Kontoor Brands (NYSE:KTB) reported revenue fell 2% in Q1 to $667M. Revenue strength in domestic wholesale and DTC were more than offset by decreases in the international wholesale business, primarily driven by the continued impacts of COVID-policy changes in China.
U.S. revenue was up 2% during the quarter to $518M. U.S. wholesale increased 1%, including strength in digital wholesale which increased 11% compared to last year. Those gains were augmented by continued strength in DTC, with U.S. own.com revenue increasing 15%.
International revenue was down 14% to $149M, driven by softness in wholesale, which was somewhat offset by strong DTC performance.
Wrangler brand global revenue was up 3% to $423M and Lee brand global revenue was down 9% to $241M.
Gross margin decreased 180 basis points to 43.0% of sales, with higher inflationary pressures on input costs and geographic mix factoring in. Impacts from proactive actions in managing internal production, including downtime, also drove the decline. The decline was partially offset by strategic pricing and moderating transitory costs such as air freight.
On the balance sheet, KTB ended the quarter with $53M in cash and approximately $800M in long-term debt. As of April 1, KTB had $50M outstanding borrowings under the Revolving Credit Facility and $438M available for borrowing against the facility.
CEO update: “As anticipated, our brands continued to gain share in the U.S. where POS outpaced shipments in the quarter. Increases domestically were muted by expected softness in International markets. In addition to share gains and positive sell through, robust performance in our own DTC during the quarter further validates that our brands are connecting with consumers and winning in a challenging marketplace,”
Looking ahead, Kontoor Brands (KTB) expects 2023 revenue to increase in the 13% to 14% range, adjusted EBITDA to increase in the 17% to 18% range, and adjusted net income to increase in the 30% to 33% range
Shares of Kontoor Brands (KTB) were inactive in premarket trading.