Earnings call transcript: Kontoor Brands Q1 2026 earnings beat expectations

Kontoor Brands Inc. reported impressive financial results for Q1 2026, with earnings per share (EPS) of $1.55, surpassing the forecasted $1.36 by 13.97%. Despite this positive performance, the company’s stock experienced a decline, falling 1.72% in pre-market trading to $73.65 and further dropping to $66.01, reflecting a 3.6% decrease from the previous close. This decline suggests mixed investor sentiment despite robust earnings.

Kontoor Brands demonstrated strong operational performance in Q1 2026, with significant growth in its continuing operations. The company reported a 67% increase in adjusted EPS from continuing operations compared to the prior year. This growth was fueled by robust revenue increases in both the Wrangler and Helly Hansen segments, showcasing the effectiveness of the company’s strategic focus on these brands.

Kontoor Brands outperformed expectations with an EPS of $1.55, compared to the anticipated $1.36, resulting in a 13.97% earnings surprise. The revenue also exceeded forecasts, reaching $808 million against the expected $799 million, marking a 1.13% surprise. This performance highlights the company’s ability to effectively navigate market challenges and capitalize on growth opportunities.

Despite the positive earnings surprise, Kontoor Brands’ stock experienced a decline, dropping 3.6% from the last close. This movement suggests that investors may have concerns about other factors, such as increased operating expenses or the impact of strategic changes like the Lee brand divestiture. The stock’s proximity to its 52-week low further indicates market apprehension.

The recent weakness is part of a broader trend, with shares down nearly 10% over the past week according to InvestingPro data. The current stock price of $65.29 trades significantly below InvestingPro’s Fair Value analysis, suggesting the stock may be undervalued—placing it among opportunities on the Most Undervalued stocks list. With a market cap of $3.61 billion and a P/E ratio of 13.16, the company trades at reasonable multiples despite its strong return on equity of 53%. For investors seeking deeper insights, Kontoor Brands is one of 1,400+ US equities covered by comprehensive Pro Research Reports, which transform complex Wall Street data into clear, actionable intelligence.

Kontoor Brands has provided optimistic guidance for future quarters, with EPS forecasts for FY2026 Q3 and Q4 set at $1.19 and $1.92, respectively. The company remains focused on expanding its product offerings and strengthening its market position, particularly within the Wrangler and Helly Hansen brands. Notably, the company has raised its dividend for five consecutive years and currently offers a 3.13% dividend yield. InvestingPro subscribers have access to 8 additional ProTips for KTB, including insights on analyst revisions and financial health metrics.

CEO Scott Baxter emphasized the company’s commitment to maximizing shareholder value through strategic initiatives and portfolio optimization. He highlighted the successful execution of Project Genius and the positive impact of the Helly Hansen acquisition on gross margin expansion.

During the earnings call, analysts inquired about the potential impact of the Lee brand divestiture on future earnings. Management assured that cost mitigation strategies are in place to offset any negative effects, with a focus on leveraging the strengths of the Wrangler and Helly Hansen brands to drive growth.

Operator: Greetings, and welcome to the Kontoor Brands Q1 2026 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Karapetian, Vice President, Corporate Development, Enterprise Strategy, and Investor Relations Corporate Management. Thank you. You may begin.

Michael Karapetian, Vice President, Corporate Development, Enterprise Strategy, and Investor Relations, Kontoor Brands: Thank you, operator, and welcome to Kontoor Brands’ first quarter 2026 earnings conference call. Participants on today’s call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to materially differ. These uncertainties are detailed in documents filed with the SEC. We urge you to read our risk factors, cautionary language, and other disclosures contained in those reports. Amounts referred to on today’s call will often be on an adjusted dollar basis, which we clearly define in the news release that was issued earlier this morning and is available on our website at kontoorbrands.com. Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in today’s news release. These tables identify and quantify excluded items and provide management’s view of why this information is useful to investors.

Unless otherwise noted, revenue growth rates referred to on this call will be in constant currency, which exclude the translation impact of changes in foreign currency exchange rates. Reported results and our outlook are stated on a continuing operations basis unless otherwise noted. Joining me on today’s call are Kontoor Brands President, Chief Executive Officer and Chairman, Scott Baxter, and Chief Financial Officer and Global Head of Operations, Joe Alkire. We anticipate this call will last one hour. Following our prepared remarks, we will open the call for questions. Scott?

Blake Anderson, Analyst, Jefferies0: Thanks, Mike. Thank you all for joining us. Today marks an important day for Kontoor. This morning, we announced we have made the decision to divest the Lee brand as part of our strong commitment to maximize value. This decision will allow us to sharpen our focus on the opportunities with the greatest potential to generate returns for our shareholders. We believe this will be a great outcome for Kontoor and the Lee business. Our discussion today will focus on three topics. First, our rationale to divest Lee and why now is the right time to do so. Next, we will discuss where we are in the competitive sale process and why we are confident this result will accelerate value creation. Finally, we will discuss highlights of our first quarter results and provide an update to our stronger 2026 outlook.

Since becoming a public company, we have been laser-focused on maximizing shareholder value and have executed a purposeful playbook to drive consistent revenue and profit growth. We established a multi-brand operating platform, executed Project Genius to create investment capacity to fund growth, optimized our supply chain, and transformed the portfolio through the acquisition of Helly Hansen. These initiatives have resulted in improving fundamentals, accelerating capital allocation optionality, and strong shareholder returns. As a result, we have delivered over 100% combined TSR since becoming a public company. Two years ago, we recognized the need to capitalize on the opportunity to improve Lee’s fundamentals. When we set out to turn the business around, we established a clear roadmap to do so. We focused on harmonizing talent, product, marketing, and distribution to create better alignment with the brand’s position as an authority in classic lifestyle denim.

While it has not been linear, we are where we expected to be when we started this initiative, as seen in Lee’s improving fundamentals in 2025. Why choose to divest Lee now? Our decision to initiate a sales process of the Lee business reflects the significant opportunities we see in both Wrangler and Helly Hansen. Focus is a critical element of our management approach. By dedicating the entirety of Kontoor’s resources and capital towards growth-oriented brands, we are confident we can meaningfully accelerate long-term growth and profitability while unlocking significant capital allocation optionality. As we stated last year when we announced the acquisition of Helly Hansen, our portfolio is built around strategically attractive categories. Outdoor, work wear, and denim are large, growing addressable markets with structural tailwinds that afford a meaningful long-term growth opportunity. Importantly, our portfolio is built around function.

We believe function and activity-based brands offer more durable, dependable, and sustainable growth characteristics with greater differentiation in the marketplace. As part of the Lee turnaround, we conducted an extensive consumer study. Our learnings confirmed the Lee brand sits outside of our strategic bull’s-eye. While Kontoor has the organizational muscle and discipline to continue to turn the brand around, we are confident our go-forward resources are better utilized in our remaining brands that are better aligned with our long-term focus. Let’s discuss how we will better deploy our resources, starting with Wrangler. Wrangler has grown at a low single-digit rate for over the last three years, and 2025 marked the strongest year for the brand. We expanded market share in our core bottoms business and drove double-digit gains in female, western, and DTC. Our investments in talent, product, and demand creation have resulted in remarkable consistency.

This quarter is the 16th consecutive quarter of market share gains in men’s and women’s bottoms, as measured by Circana. Wrangler has a unique position in the market. It is the authority in Western lifestyle and offers an attractive value proposition for our core consumer. Its distribution footprint is healthy with significant white space opportunities in specialty, female, and direct-to-consumer. With our team entirely focused on Wrangler, I am confident the brand’s best years are ahead. Turning to Helly Hansen, the global opportunity for the