New owner of Lee off to bumpy start

Kontoor Brands, new owner of Lee & Wrangler, off to bumpy start after separating from VF Corp
Kontoor Brands' net income & adjusted net revenue were above expectations despite declines in overall revenue & profits.
// Kontoor Brands’ profits and revenue down, but forecast remains upbeat
// Kontoor Brands is the new company that owns Lee & Wrangler, which was spun off from VF Corp earlier this year

The new company behind denim retailer Lee has reported significant declines in both revenue and profit for its second quarter, but remained upbeat in its full-year forecast.

Kontoor Brands, which was spun off from VF Corp and became an independent, publicly traded company on May 23, revenue decline by six per cent while profits dropped almost 40 per cent.

Despite this, the new company – which operates both Lee and Wrangler – reaffirmed its outlook for the fiscal year, in which it expected revenues to exceed $2.5 billion.

However, that target is a mid-single digit decline compared with last year’s annual adjusted revenue, which excludes the impact of restructuring and separation costs and changes in the business model.

Just months after completing its separation from VF Corp, Kontoor Brands said its total costs and operating expenses had fallen about five per cent in the second quarter as it streamlined supply chains and sourced materials for less.

Kontoor Brands’ net income for the quarter of 96 cents per share beat analysts’ estimates of 67 cents while adjusted net revenue of $602.4 million (£497.3 million) was around $10 million above forecasts.

The company’s trading update sent its shares up by over 13 per cent.

Meanwhile, Kontoor Brands executives warned they would look at withdrawing from unprofitable markets if need be and would consider sourcing opportunities in new markets.

“The restructuring and cost savings actions we’ve taken… are paying off and are setting the foundation for improved profitability in the second half of 2019,” chief executive Scott Baxter said in a statement.

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