Kontoor To Big Up Helly Hansen, Sell Lee

Kontoor Brands is restructuring its portfolio in a major strategic pivot, announcing plans to divest its historic Lee denim business to sharpen its focus on what it views as its two highest-growth assets: Wrangler and the recently acquired Helly Hansen.

The Greensboro-based apparel giant revealed the decision alongside a strong first-quarter earnings report on May 7, which showcased revenue from continuing operations of $613 million—a 45% increase year over year. The impressive growth was propelled by a 4% rise in Wrangler sales and a 16% pro-forma surge from Helly Hansen.

"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," said Scott Baxter, Kontoor’s President, CEO, and Chairman, in the company's earnings release.

Moving Toward Action and Function

The decision to part with Lee represents a fundamental shift in Kontoor's long-term corporate identity. Speaking to analysts on the company's earnings call, Baxter explained that the divestiture reflects a deliberate turn toward function- and activity-based brands. While a recent turnaround effort successfully improved Lee's fundamentals in 2025, Baxter noted that the brand no longer aligns with the company's forward-looking strategic direction.

The sale process for Lee is already in an "advanced state" with multiple interested parties. Kontoor expects to close the transaction by the end of the year. For the first quarter, Lee generated approximately $195 million in revenue and has now been reclassified under discontinued operations. The brand is projected to bring in roughly $750 million for the full year.

The capital and corporate bandwidth unlocked by the Lee exit will heavily favor Helly Hansen. Kontoor originally acquired the Norwegian outdoor and workwear brand from Canadian Tire Corporation in a $900 million deal that closed in June 2025, marking its first major corporate acquisition and its entry into the performance apparel market.

The Massive U.S. Opportunity for Helly Hansen

A primary catalyst for the restructuring is the untapped potential of Helly Hansen in the United States, which Baxter categorized as the world’s largest outdoor and workwear market. Recognizing that the brand remains significantly underpenetrated domestically, Kontoor is aggressively investing in infrastructure and leadership to pave a path toward double-digit growth.

A major milestone in this expansion will take place this fall, when Helly Hansen secures its first distribution through Dick’s Sporting Goods’ experiential House of Sport concept—a crucial foot in the door with the nation's largest sporting goods retailer.

To spearhead this growth, Kontoor has initiated a leadership shakeup:

Joe Alkire (CFO): Assumed global oversight of the Helly Hansen brand in early April.

Erinn Murphy: Appointed in early May as VP and Global Head of Finance and Operations for Helly Hansen and Corporate Investor Relations.

North America General Manager: A dedicated search is currently underway to fill this new role.

In Q1, Helly Hansen generated $176 million in global revenue, comprising $120 million from its Sport division, $45 million from Workwear, and $11 million from its Musto brand. The brand's higher margins provided a significant mix benefit to Kontoor, helping drive adjusted gross margins up 470 basis points to 50.6%. Adjusted operating income from continuing operations spiked 60% to $87 million.

Financial Outlook and Windfalls

Buoyed by the strong first quarter, Kontoor raised its full-year 2026 outlook. The company now expects revenue from continuing operations to land between $2.66 billion and $2.71 billion, with an adjusted EPS of $5.15 to $5.25. Free cash flow for the year is projected to exceed $400 million.

The company's bottom line was further padded by a massive tariff refund windfall during the quarter. Following a U.S. Supreme Court ruling that certain International Emergency Economic Powers Act (IEEPA) tariffs were unauthorized, Kontoor recognized a $54 million net receivable. Looking ahead, Kontoor's 2026 modeling assumes a 15% reciprocal tariff rate on applicable inventory, though its imports from Mexico will continue to benefit from USMCA exemptions.

Wall Street Reacts

Wall Street viewed the planned Lee divestiture with optimism, though analysts remain divided on Helly Hansen's baseline trajectory.

UBS analyst Mauricio Serna praised the move, noting that Helly Hansen's momentum could accelerate via the upcoming Dick’s House of Sport launch. Serna also highlighted that the capital freed up from Lee could boost underpenetrated categories at Wrangler—such as its women's apparel lines and direct-to-consumer (DTC) channels—positioning Wrangler to become a mid-single-digit growth business. Without Lee, Serna wrote that Kontoor "owns two powerful brands with significant long-term potential across several categories, channels, and geographies."

Conversely, BNP Paribas analyst Laurent Vasilescu offered a more cautious perspective on Helly Hansen’s historical performance. According to Vasilescu's analysis, Helly Hansen declined in fiscal 2024, grew only in the low-single digits in 2025, and missed Q1 expectations. "In our view, [Helly Hansen] was a no-growth brand for the last few years and it is materializing again in 2026," Vasilescu noted.

Ultimately, Kontoor is banking on the bet that by shedding its denim heritage in favor of an active, outdoor-centric portfolio, it can unlock a higher growth profile and maximize long-term shareholder value.