Key Takeaways:
Kontoor Brands (NYSE: KTB) will divest its Lee brand and has authorized a new $750 million share repurchase plan, shifting its focus to the higher-growth Wrangler and Helly Hansen businesses after strong first-quarter results.
"This decision reflects our effort to sharpen our focus on the opportunities with the greatest potential to generate returns for our shareholders," President, CEO and Chairman Scott Baxter said. He noted that while Lee’s fundamentals improved in 2025, the brand now sits outside the company’s long-term strategy.
The company reported first-quarter adjusted earnings from continuing operations of $1.06 per share, a 67 percent increase year-over-year, on revenue that grew 45 percent to $613 million. Global revenue for the Wrangler brand rose 2 percent, while Helly Hansen revenue climbed 16 percent on a pro forma basis. The Lee business is now reported as a discontinued operation.
Kontoor raised its full-year combined adjusted operating income forecast to a range of $516 million to $523 million, up from a prior outlook of $506 million to $512 million. The company plans to use the majority of proceeds from the Lee divestiture, for which it says it has received "strong interest," to accelerate share repurchases under the new authorization.
The sale of Lee marks a significant strategic pivot for Kontoor Brands, which was spun off from VF Corporation in 2019. The company will now concentrate its resources on two core brands: the iconic American denim maker Wrangler and the performance-oriented outdoor brand Helly Hansen. CFO Joe Alkire said the move will reduce operational complexity and allow for more concentrated investment. The company expects the divestiture to be immaterial to earnings per share over a 12- to 18-month period.
Wrangler has now gained market share for 16 consecutive quarters in men’s and women’s bottoms, according to Circana data cited by the company. Management sees significant growth opportunities in Wrangler's women's apparel line, which currently accounts for about 10 percent of the brand's revenue.
For Helly Hansen, Kontoor is focused on expanding its presence in the U.S. market, where it remains underpenetrated. A key step in this strategy is a new distribution partnership with Dick’s Sporting Goods’ House of Sport concept, set to launch this fall.
Alongside the new $750 million buyback plan, Kontoor remains focused on strengthening its balance sheet. The company expects to generate over $400 million in free cash flow in 2026 and has already paid down $250 million in term-loan debt since acquiring Helly Hansen. Management is targeting a net leverage ratio at or below 1.5 times by the end of 2026.
For the full year from continuing operations, Kontoor expects revenue of $2.66 billion to $2.71 billion and adjusted earnings per share of $5.15 to $5.25. This includes a negative impact of $0.55 per share from unmitigated expenses previously allocated to Lee.
The updated guidance suggests management is confident that growth from Wrangler and Helly Hansen, combined with aggressive capital returns, can more than offset the earnings impact from the Lee sale. Investors will watch for the announcement of a definitive sale agreement for Lee later this year and execution on the expanded U.S. distribution for Helly Hansen.
This article is for informational purposes only and does not constitute investment advice.
