US' Kontoor Brands expects low-single digit revenue rise in FY23

The second half of the year is expected to outperform the first in terms of growth. Despite anticipating challenges in US consumer demand in Q4 FY23, the reopening of the China market is likely to offset some concerns. Given the continued market share gains in the US, along with improved shipments and point-of-sale (POS) metrics, Q3 FY23 is predicted to see mid-single digit revenue growth, surpassing the overall yearly forecast, Kontoor Brands said in a press release.

The adjusted gross margin for FY23 is slated to range between 43.5 per cent and 44 per cent, which represents a 40 to 90 basis point growth compared to FY22’s 43.1 per cent. Excluding restructuring charges in Q2 FY23, this estimate aligns with their previous projections. Factors contributing to this margin expansion in the latter half of the year include a mix of geographic and direct-to-consumer sales, regularising production, and easing input costs. Remarkably, the most significant gross margin gains are anticipated in Q4 FY23.

In terms of operational expenses, the adjusted selling, general, and administrative expense is predicted to grow at a mid-single digit percentage compared to FY22. Adjusted earnings per share (EPS) for the fiscal are expected to range from $4.55 to $4.75. Notably, the largest EPS growth is foreseen in Q4 FY23.

The company projects capital expenditures between $35 million and $40 million for FY23, primarily directed towards expansion of owned retail stores and enhancements in manufacturing and distribution facilities.

“While we continue to assume macroeconomic pressures will weigh on consumer demand in the second half of FY23, we are seeing shipments better align with POS in the US, which gives us confidence that third quarter revenue should deliver outsized growth relative to our full year guidance. Our FY23 outlook, now on an adjusted basis to exclude restructuring charges, is consistent with our prior outlook. Our aggressive measures to improve inventory in the second quarter, and expected further progress during the balance of 2023, will position us to exit the year with a healthy balance sheet and accelerating cash flow that affords significant capital allocation optionality as we head into FY24,” said Scott Baxter, president, chief executive officer and chair of Kontoor Brands.

ALCHEMPro News Desk (DP)