Kontoor Brands NYSE: KTB raised portions of its 2026 outlook after reporting second-quarter adjusted earnings per share of $1.60, up 13% from the prior year, as stronger gross margin and contributions from Helly Hansen supported results.
President and CFO Joe Alkire said the company’s first-half revenue reached $1.2 billion, an increase of 31% from the prior year, while adjusted gross margin rose 590 basis points to 52.2%. First-half adjusted EPS increased 36% to $2.12.
For the second quarter, adjusted gross margin increased 710 basis points year over year to 53.8%. Alkire attributed the improvement to Project Genius savings, Helly Hansen’s higher gross-margin contribution, and favorable channel, product and pricing mix. SG&A expenses totaled $221 million, or 37.8% of revenue, reflecting a full quarter of Helly Hansen expenses and increased spending on direct-to-consumer, demand creation and technology initiatives.
Wrangler posts DTC growth and market-share gains
Wrangler global revenue increased 1% in the second quarter, led by 12% growth in direct-to-consumer sales. U.S. revenue also increased 1%, with DTC revenue up 9% and wholesale revenue relatively flat. International revenue increased 8%, driven by 27% DTC growth and 4% wholesale growth.
Scott Baxter, chief executive officer and chairman, said the brand gained more than 100 basis points of market share in its core bottoms business during the quarter, according to Circana. Alkire said Wrangler recorded its 17th consecutive quarter of market-share gains in men’s and women’s bottoms.
Wrangler’s first-half female revenue rose 20%, with growth accelerating in the second quarter, while Western revenue grew at a low-double-digit rate in the first half. Baxter said the company continues to invest in talent, design, product development and demand creation for the female business, which represents about 10% of Wrangler revenue despite females comprising more than half of the U.S. denim market, according to Alkire.
The company also is expanding Wrangler’s physical retail presence. After opening a full-price store in Fort Worth, Texas, Kontoor secured two additional Texas locations scheduled to open in early 2027. Alkire said the company plans to test and scale the retail concept while investing in digital capabilities, artificial intelligence, site experience and an expanded loyalty program.
Management expects Wrangler to generate mid-single-digit growth in the second half, excluding the effect of a 53rd week in 2025. Alkire said the outlook is supported largely by committed new distribution, including Lowe’s Home Improvement, as well as continuing growth in female, DTC and Western categories. Retail partners, however, remain cautious about inventory commitments, management said.
Helly Hansen exceeds expectations
Helly Hansen generated $114 million in second-quarter revenue, up 6% on a pro forma basis and above management’s expectations. First-half pro forma reported revenue increased 12%, while underlying constant-currency growth was in the mid-single-digit range.
Sport revenue totaled $70 million, with the strongest growth in the U.S., Nordic countries and the Alps region of Europe. Workwear revenue was $37 million, with growth in the U.S. and the Alps region. Management said workwear e-commerce, though still small, was particularly strong in the second quarter.
Alkire said Helly Hansen produced positive operating profit during what he described as its seasonally smallest quarter, helped by sourcing, logistics, planning and procurement improvements, better inventory quality, more full-price selling, less promotional activity, pricing and synergies.
Through the first half, Helly Hansen’s operating margin expanded about 600 basis points to 7%, according to Baxter. The company remains committed to reaching a mid-teens operating-margin target for the brand.
Management is separating Helly Hansen’s sport and workwear commercial organizations and has hired a North America general manager for the sport business. Kontoor also plans incremental spending on demand creation during the second half, particularly in the U.S., where Alkire said Helly Hansen’s aided brand awareness is about 30%.
Helly Hansen will begin appearing in 18 Dick’s Sporting Goods House of Sport locations in October, Baxter said. The company plans to provide further details on the brand’s strategy at an investor day in Norway on Sept. 2.
Lee divestiture and capital plans
Kontoor said its divestiture of the Lee brand to Authentic Brands Group remains on track to close in the fourth quarter. The company expects to use most of the net proceeds to fund a new $400 million accelerated share repurchase program, with the remainder directed toward voluntary debt repayment.
Alkire said Kontoor expects to offset approximately $40 million of stranded costs over 12 to 18 months following the sale. He said the company expects the Lee divestiture to be immaterial to EPS over that period, supported by cost actions, the anticipated share repurchase and debt reduction.
Kontoor repurchased $50 million of common stock in the second quarter and $75 million year to date at an average price of $75 per share. It ended the quarter with $700 million remaining under its existing repurchase authorization. The board also declared a quarterly cash dividend of $0.53 per share.
Inventory declined 3% year over year to $526 million, primarily reflecting reductions at Helly Hansen. Net debt stood at $1.1 billion, with $58 million in cash and an undrawn $500 million revolver.
Updated 2026 outlook
The company maintained its full-year revenue outlook of $2.66 billion to $2.71 billion but raised its adjusted gross-margin forecast to 49.8% to 50%, from a prior range of 48.3% to 48.5%.
- Adjusted operating income is now expected to be $413 million to $420 million, compared with prior guidance of $411 million to $418 million.
- Adjusted EPS is expected to be $5.25 to $5.35, up from prior guidance of $5.15 to $5.25.
- The outlook includes about $25 million of incremental brand-building and other growth investments and approximately $0.36 per share of incremental investments relative to prior guidance.
- Cash from operations is expected to approximate $450 million, including the Lee business contribution reported in discontinued operations.
Kontoor expects to return more than $900 million of capital during 2026, including anticipated proceeds from the Lee sale, through share repurchases, dividends and voluntary debt payments. The company expects net leverage to fall below 1.5 times by year-end.
About Kontoor Brands (NYSE:KTB)
Kontoor Brands, Inc is a global apparel company best known for its Wrangler and Lee denim and lifestyle brands. Established as an independent, publicly traded company in May 2019 following a spin-off from VF Corporation, Kontoor leverages a legacy that dates back to 1889 with the founding of Lee and to 1947 with the introduction of the Wrangler brand. The company focuses on designing, manufacturing and distributing premium, casual and workwear apparel, including jeans, pants, shorts, shirts, jackets and complementary accessories.
Kontoor Brands operates a diversified sales model that combines wholesale partnerships with leading retailers, distribution through e-commerce channels and select direct-to-consumer formats.
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