Helly Hansen Parent Kontoor Brands Reports Stronger 2026 First Quarter Results. Raises Full Year Outlook; Announces Planned Divestiture of Lee, $750 Million Share Repurchase Program

Kontoor Brands, Inc. (NYSE: KTB) today reported financial results for its first quarter ended April 4, 2026.

During the first quarter, the Company initiated a competitive process to divest the Lee business. As a result, the Company’s first quarter results and updated 2026 outlook reflect the presentation of the Lee business as discontinued operations.

Key Highlights

• First quarter revenue including the contribution from discontinued operations was $808 million. Revenue from Lee of $195 million now reported in discontinued operations. First quarter revenue from continuing operations of $613 million exceeded expectations driven by 4 percent growth in Wrangler and 16 percent growth in Helly Hansen on a pro-forma basis

• First quarter reported EPS including the contribution from discontinued operations was $1.65. First quarter adjusted EPS including the contribution from discontinued operations was $1.55. First quarter adjusted EPS from continuing operations was $1.06

• Full year revenue outlook including the contribution from discontinued operations is now expected to be in the range of $3.41 to $3.46 billion ($3.40 to $3.45 billion prior). Expected revenue from Lee of approximately $750 million now reported in discontinued operations. Full year revenue outlook from continuing operations is now expected to be in the range of $2.66 to $2.71 billion driven by growth in Wrangler and Helly Hansen

• Full year adjusted EPS outlook including the contribution from discontinued operations is now expected to be in the range of $6.60 to $6.70 ($6.40 to $6.50 prior)

• The Company announced plans to divest the Lee business to sharpen strategic focus on its largest growth assets and enhance capital allocation optionality

• The Company’s Board of Directors approved a new $750 million share repurchase authorization

“Our strong first quarter results reflect the power of our operating model combined with strong execution,” said Scott Baxter, President, Chief Executive Officer and Chairman of the Board of Directors. “Wrangler drove another quarter of broad-based growth and market share gains, and Helly Hansen delivered better-than-expected revenue and profitability. Our decision to divest Lee enables sharper focus on the opportunities with greatest potential to maximize shareholder returns as we align the Kontoor brand portfolio to a higher growth profile.”

“Our updated outlook reflects better than expected first quarter results and improving visibility for Wrangler and Helly Hansen,” added Joe Alkire, Kontoor Brands’ Executive Vice President, Chief Financial Officer and Global Head of Operations. “Our planned divestiture of the Lee business is in an advanced state and has attracted interest from multiple parties. We are confident in our ability to successfully complete a transaction this year, resulting in significantly more capital allocation optionality and accelerated growth as we drive enhanced shareholder returns into 2027 and beyond.”

Planned Divestiture of the Lee Business

During the first quarter of 2026, the Company initiated a competitive process to divest the Lee business. The process has attracted interest from multiple parties and the Company anticipates entering into a definitive agreement to divest the Lee business in 2026. As a result, the Company has reported the results of the Lee business in discontinued operations.

The Company expects the divestiture of Lee to be immaterial to earnings per share over a 12-to-18-month period. The earnings contribution of the Lee business will be offset through strong capital deployment and mitigation of overhead and other expenses through restructuring and other mitigating cost actions to offset the costs that were previously allocated to the Lee business.

First Quarter 2026 Income Statement from Continuing Operations Review

Revenue from continuing operations was $613 million and increased 45 percent compared to prior year, including the contribution from the acquisition of Helly Hansen completed in the second quarter of 2025.

Wrangler brand global revenue was $436 million and increased 4 percent compared to prior year. Wrangler U.S. revenue increased 1 percent, driven by a 6 percent increase in direct-to-consumer and a 1 percent increase in wholesale. Wrangler international revenue increased 20 percent compared to prior year, driven by a 38 percent increase in direct-to-consumer and a 17 percent increase in wholesale.

Helly Hansen global revenue was $176 million. Sport and Workwear revenue was $120 million and $45 million, respectively. Musto brand revenue was $11 million.

Gross margin from continuing operations on a reported basis increased 810 basis points to 53.7 percent. On an adjusted basis, gross margin from continuing operations increased 470 basis points to 50.6 percent compared to prior year, driven by the impact of Helly Hansen, the benefits of Project Jeanius and channel mix, partially offset by increased product costs, net of pricing actions. Adjusted gross margin includes $1 million of overhead and other expenses that were previously allocated to the Lee business.

Selling, General & Administrative (SG&A) expenses from continuing operations were $239 million, or 39.0 percent of revenue on a reported basis. On an adjusted basis, SG&A expenses from continuing operations were $224 million, or 36.5 percent of revenue. The increase in SG&A expenses was driven by the impact of Helly Hansen, higher demand creation and direct-to-consumer investments and volume-based variable expenses, partially offset by the benefits from Project Jeanius. Adjusted SG&A expenses include $7 million of overhead and other expenses that were previously allocated to the Lee business.

Operating income from continuing operations was $90 million on a reported basis. On an adjusted basis, operating income from continuing operations was $87 million and increased 60 percent compared to prior year. Operating income includes $8 million of overhead and other expenses that were previously allocated to the Lee business.

Earnings per share (EPS) from continuing operations was $1.09 on a reported basis. On an adjusted basis, EPS from continuing operations was $1.06, including a $0.26 contribution from Helly Hansen. Adjusted EPS includes $0.11 of overhead and other expenses that were previously allocated to the Lee business.

Balance Sheet and Liquidity from Continuing Operations Review

The Company ended the first quarter with $56 million in cash and cash equivalents, and $1.14 billion in long-term debt. At the end of the first quarter, the Company had no outstanding borrowings under the Revolving Credit Facility and $493 million available for borrowing against this facility.

Inventory at the end of the first quarter was $464 million, including the contribution of inventory from Helly Hansen.

As previously announced, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.53 per share, payable on June 18, 2026, to shareholders of record at the close of business on June 8, 2026.

The Company returned $54 million to shareholders through dividends and share repurchases during the first quarter, including the repurchase of $25 million of common stock.

Share Repurchase Authorization

The Company’s Board of Directors has authorized a share repurchase program of up to $750 million of the Company’s common stock. The new repurchase authorization replaces the existing share repurchase program announced on December 11, 2023.

“Our $750 million share repurchase program reflects the confidence we have in our business moving forward and the opportunities to generate significant value from our sharper brand portfolio,” said Scott Baxter, President, Chief Executive Officer and Chairman of Kontoor Brands. “We remain committed to returning cash to shareholders while maintaining an unrelenting focus on delivering superior total shareholder return over time.”

The timing and amount of repurchases will be determined by the Company based on its evaluation of market conditions, continued compliance with its debt covenants and other factors. The program does not have an expiration date but may be suspended, modified or terminated at any time without prior notice. The Company expects to fund repurchases through cash flow generated from operations and expected proceeds from the planned divestiture of the Lee brand.

Tariff Update

Following the U.S. Supreme Court’s decision that the International Emergency Economic Powers Act (“IEEPA”) does not authorize tariffs, the U.S. Court of International Trade has ordered U.S. Customs and Border Protection to refund IEEPA duties.

The Company believes it is probable that it will recover the IEEPA tariffs previously paid and therefore has recognized a net receivable of $54 million as of March 2026. As a result, during the first quarter of 2026, the Company reduced cost of goods sold by approximately $49 million on a reported basis, representing the reversal of expense for IEEPA tariffs on inventory previously sold. Of the $49 million reduction in cost of goods sold, $29 million was related to tariffs expensed in 2025. On an adjusted basis, the Company has excluded the impact of the reversal of expense for 2025-related IEEPA tariffs on first quarter results and in the updated 2026 outlook.

The Company’s outlook assumes a 15 percent reciprocal tariff rate on applicable inventory receipts for the remainder of 2026. For applicable inventory receipts effective February 24, 2026, a 10 percent reciprocal tariff rate applied, which remains in effect. Applicable inventory owned prior to February 24, 2026 is exempt from reciprocal tariffs. The Company’s updated outlook includes the impact from increases in tariffs on all countries from which the Company sources product, with the exception of Mexico. Based on currently available information, the Company’s imports from Mexico to the U.S. remain exempt under USMCA.

The Company is evaluating the impact of the United States and Bangladesh reciprocal trade framework. The Company utilizes U.S. grown cotton in more than 80 percent of products sourced from Bangladesh which may qualify for a duty exemption under the trade framework.

Updated Full Year 2026 Outlook from Continuing Operations

The Company’s updated full year 2026 outlook reflects the impact of the planned divestiture of the Lee business, which is now reported in discontinued operations.

Revenue including the expected contribution from discontinued operations is now anticipated to be in the range of $3.41 to $3.46 billion. This compares to the prior outlook range of $3.40 to $3.45 billion. Lee revenue is expected to approximate $750 million and is now reported in discontinued operations. Revenue from continuing operations is expected to be in the range of $2.66 to $2.71 billion.

Adjusted EPS including the expected contribution from discontinued operations is now anticipated to be in the range of $6.60 to $6.70. This compares to the prior outlook range of $6.40 to $6.50. The expected EPS contribution from the Lee business now reported in discontinued operations is approximately $0.90, or approximately $1.45 including the impact of $0.55 of overhead and other expenses previously allocated to the Lee business that were reported in continuing operations.

Adjusted EPS from continuing operations is expected to be in the range of $5.15 to $5.25, including the impact of approximately $0.55 of unmitigated overhead and other expenses that were previously allocated to the Lee business.

The Company expects the divestiture of Lee to be immaterial to earnings per share over a 12-to-18-month period. The earnings contribution of the Lee business will be offset through strong capital deployment and mitigation of overhead and other expenses, through restructuring and other mitigating cost actions to offset the costs that were previously allocated to the Lee business.

The Company’s full year 2026 outlook from continuing operations also includes the following assumptions.

Adjusted gross margin is expected to be in the range of 48.3 percent to 48.5 percent, representing an increase of 180 to 200 basis points compared to prior year. The benefits from Project Jeanius, channel and product mix, and the mix benefit from Helly Hansen are expected to more than offset the impact from increases in product costs, net of pricing actions.

Adjusted SG&A expenses, including the unmitigated impact of expenses previously allocated to the Lee business, are expected to increase approximately 18 percent compared to prior year, including the annualization of Helly Hansen expenses and an increase in investment in demand creation and other strategic growth initiatives, offset by the benefits of Project Jeanius and the impact of the 53rd week in prior year.

Adjusted operating income, including the unmitigated impact of expenses previously allocated to the Lee business, is expected to be in the range of $411 to $418 million, representing an increase of 15 percent to 17 percent compared to prior year.

Capital expenditures are expected to be approximately $40 million.

The Company expects an effective tax rate of approximately 20 percent on adjusted earnings, including the benefit of synergies from Helly Hansen. For the first half of 2026, the Company expects an effective tax rate of approximately 25 percent.

Interest expense is expected to be approximately $55 million. The outlook for interest expense does not include the impact of potential additional voluntary debt repayments with a portion of the expected proceeds from the planned divestiture of the Lee business.

Other expense is expected to be approximately $15 million.

Average shares outstanding are expected to be approximately 56 million. The outlook for average shares outstanding does not include the impact of potential additional share repurchases from the expected proceeds from the planned divestiture of the Lee business.

The Company now expects cash from operations of approximately $450 million, including the expected contribution from the Lee business which is reported in discontinued operations.

The Company expects to make voluntary term loan payments of $225 million, excluding the impact of potential additional voluntary debt repayments with a portion of the expected proceeds from the planned divestiture of the Lee business. The Company expects to achieve a net leverage ratio below 1.5 times on a continuing operations basis by year-end.