targets,” said Scott Baxter, Chairman, CEO and President of Kontoor Brands in a statement.
Kontoor Brands Fourth Quarter Results Highlights
For the fourth quarter, US revenue was $605 million, an increase of 16 percent over the same period a year earlier, with gains across the Wrangler and Lee brands.
US wholesale increased 17 percent, including US digital wholesale strength of 66 percent compared to last year. These gains were bolstered by the continued strength of own.com’s US revenue, which increased 19 percent compared to the same period last year.
International revenue was $127 million, a decrease of 20 percent or 12 percent in constant currency from the same period last year. China declined 33 percent, or 25 percent in constant currency, driven by the impacts of Covid lockdowns and restrictions in the region. Europe was down 15 percent or 4 percent in constant currency, with wholesale pressures more than offsetting constant currency gains in DTC.
Global revenue for the Wrangler brand was $509 million, up 15% or 16% in constant currency. Wrangler revenue in the USA and t-shirts. Wrangler international revenue decreased 17 percent, or 9 percent in constant currency, with gains in DTC more than offset by declines in wholesale channels.
Global revenue for the Lee brand was $219 million, down 6 or 3 percent at constant currency. Lee’s US revenue increased 5 percent compared to the same period last year, driven primarily by digital. Globally, non-denim categories such as T-shirts saw significant year-over-year gains in the quarter. Lee’s international revenue declined 21 percent, or 13 percent in constant currency, driven primarily by reductions in China due to the impact of Covid restrictions.
Other global revenue was $4 million, a decrease of 19 percent compared to the same period last year.
Gross margin decreased 200 basis points to 40.8 percent of revenue compared to the same period last year. Compared to adjusted gross margin in the fourth quarter of 2021, gross margin decreased 180 basis points. Operating income was $85 million on a reported basis and $86 million on an adjusted basis. Adjusted operating margin of 11.7 percent increased 110 basis points.
EBITDA was $95 million on a reported basis and $93 million on an adjusted basis. Adjusted EBITDA margin of 12.7 percent increased 60 basis points.
Earnings per share were 91 cents on a reported basis and 88 cents on an adjusted basis compared to reported EPS of 75 cents and adjusted EPS of 88 cents in the same period last year.
Kontor Brands Comprehensive Annual Performance Review
Full-year US revenue was $2.07 billion, up 11 percent from last year, with gains across the Wrangler and Lee brands. US wholesale increased 11 percent compared to 2021, including strength in digital wholesale, which increased 23 percent compared to last year. own.com US revenue increased 23 percent compared to 2021.
International revenue was $557 million, down 8 or 1 percent in constant currency from the prior year. China declined 23 or 20 percent in constant currency compared to 2021, driven by the impacts of Covid lockdowns and restrictions in the region. Europe was down 5 percent or up 7 percent in constant currency over the prior year, with DTC driving constant currency gains.
Global Wrangler brand revenue was $1.75 billion, up 11% or 12% in constant currency, driven by Wrangler own.com US and global wholesale, which increased 25%. Wrangler US revenue increased 13 percent compared to last year. USA Wrangler.com increased 27 percent compared to last year. Wrangler international revenue decreased 1% or increased 8% in constant currency compared to 2021.
Global revenue for the Lee brand was $874 million, a decrease of 1 percent or an increase of 1 percent in constant currency over the prior year. Lee’s US revenue increased 7%, driven primarily by digital. USA Lee.com rose 13 percent compared to last year. Lee’s international revenue declined 12 percent or 6 percent in constant currency from 2021, driven primarily by reductions in China due to the impact of Covid lockdowns.
Other global revenue was $11 million, a decrease of 17 percent compared to the prior year.
Gross margin was 43.1 percent of revenue, a decrease of 160 basis points. Operating income was $357 million on a reported basis and $372 million on an adjusted basis. Adjusted operating margin of 14.1 percent decreased 10 basis points. EBITDA was $390 million on a reported basis and $402 million on an adjusted basis. Adjusted EBITDA margin of 15.3 percent decreased 30 basis points compared to the prior year.
Earnings per share were $4.31 on a reported basis and $4.49 on an adjusted basis compared to $3.31 and adjusted EPS of $4.28 in the prior year.
Kontoor Brands expects FY23 revenue to grow at a low percentage
By 2023, the company said, revenue is expected to grow by a low single-digit percentage over 2022 with growth fairly balanced between the first and second halves.
The company expects first half growth to be led by the US with continued momentum in POS, equity and digital gains somewhat tempered by weakness in China as the region continues to recover from lockdowns and restrictions. Covid.
During the second half of 2023, the company assumes that macro consumer demand conditions will be more challenging in the US, with the full reopening of the Chinese market.
Gross margin is expected to be in the range of 43.5 percent to 44 percent, increasing 40 to 90 basis points compared to gross margin of 43.1 percent in 2022. EPS is expected to be in the range of $4.55 to $4.75.