Kontoor Brands (KTB) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue rose 2% year-over-year to $670.2 million, driven by U.S. Wholesale and Direct-to-Consumer growth, while Non-U.S. Wholesale declined 7%.

• Net income increased 19% to $70.5 million; adjusted EPS was $1.37, up 12% year-over-year, and reported EPS was $1.26.

• Gross margin expanded 320 basis points to 44.7% (adjusted 45.0%), supported by lower input costs and supply chain efficiencies.

• Wrangler achieved its 10th consecutive quarter of U.S. market share gains, with 4% global revenue growth and strong performance in outdoor and female segments.

• Project Jeanius transformation program is on track to deliver $100 million in gross margin and SG&A savings by 2026, with $6.3 million in Q3 restructuring costs.

Financial highlights

• Q3 net revenues: $670.2 million (+2% YoY); net income: $70.5 million (+19% YoY); adjusted EPS: $1.37 (+12% YoY).

• Adjusted gross margin expanded 150 bps to 45.0%; adjusted operating income was $107 million (15.9% margin).

• Adjusted SG&A expense rose 5% to $195 million; Q3 SG&A as % of revenue: 30.0%.

• Cash from operations for the nine months ended September 2024 was $286 million, up from $148 million in 2023.

• Inventory decreased 24% to $462 million; ended Q3 with $269 million in cash and $745 million in long-term debt.

Outlook and guidance

• Full-year 2024 revenue expected at $2.6 billion, with Q4 revenue of $695 million (4% growth).

• Adjusted gross margin outlook raised to 45.1%, up 260 basis points from 2023.

• Adjusted operating income expected at $385 million (11% growth); Q4 adjusted operating income projected at $105 million.

• Full-year adjusted EPS now expected at $4.83, up 9% year-over-year; Q4 adjusted EPS expected at $1.31.

• Cash from operations expected to exceed $360 million; capex reduced to $25 million.

• Preliminary 2025 outlook: ~4% revenue growth in H1, with margin expansion weighted to H2 as Project Jeanius savings scale.