American firm Kontoor Brands' revenue jumps 8% in Q3 FY23

The revenue uplift was largely attributed to a strong showing in the US market, where wholesale and direct-to-consumer (DTC) channels saw robust growth, overshadowing the decline in international revenues, particularly in China.

US revenue for Kontoor Brands jumped 12 per cent to $506 million over the previous year, with US wholesale also witnessing a 12 per cent increase compared to Q3 FY22. In stark contrast, international revenues dipped by 4 per cent to $149 million, marking an 8 per cent decrease in constant currency, as international DTC growth failed to offset significant losses in China, which plunged by 23 per cent (19 per cent decrease in constant currency), the company said in a media release.

Despite a broader international revenue contraction, the Wrangler brand saw global revenues climb by 9 per cent to $445 million, with a 10 per cent upturn in the US. Wrangler's international revenue rose by 8 per cent, albeit only a 2 per cent increase when accounting for constant currency adjustments.

The Lee brand also posted global revenue gains of 5 per cent to $208 million, translating into a 3 per cent constant currency increase. Lee's US revenue surged by an impressive 20 per cent, driven by wholesale and own.com successes. However, Lee's international figures took a hit with a 10 per cent revenue fall, which in constant currency terms equated to a 13 per cent decline, again largely due to weaker performance in China.

In the backdrop of these revenue patterns, the company experienced a gross margin reduction of 200 basis points, settling at 41.5 per cent. Selling, general, and administrative expenses presented a more positive outlook, decreasing by 30 basis points to 28.4 per cent of revenue, reflecting diligent cost management.

Operational efficiency, however, seemed to take a toll, with operating income standing at $85 million and operating margin shrinking by 170 basis points to 13.1 per cent compared to the adjusted figures for the prior year. Similarly, EBITDA was reported at $91 million, which includes an approximate $13 million duty charge, leading to an EBITDA margin decline of 200 basis points.

Earnings per share (EPS) were up at $1.05, in comparison to the reported EPS of $0.90 and an adjusted EPS of $1.11 in the same period last year. Inventory management ended on a high note with Q3 closing at $605 million, reflecting an 11 per cent decrease from the prior year.

“In the third quarter, we delivered strong revenue growth and profitability that was ahead of our expectations, excluding the duty charge, reflecting the broad-based strength of our business. Supported by strategic investments in our brands, US POS strength continued, driving further market share gains in core US wholesale. And we delivered another solid quarter in DTC, a critical growth pillar of our diversified, accretive growth strategy,” said Scott Baxter, president, chief executive officer and chair of Kontoor Brands.

ALCHEMPro News Desk (DP)