Kontoor Brands (KTB) 4 Aug 222022 Q2 Earnings call transcript

Good day, ladies and gentlemen and welcome to the Kontoor Brands’ Q2 2022 Earnings Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Eric Tracy, Vice President of Corporate Finance and Investor Relations. Sir, the floor is yours.

Thank you, operator and welcome to Kontoor Brands’ Second Quarter 2022 Earnings Conference Call. Participants on today’s call will make forward-looking statements. on cause and differ. actual based uncertainties subject are could that results statements current are expectations to These to materially uncertainties documents in are the These SEC. filed with detailed to reports. language, you We factors, our contained those disclosures cautionary urge in and read other risk

results our and website news a is GAAP the provide of why at XXXX to financial we Comparisons amounts to GAAP make constant in first certain quantify comparisons basis. These kontoorbrands.com. an the included management’s on XXXX on was will issued found and morning on view currency, investors. otherwise unless that we tables and release comparisons measures and release. to in results can cases, news XXXX be are supplemental Reconciliations stated. clearly useful results, adjusted quarter will Select to items this information Second quarter on dollar defined adjusted available this be which tables basis of today’s will earlier in in identify be excluded is

today’s and call Baxter Executive and about Chief Officer are will We hour. Brands’ this Kontoor Scott last an Scott? on Rustin call Financial Chair, anticipate Officer, Chief me Welton. Joining

for environment leading simply and to to not today’s industry only everyone clear, have persevere through success. results times, macro let’s position our to long-term thanks operational dynamic greater isn’t today. TSR and our the but for dynamic And to humbled us spin, say been by deliver our start on while economic Kontoor greatly drive since been Eric Thanks, around enough. all continuing near-term has the want collaboration agility, call resolve in I thanking sincerely I by joining colleagues world. our team’s these be

been people to to have as face it recent and is, and of chain discussed from been that supply the to unprecedented. our Let’s disruptions these war not the the And Kontoor world we COVID are call quarterly many companies, continue obstacles. difficult inflation, consumers to to pandemic around pressures have immune calls, and lockdowns the it downright has on like it’s

face to system In And independent for spin-off, model, addition our challenging more set of a ERP growth our about further global the stood we hear are at Kontoor these executed catalyzing operating and foundation as you relocating in times, a up new an and the headquarters. European globalizing our company, have implemented including we will today strategy.

us to income time in on environment, do POS XX% me earnings our on our are business. were and goals year-over-year years to the wouldn’t up deliver further execution. over and in drive at bit. line able profitability in we greater expand of midpoint X region, knew benefits We in are sit really guidance further easy. how the and let intend be as this a to range. some to top of knew transition to about and strength today last up would talent But quarter significant near-term on excited they and provide not position strengthen overnight. support oriented will macro world second still we legacy to and the touch to organization Despite unlock tremendous. have don’t our sustained insights challenges model. a we requires our growth these We But and they be first, coming organization, model AURs over our the operating class operating linear. been journey initiatives here we We uneven can’t able results. But core better attract and share, the challenges, our as for strategies operating with brands, the I This And XX% our transform even it U.S. business our our with

come didn’t to the second some strength much supply swing progressed. without aggressively inflationary demand pendulum quarter discussed that as Now, rebalancing headwinds, this caused and including incremental retailer line the the inventory pressures bottom

XX% While tempered top we growth declines sooner That both women’s to factors weigh were more our augmented strong market had these gains in U.S. momentum strength collection, still Wrangler currency. anticipated portfolio somewhat workwear business in Wrangler with in our by up in international offset QX. The at was results, our Europe development and would timing in expected. Lee our line breadth up the impacting the the brand supported categories. the than largest underlying Western in we half lockdowns the more comparison our said impacted included constant XX% modern on by China product were fully Highlights second least global in in strong expected brands they owing domestically. and and of than These shifts by

summer fact, In Western seasonal up were double-digits. bookings

importantly, pre-pandemic X%, our we proactive Lee, ATG the outdoor strengthen gains addition, across evolution denim, men’s within gains. first share Motion year, a all India. revenue growth Compared and innovation to core strong but In a solid categories with think ‘XX accretive XXXX a how in just our diversified from of really versus young geographies. to gives assessment normalized product at growing of more drive seasonals, the to bit and the Wrangler Stepping growth to Flex quarter compared and XXXX, more specialty too lines, with taken indication again back It Women’s VFO as believe I of perspective should brand’s double-digit Lux results in quarter. Ultra half excluding performance strategies casuals and our actions second the half experienced At business. categories brand look male its saw fishing across important core once channels, saw XX% providing the last half global first platforms the and continue also half wear. of driving performance increased have first better our increased it’s sports momentum supported the first

our and largest market, driven U.S. our In have XXXX increased brands the core XX share up proactive and and first if in of of certain casual ‘XX gains of both business, points exit business denim points Lee XX% half be and Wrangler respectively significant Wrangler distribution. levels. bottoms quality terms men’s over our points core over In XX% to greater Lee half for sales even not actions first up XX with would

distribution. AURs to Importantly, also brands driven this the time period, by premium mix have supported for in brands of points and increased double-digits expansion innovation, up both digital over the U.S. of more by

XXX% Turning to increased XXX% our focus XXXX. to ‘XX our digital, owned.com half the owned.com on with our U.S. first diversification, channel compared increased global and

by investments to support of long continued From this brands as talent, overdue to and both demand able innovation. However, and for key making amplify the we creation demand brand QX like exciting Lee deliver the in to heat the have balance year. challenges plans such and creation Wrangler have perspective, been multitude before of enablers a these in performance never despite the macro growth

continues mark iconic specific at destination including able recent in demand a second Lollapalooza like year-over-year of sponsor tees the last merchandise its continued past, campaign significant and digital Brand digital square the self of new in of such laser our by of Limits, distorted and elevated impressions with of June, media over perhaps points XXth of and on AURs reflective further brand the passion the also May. apparel, aficionados celebration highlighted experiences the originality. City music these Wrangler, Music leaves in spirit music, wrangler.com. it denim health to up to but three of drove cultural brand highlights by celebrating customization exclusive seasonal XXX brand with by increase media complete brand men’s free activation to spend, music in in kicked in fashion million collaboration are the to with the line sweepstakes enhance how Fender with XX interactive only Fender, exactly events connection in Lee, creation streaming the music the the denim never XX in Lee’s summer interactive of were with the we demand partnerships feet your to compared a denim in right to wrangler.com. the consumer social creation, with XXX% consumer expression integrated brand our as that catalyze First, quarter, of the remained in efforts impressions originality Berlin meaningful It a marketing music the shared Hundreds our heart additional decorating booth growth scraps, customer exciting support positioning, festivals. brand the saw the how the Lee of Lee off festivals, new investments additional demand of denim sponsored not to original team engagement, a culture one Chicago investments points share QX and supporting Life brand old acting which million campaign, art digital successful collab with including as Similarly, festival. the that goers that is music launched For Days in denim the highly to and available over the as leaned media years have festivals offering and prizes two Lollapalooza plays brand with reflected anniversary and key particularly Summer, an increased that collaborations holistic is most moment premiumization allowing event. touch of the into by And celebrating digital QX has traffic collab, Augmenting Authentic, originals, personalize Wrangler levels. of space, throughout Austin platforms, social Bonnaroo reach buy quarter. the XX The bottom helped gains, exclusive enthusiasts during In media and brand in in well allows drop iconic influence. second types year-over-year of in including to Tree, A across within festival market elevate as different brand experience strategies, music XX% free the the showing XX Lee’s traffic year XXXX Authentic elevated to brand growth Lee kind in increased XX Wrangler with tree Ride for With partnership consumers domestic importantly piece before. and days made Festival these brand’s a Wrangler culture their casual efforts is including creation make Wrangler in American

wait can’t performance City of are I you joining Wrangler followed Wrangler’s really by with event. Leon Grammy on collection, York including be XXth preview share event, himself. Bridges the we some an with us a know Finally, a New will upcoming that this excited We this to Award anniversary for folks. to by of amplify our winner call

As top brand efforts brands to consumer see, of beyond. have brand elevating demand we an with to you activation invest incredible line equity, will reach behind drive and continue amount can we creation both in growth ‘XX and and these

how forward. So, let with about me we close the now go think

more the on be factors, China. remain macro more lockdowns an to have necessarily half we to March, own in view As we from inventory healthy focused rebalancing Despite by experiencing not particularly even but anticipated conservative impacted greatly our you backdrop, our guide Recall indication initial macro we today, and have we of of business. the reflect back back these lowered our seen, ongoing retailer strategies. outlook headwinds, the in momentum executing our are an the in

that growth This is future As U.S. we channel anticipate we outsized our geographic to look expansion. and be diversify as have wholesale. frequently, stated beyond category, important will driven revenue in portfolio we by

happen earlier, said doesn’t overnight. I As this

accretive investing absolutely are in We areas. those

First, platform. channel our diversification in enhancing digital

to to authentic what beyond DXC to early Pinnacle already of of the across is and natural love directly days. Western, each outdoor, finally, And we leverage accretive showcase breadth opportunities our learnings in tees, much develop category we in nearly of consumers, turning opportunity omni-channel DXC integrate their peers that its evenness. nearly do remain we workwear, remain full-price female, a consumer markets connect portfolio greater, us But with and the have more holistic, category us extensions are most a And margins. our of perspective, further bottoms. over highly of vertically under-index of of brick-and-mortar XX% denim product our business evolve you business the brand’s we From made global to digital this as a the outside so importantly, by our and size time. leveraging expansion, XX% to growth importantly, the we our really of XXXX, our significant internationally, our double for international while seen product target experience have strides penetration tremendous a established for While have our model

As to aggressively am on near-term, to the QX, this over relocation for growth, investment globalize further growth Switzerland. that Europe. international, substantial ourselves we to but continue weigh to in mega in both operating expect excited enhance Highlighting China to long-term we today decision our have I we particularly and model, our the macro Asia positioning pressures of announce to the invest discussed, headquarters we across including made Geneva,

of With global global a foundation operating transition the time our it’s to us to further our accelerate growth infrastructure implementation organizations. the now oriented ERP and ideal efficiencies drive complete, and for

continue even sustained, go-to-market to macro capital strategically talent For long-term, providing in and growth. including benefits, these to capabilities, announcement SKU our when access The commitment long-term class efficiency, driving profitable greater remain rationalization. for improving conditions enhancing best actions difficult to are invest significant, reflects

to we structure the give to me capital Rustin? afford proven taken strong will environment look our tighten in in We choppy navigate to even confidence that Further, competitive recognize significant continue moves, to uncertainty cash have periods coupled years and the also with macro to and separation. several last need increased great sheet flexibility of Kontoor expenses. actions fortify flow waters. over this we the us generation, be optimize These our our accordingly will accelerate our balance non-strategic agile the

inventory inflationary number you topics, Scott and I demand, retailer joining all macro you, today. on questions have know us all you rebalancing. Thank pressures consumer and for thank including a of

and in begin discussing will by incorporated reviewing these some with quarter of both factors are key XXXX performance before our external second updated closing I how So our outlook.

U.S. in Let’s begin the

during reflect supply As the the Scott mentioned, many to signals retailers quarter began demand better in marketplace. levels and to inventory rebalance

how a our While level, chronicled dig specifically been core brands retail more to into point-of-sale. have I and performed macro at apparel inventory our at a want well levels little categories

for the performing a seasonals segment, core and casual past better significantly low both the our segments. X key largest bottoms, to Wrangler Over denim and casual months, in women’s. bottoms, our single-digits across measured the categories the pants. In mid denim and outperformed U.S. market in women’s and men’s pants market categories total men’s grew bit men’s Lee With than of

As in believe have consumers migrate we of to previously, brands stated trusted times we uncertainty.

expected seasonals, as during women’s, in the categories. value and of the casual Lee market noteworthy, there point-of-sale. we retail market is made demand seasonal softness place strength as creation resonate end it level, Scott inventory was that disparity challenges consumers season, and retailers taking more business the is restrictive With but broader high and category key led in at across the to back Wrangler of market rebalancing the portfolio for this a half. our stepping Wrangler continue are quarter And the and with Lee that with focus Wrangler have outperformed the innovation how point-of-sale discounting quarter seasonal investments shipments and product, outperformed in has into to adversely saw the proposition pleased outlined, U.S. On majority In of prior we pants to a and at to-date. and are But the very while back, second with softness performed our in open-to-buy is in Lee as dollars in impacted the ever with

to behavior Wuhan brands for markets, restrictions a city-wide more to restrictions jurisdictions played our traffic Shanghai quarter basis and These and our parity first contributing Shenzhen, two line headwinds Chengdu, a currency time quarter, are are outlook movement embrace and the in dollar with the as and Europe, number continue the are relative conservative U.S. with and the expectations to In to impacting continue our out in brick-and-mortar consumer half. such at in and winning as consumers most In a the Kontoor reopened We expect back accelerated lockdowns and clearly on decades core results. how the euro FX on categories. remain. during in recently in we pressures for temper the and anticipated. In international generally but of in offerings China, quarter

on as the surcharges input and cost oil, affects quarter chain. during crude before Turning in highs QX. key to Inflation freight to such spiked which year-to-date supply moderating cotton

prior a momentum. We to second with U.S. recent increased half on XX% both year. strength let’s Growth driven ‘XX basis, significant by impacting interests. revenue, given of Beginning assuming second results. lag our the X reductions driven to the U.S. the benefit in the are broad-based XX% revenue increased not P&L of backdrop, a these commodity compared on channels. digital the and by in across from revenues continued time this month X review the global many On With quarter wholesale regional was

we addition delivered new categories, the such strength to all In and are in our quarter. business in decreased progress strong are encouraged in as prior the traffic we distorted year, our revenues improved outdoor, in to are compared workwear by diversifying supported into and owned.com which core, our tees, the which XX%. making growth the investments AURs. driving increased And digital, business, of in XX% by digital U.S. International

COVID-related lockdowns the China XXXX expected, on comparison ERP in quarter. As weighed in implementation in the to

driven revenue Turning workwear. to global our in from strong and Growth contributions increased momentum brand our XX%. the Western, brands, by outdoor was including U.S., continued Wrangler of

compared to in revenue increased international non-U.S. quarter. Europe. shifts owned.com in we growth addition, offset the timing XX% In gains Wrangler’s tees, implementation partially to by business, increased in Americas In X% ERP Wrangler related strong the the saw in prior which increased triple-digits digital U.S. with XXXX year.

platforms. product XX%. global U.S. increased momentum as and Lee, performance by driven well to in increased styles revenue revenue new XX% Turning Lee as comfort

XX% wholesale strength XX%. We up decreased also U.S. international Lee revenue owned.com XX%. digital in U.S. saw digital increasing and with

quarter, finally, a lockdowns see decreased April perspective, did with increases business, wholesale eased, on had in and XX%. COVID-related our a lockdowns May. significant increased XX% the non-U.S. particularly sequential saw in in China increased U.S. discussed, wholesale We improvement owned.com which a impact digital channel double-digit And and from as global particularly June. As XX%,

margin adjusted XXX gross Gross margin decreased to to on gross last margin. points Now compared basis year.

As we point continue factors These to XXX headwind resulted last discussed the transitory in air in quarter, including costs, elevated a quarter. basis we see freight.

the pricing, timing expense geographic SG&A an offsetting quarter. the SG&A. resulting a resulted benefits first cost ERP versus adjusted million million lockdowns unfavorable offset point in in related product from in decline. basis headwinds strategic was further Europe addition, $XXX and Partially mix In than from China were increase shifts shifts pressures XXX which $XX quarter XXXX more these or

the As model a efficient the leveraged behind key the digital to such percent on of of by share, SG&A revenue, in demonstrating still and to enablers in basis support basis. adjusted Earnings benefits XXX the demand period creation, multiple levers points $X.XX in growth and IT. was an prior per while highly profitability, year as our same $X.XX investing quarter compared

turning balance our sheet. Now, to

XXXX the in net and debt $XXX increased quarter quarter were Compared or cash XX% with to of second year. debt million flat. inventories compared last $XXX We Second and cash million less inventory to finished long-term levels, pre-pandemic equivalents.

Our our at range was ratio Xx of trailing quarter end Xx. divided X.Xx, net adjusted to targeted within EBITDA of debt the leverage the net by or XX-month second

million shareholders during authorization. $XX a When returned end share $XX repurchase at Finally, we of million common during the a stock. quarter, QX. strong repurchased And combined total approximately dividend, we with the under $XX we our remaining had million to the quarter, in of

prior in first In breakdown review take on our China, first COVID to outlook rebalancing half retailer efforts like the our the outlook provided a Before to on supplemental year, key given U.S. assumptions for we moment the inflationary to the reflect incremental balance in our March, we XXXX. regarding implementation a and results. ERP lockdowns inventory half in of pressures, I’d

to we billion to indicated global we half the in revenue Specifically, first $X.XX or XX% that billion expected a compared of XX% increase $X.XX to XXXX.

a line, half XXXX half, has GAAP to were to the $X.XX many compared constant Despite right We we our in of EPS. quarter expected grew the increase GAAP the XX% factors delivered than $X.XX compared in and bottom March have currency increase first due macro share we or top in middle $X.XX adjusted discussed, we expectations. of factors, XXXX to to revenue that to XX% to per expected XX% able EPS adjusted on we differently in results first XXXX. EPS half unfolded an Although the Similarly, EPS. of bottom indicated to XX% compared constant deliver in line first the currency our

our gives with agility Our the in and to uncertainty. confidence combined us marketplace, future focus navigate brand on execution, momentum clearly

This are in expected half begin outlook previous half with of how Let’s half. covered? to pressures. implies I the increase last the XX% global the revenue everything approximately we consumer light revenue. mid-teens we guidance So, mentioned in range, from were second increase to in thinking second single-digit the softening about mid with full quarter, first incorporating to revenue In inflationary we just to year already that we global increase anticipated Notably, due demand a at our compared XXXX.

driven Our flat to by factors. updated second XXXX to primary outlook compared global now assumes two be revenue half relatively

anticipate we be implemented. to inventory dollars as somewhat restricted open-to-buy retailer rebalance are actions to levels First,

our the We issues quarter pressured weigh will than anticipated, fourth more more third with expect top the quarter. than originally line these on

believe outlook, more global in first and expect sum, compared growth a second we it revenue Second, flat is be currency take will a given XXXX. in ongoing With outlook. XX% driven prudent now more of cautious our relatively COVID by delivered now China XXXX. half revenue updated challenging market U.S. constant half global second believe conservative the and XX% we restrictions we growth to remain our to to of the lockdowns, In half compared to approach to

the during continue pressure from as quarter conservative a of Inflationary that inventory retailer more China. rebalancing gross to terms adverse In a to will mix the will and call margins margin, to geographic items approach pressures out. second peaked gross few

moment I such to strategic will offset want transitory expenses by SG&A. on a these accretive expect mix headwinds We spend channels shifts lower freight continued air Last, be structural pricing. somewhat to as and and

strategic Scott our including to highlighted, will of the Importantly, as globalization first diversified the accelerate thoughtful accretive continue digital, run. and we operating to international long over make growth foremost, investments models and

on of However, tighter we non-strategic light expect discretionary controls and items. in the expense uncertain environment, macroeconomic

details the XXXX. Additional to expected our to with full flat in compared summarize, release. earnings outlook is year be increase to X% approximately second now relatively on revenue today’s can found But for half

quarter relative The adjusted experience is is Gross to compared fourth greater pressure the now to approximate in expected third margin achieved gross quarter. margin of to to XX.X% XXXX. expected XX.X%

consistent rate a relatively to relocation charge compared be of in Adjusted of efforts $X.XX with expect to with in gross of our and increase growth. XXXX SG&A globalization headwinds EPS, We associated share, excluding in estimated $XX our per headquarter margin quarter with Adjusted to mid one-time at the relocation, second with adjusted million quarter. half, European per third is fourth to globalization revenue European an greater expected share. experiencing moderate charge the SG&A, year-over-year estimated pressure $X.XX relative one-time to the expected to single-digit an efforts in is range the associated excluding now headquarter $X.XX

briefly Finally, I our inventory allocation. regarding want Since some comments to capital improve the to flow we discussed spin, metrics. and provide actions have inventory, cash

XXXX, flat, XXXX revenues. to back levels Looking our are higher despite projected inventory

half. evergreen did good majority styles poor to in the quality improve these levels U.S. the about rebalancing sequentially higher feel the finish our quarter, second working the inventory during inventory importantly, be But in and we expected. than Given will is efforts retail we levels the as from

expect generating in is XXXX. and continue from to historically cash this operating from highest the activities Additionally, quarter QX we

tremendous in our allocation provides like we flexibility optionality, capital confident discussed, have these. remain we us in As times which with

while operating shareholder returns. to to I sustainable our a strategies, We investing dynamic are concludes operator. remarks. clear This we our be on model in environment. the growth Horizon call transform X And to remain behind But executing turn profitable I want laser back long-term now clearly initiatives prepared highly Operator? the delivering our focused will

comes Our Sole your state Jay Instructions] with Please UBS. [Operator first you. Thank question question. from

is morning. on Serna Mauricio taking Sole our for behalf and good This of Hi, Jay thanks questions.

far confidence about that on numbers a of fiscal outflows, of level speak little if the the especially business, – previous you updated so compared compared couple broad a maybe you to quarter And prior your from evolved like QX? seeing Thank demand, maybe in in outlook? like you bit how how are you during feel could side, bit could into do are numbers that this have you. about and speak the risk perceive a to more that what consumer how little questions you’ve these you core if Just the year our you this U.S. seen ‘XX

in Hey, bet. will start about And Scott. and will Mauricio. over the little This a I it hand speak will bit is I just You our Rustin But prepared challenges then of and did outlook all Rustin. to very will we business. we face up. the really, thoughtful I then our follow really that review understood consumer in our remarks, a we and

thought our understands And controlling we the business that. into working everybody updated what standpoint. can we analysis that went So, we now are outlook. the than a with really today came that’s right Hopefully, on why from

X hadn’t you position I themselves the couple And fundamentals team been investments can and right today, before all results that first cash marketplace And as in you understand, really saw through strategy the quarter our investments the the out the are think the really the the invest even in we right, years, we’ve strong I and as have the to and we now. the a updated are continue in what’s design, really in in in half, about made in investments current that think going about the the forward. that you I we product, of strongly our but going made the it. we that dynamics that last payoff first the the in the business, the looked the our in about really to saw the investments So, think think make marketplace at we saw in, consumer are thing now, the when you And happening marketplace. our we business in with that feels and right flow to investments continue working the starting specifically, brands that outlook, feel that us to And and good in that that in in puts core. our

checking We the which us core, gives in confidence. well great really are

had are We we and important have categories going going advantage I And leave forward. space, these us that’s in have Bonnaroo work giving think And I prepared that think thing a with But in really is with, remarks, and us invested made conversation us invest comments my big geographies end pricing the of our we the the in to is festival. our to brands advancements our some continue real channels, which the brands. the and never made which have to weigh in before you I that real really to consumer. in our you in that outdoor us it’s power to about in we want the tees given

happened would like Wrangler that with Hundreds. and we never had the The investment Wrangler’s Lollapalooza that we’ve XXth collabs in Something and different that with have our have Lee, with made before like some anniversary of in

bit about to then and am I for over little continue will I’ll it flip outlook. the So questions. real and go we the ahead to not work pleased, happy, hard, talk Thanks to a Rustin

Good Scott. question. the morning, Thanks, for Mauricio. Thanks

a comment. with start will I First

as in As Scott proposition that offer about the are investments important. it talked and has that driving as making think consumers really really that demand brands, It’s ever particularly and we in high we are been. is value he I mentioned, that product the creation

that double-digit remarks that talked about strong are sell-throughs the the in in in second increases quarter we You us.com. the prepared and on own our seeing the

with were price put a increases remind everyone So our been bit little at increases. price strategic more And place we additionally, I context, many in the retail. maybe of already have

While on seen talked we the more as dollars taking a favorable early, POS. are outlook. in and we in inventory we strong broader are are it’s more conservative expect to said, China we That open-to-buy response be until updated view seeing still this as levels about, the do certainly rebalanced a restricted

up the where Mauricio half, flat one in relatively our updated And first XX% this guide. globally expect to half second said revenues We were versus point, be to into have the currency. incorporated compared constant as XXXX closing maybe just with we we we

thinking mine hopefully comments So, Scott’s perspective you that little Thank you. on how are revenue. and gives a about we between

you Thank much. very

Thanks, Mauricio.

Okay.

Our next question. your state Drbul from Securities. with Guggenheim comes Bob question Please

Good Hi. morning.

couple a questions Just me. from

have you gross inventory of expectations they the much do second the further just retailers And Thanks. your work are visibility what on on you do how the around the your are on really of Do bit then a of the Just plans own support the to terms where as few think retail, into question next brands? how we commitments in down and continue levels it’s and you at I the are the the QX think you adjusting margin, little QX, readjustment X-month quarters? over have manufacturing inventory is levels readjustments? on

feel business are go you? are How will Bob. talked we the well. put ahead going doing of start making that lot and really from We a the where support. outlook and a we I the emphasis an Hey, Thanks about forward and understand little are standpoint. for Hope on you confident questions. a bit sure lot on

Our to here product the touch behind key think before that we the the about. are Rustin brands. we checked kind well, I have just is hand and for that, the over which has really But made real it is that have at two the thing been thoughtful I we happy of it other I is really about on investments retail will

real the We design have about in winning with brands the been direction the winners. of thoughtful and

is continues and from on, of very us strong been the going be going that’s strong the rebalancing for to position forward. So, standpoint our

Rustin, the and rest? take our So ahead that teams you have in pleased respect. to go with the want that globally work done

gross updated outlook aware. Scott. we Thanks, you as That be and go our the are you to Again, this full with does approximately And morning, obviously, question XX.X% in guide ‘XX. had. ‘XX. Bob. well year compare gross We ahead about margin Bob, will to with for the expect morning, was ‘XX. prior Yes. I start Good XX.X% margins now consistent

not the back specifically more be margin XX.X% down in and the we As QX of on half the And certainly down continue somewhat in The gross headwind takes, about that is to little P&L. as of in really some breaking assuming few is we expect about flow the takes half view past, imply input on consideration half, of the and QX the our than then little a two we – efforts. and just pressure But back second as the Maybe ‘XX. we in the are see Bob, quarter more are guide and outlook, side. the impacting spiked at about through costs, retailer a versus that have into recent that a the the a China remarks revenue moderated factors does taking talked your it bps XX where bit benefit the talked those puts we indicated you rebalancing side on in talked for question, about do conservative second inflationary peaks. quarters off prepared bit they about a pressures

of some to shifts structural certainly more that’s There China certainly from tailwinds mentioned. is unfavorable major out headwind, mix second in on the channels. shifts the view those The there mix accretive the I are conservative numbers, sort geographic well just as

You have here. deliver of seen us quarters number a over

prior We half inventory in as we under at taken in how but front distorting the the half if have bit, XX% still previously, we up year. million. talked was net been as $XXX just little year. then a of better inventory headwind finish did about the incrementally there. investment get should over about will That we Strategic and for pricing, shift thoughtful be are to freight, air on particularly pricing, calls, to And the back continue HX, year. a our Maybe very will about, I

and year the that’s relative to on think up that full on versus prepared Bob, really comment, revenue be remarks, XXXX to flat it’s expected ‘XX telling me was highlight heard important ‘XX. you to I As that

on the we been retail certainly Certainly Scott broad to-date. the a as which in the affected on then really open retail area both impact about seasonals, working talked have on So, and And outperformed an But our through. that to retailers it, dollars buy women’s market prepared strong as are seeing the have side. POS seasonals inventory an remarks I well. inventory imbalances my shipments softness had mentioned are relative have have basis of men’s and in the

sequentially as of styles. really through go we I think positions it’s So, for our mostly inventory inventory to as quality healthy it’s working we improve evergreen the the year. are important is in But that

In terms previous we trade how very we as talked close just I partners in try stay have to say, are retail calls, of modifying we and Bob, managing that, very, our and about would modify and they to that and quickly agility are retail seeing, the that ongoing. are have they the see in react inventory certainly efforts on that signals, changes to demand trends the including rebalancing

for more provides clarity. Thanks hopefully So, that question Bob. a the little

you. Thank Great.

Bob. Thanks

Okay.

question comes with next Please Kearney question. Our Barclays. your state Paul from

for taking about question $X long-term EPS the my and think margin. guess your and question. my those timeline track? your everybody. from plus on gross plus I Investor Thanks is in saw those Hi Day, targets of in should potential achievability and How for Thanks. we the maybe I on XX% what

do go want to you ahead? Rustin,

the Day Yet, extensions. we of the that lot, about you really they intact, rebalancing. talk heard Investor back certainly May accretive or strategies at growth. And Investor category ‘XX, laid we in out hosted all Scott. seen us Thanks inventory Since market, today diversified that remarks important we take Scott’s in driving as our will think to Paul. channels, are hyperinflation, stress it’s about underlying geographic, happened our about remain Day in about morning I Yes. I have a that. that’s retail Good

step are So, billion greater EPS we but laid with a at EPS. was a for $X.XX targeting $X.XX than ‘XX, on we the And obviously, outlook and broader scale, updated ‘XX revenue we a look if our with maybe $X.X it ‘XX ahead plans today, on to of in today, basis. guide on and out of back we won’t revenue

feel really about we we it that the fall, have. positive how strategy And little to into about will we relates certainly bit get a as So, more talk the later and structurally, timing ‘XX.

Thanks Paul.

Thanks.

for I one more me may. Just if

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that We right our are across seeing now businesses.

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and business. for our Mexico, of this ERP America, building upon company standpoint. upon work we two could and knows didn’t system. teams on the weren’t with I really the call thing went system, is systems globe. because that Same system out South one fundamental another other our globalizing the know didn’t business. working we talking, difficulty that cohesively projects Wrangler, together everybody implemented We We around didn’t combine. then And embarked of businesses and a from geography the we run teams that pulled have And an one China, together. so have this this piece ahead their embarked were

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of the happening to reasons do into went Paul. that And thought that. of lots lots Thank for advantages, it, of that. lots you So, question, right now. that’s Appreciate

Thank you. Bye.

Okay.

question state your Brooke next from with Goldman comes question. Our Please Sachs. Roach

year. Scott, you But marketing expense controls question. which I Kontoor result of have the and a Kontoor some is this in think thank big as Good a up prepared the investments, macro that for to my morning on tighten of looking taking been these remarks for question Can be focus headwinds. that is I result should this spend any demand for? heard clarify you the for on as tighter creation are macro? And a then the can we launches plan in that where lookout into really big SG&A your of innovations half, second campaigns areas flex your or or the you down

I go our Got have and know, optionality. will we part. second take cash as outlined will the to ahead then and hand you first I it. part, Rustin the flow over We, and for our strong

the things the have do time. we ability marketplace multiple to the in at So, same

on brands One we are things have way. a pretty that here invest behind of made decision the in significant is to to the a that we going continue

is want had. that we things the momentum stop we do to to that of don’t the want don’t One we

momentum. good really created have We

the got good right really that product line. have and We machine we this globalizing are working now

good well. We taking that’s really out really are creating product

heard us is our about, well. You checking POS extremely talk

some we likes. about most our recent In talented are designs that, can good that of great behind really then are talk the consumer stuff. that have doing addition that and I really people we to got And creating

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demand, and it’s goes it, think ‘XX going into are how ‘XX. about accelerate to and on going We as our we with continue products to

have a and the of of campaigns focus, we these really has So, really focus, The about to most I Rustin, all thoughtful important energy this in money it’s on to some in single they powerful you two big significant consumer way. behind put that? want worked, because is would the before. talk and we big, them And haven’t do these and accepted focus brands good had brands, other piece thing it you, time tell the back come

Scott morning Brooke. Yes. it. Good hit Thanks Scott. Certainly

going We behind invest to strategically Brooke. are brands the

sure that. You of be need to

spend. do spending and you morning globalization is the and at headquarter the involving saw As looking all certainly non-strategic European categories. That we tightening this with certainly scrutinizing us But the uncertainty, across are in discretionary move.

that goes training, needed. take As Same or open lens become that. positions of that travel, going sure we make type and other fresh have they that for available, those certainly whether are a we positions like or it’s it’s are to factors at

and are invest wise of be every expect continuing would you look this we at to us with it spend to in that’s the going to environment, be type very in business. there as while out So,

takeaway. think the I Brooke. key Thanks that’s

the more the And in Rustin. margin, there. that guidance ask can help that’s conservative proportion seeing United of Thanks are you if reduction the gross weaker on versus one view could taking second the you headwinds States? understand the us are you attributable I just China and half sales China that the in Rustin, the follow-up macro and to outlook

Yes.

you as am doors And expected, lot you double-digit certainly I in and in particular the think, our brick-and-mortar us in was there, on Brooke, quarter quarter back of as you improvement as our expect. line there as you sequential though. saw talk out think China, including Lee. Certainly, out progressed, Certainly, the uncertainty heard we saw our We would and prepared June Shanghai step at both on going about But I country, bit growth is for remarks. with a reopening expectations. the I e-comm. a largely a played if not look little our to guide

that Wuhan, other We Shenzhen, restrictions lockdowns impacted Chengdu, movement have those remain. and have seen jurisdictions including

conservative conservative going continue China, quarter region as in last point, to the about QX is going year. approach to the a and to there. And we appropriately. hit half cautious long-term given expectations, of really place leave re-openings bit that say are invest But to a lots the are Certainly, just Lee of Certainly, more those of the believe taken where in pleased as take I opportunity think upon would back I some we the outlook assumptions, to Wrangler more to continue this in brands I really half region. a back taking the little we sure we a according have both make for healthy would factors. Scott’s with talked it but and approach and that some the to our uncertainty of strong reopens in that’s relates to these are to

thinking So, we a hope more are helps that Brooke China. how little about about bit

would I comment, make kind Brooke, internationally And really these an one beyond of brands. broader China. We have opportunity for

we headquarters new that why, have how with our about acceptance we And new we the a as is believe some of and in brands these here peer that the under-indexed Europe, are and enter a and that to there today think for runway time very and here relative nice actions really taken have categories gain we we talked our geographies. set as across long globe

will feel and operating the very Brooke. broader catch quickly that. like like we we really do Thanks to are a we standpoint, game from up early So, in have here that got right systems where very the now

Thank you.

Gardner And your Please Will our from Fargo. question. final question state comes with Wells

holiday ask have guys you channel. with know the promotions rest how want Hey, excuse I thank for you and you you promotions Under Target, their how more about thinking the into year, about for a inventory, the it to wanted but are about the to you back-to-school, to know I heard of guys are the for just talk me, to they of Armour balance this optimizing just Walmart, year. making question. yesterday, lot going the

secondly, impacting know want that. to merch how And just thinking you. that’s So, how you about margin? Thank your are

and from And product, checking. our really standpoint, Rustin are take that’s I Will, go building resonating and product there. then our it’s will ahead like we But start well. from will people really it

and that really have a making aligning we the our design the with and consumer we forward. we combination to and that then brand of from understand right and in our limited standpoint. promotions position, product, put campaigns We think sure marketing really too customer So, will our good good relative that going ourselves

– back-to-school holiday. not to to bit that believe be over-promotional are and/or want little rest? we position don’t Rustin, all we be a in do we at have to for about So, going talk a you

necessarily not retailer about resonates Kohl’s, rebalancing if that in Yes. customers to model, I focused Scott’s you compelling you again, efforts like four of are nature. we product back, Will, earlier. would step Certainly the delivering Certainly, Walmart, in order. as our have really most and our know, proposition been the been that not Amazon, we and just have those add top that promotional we well positioned. are how we value with chronicle here. delivering But talked really on on consumer that And Target point,

we and landscape consideration taken our this seen morning. have So, certainly into outlook that the have global you here

you, Thank Will.

was And AURs, impacting if the Sorry. My on other how is a question us environment just quarter. just they at how all? were promotional

talked AUR AURs seen it growth break a bit in that have as specifically on are that a in relative product, It’s bit that’s what the about highlighted Will to about investments quarter. – well by digits ‘XX, we the higher out to you we talked I really there. prepared It’s We think speaks We the little Yes. double our strategic remarks. as yes, in didn’t that up little again, this have the out morning. into we making. pricing mixing everything call the But

have how the of are momentum into to – as as cost margins, certainly earlier saves offset we our those. that really Bob gross So, about with and combination the thinking we combination very pricing Will. a the about And been impacts mixing business that strategic the But bit our in the again, Thanks with the thinking it’s about have using brands up and pleased AURs. have we really thoughtful that the AURs, in pricing. little inflationary of seen and strategic commented I moved

Thank so you Great. much.

Will. Thanks

final That to over I question. Scott was it closing remarks. our turn for will back

for forward, our for interest run just thank to way. position in all with steps today. taking on positioned We are very assure, necessary folks, you it. want dynamic leave going and I we we really this you appreciate right coming how rest like business about the thoughtful And Well really thank company. are the this questions that ourselves have We and how sophisticated all we marketplace. this to going to in the you a ourselves And really

as to you forward going differentiate and of about think I a that’s forward. process to we companies lot And to how that look really we talking here in go QX.

day today. look again a next everybody. So, thank forward great for support. Have the Thank you we the for get And together. to you time

you concludes thank today’s This your call. for you. Thank participation. We conference

You day. lines great may your and at disconnect time this a have