Earnings call transcript: Kontoor Brands Q1 2026 earnings beat expectations

Kontoor Brands Inc. (KTB) reported impressive first-quarter 2026 results, surpassing earnings and revenue forecasts. The company achieved an EPS of $1.55, exceeding the predicted $1.36, and posted revenue of $808 million against the anticipated $799.01 million. This strong performance led to an 8.37% surge in the stock price, reaching $79.56 in pre-market trading.

Kontoor Brands demonstrated robust performance in Q1 2026, with notable profitability improvements. The integration of Helly Hansen played a pivotal role, enhancing both revenue and margins. The company’s focus on operational efficiencies and strategic investments in digital and direct-to-consumer channels also contributed to this strong quarter.

Kontoor Brands delivered an EPS of $1.55, surpassing the forecast of $1.36, marking a 13.97% surprise. Revenue also exceeded expectations, coming in at $808 million versus the predicted $799.01 million, a 1.13% surprise. This performance underscores the company’s effective strategic initiatives and operational improvements.

Following the earnings release, Kontoor Brands’ stock price rose by 8.37%, reaching $79.56. The stock continued climbing to $81.31, bringing the company’s market capitalization to $4.14 billion and year-to-date returns to an impressive 23.6%. Trading at a P/E ratio of 20.04, the stock appears fairly valued according to InvestingPro analysis, which suggests modest upside potential. This movement is a strong indicator of investor confidence, as the stock approaches its 52-week high. The positive reaction reflects the market’s approval of the company’s earnings beat and strategic growth efforts.

Kontoor Brands remains optimistic about its future, with strategic initiatives aimed at expanding its digital and direct-to-consumer presence. InvestingPro assigns the company a "GREAT" Financial Health Score of 3.13 out of 5, reflecting solid fundamentals. Investors seeking deeper analysis can access KTB’s comprehensive Pro Research Report, one of 1,400+ available reports that transform complex data into actionable intelligence. The company is also focusing on enhancing its product offerings and market penetration, particularly in the women’s denim and non-denim categories.

CEO Scott Baxter stated, "Our strong Q1 results reflect the successful integration of Helly Hansen and our ongoing commitment to operational excellence." CFO Rustin Welton added, "We are pleased with the progress in our strategic initiatives and remain focused on delivering value to our shareholders."

During the earnings call, analysts inquired about the timeline for the Lee brand divestiture and its impact on financials. Management expressed confidence in mitigating related expenses and emphasized their focus on growth opportunities with Wrangler and Helly Hansen.

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’ 1st 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 1 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. 2 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 3 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 D2C. 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 brand is significant, and we expect the business to be a substantial contributor to our growth and profit engine. It starts in the U.S., which is the largest outdoor and workwear market in the world. While it is already among Helly’s fastest-growing markets, the brand remains significantly underpenetrated relative to its peers.

Within sport, aided brand awareness is less than 30%, and within workwear, we are just getting started. Across both sport and workwear, we will accelerate investments in talent, direct-to-consumer and wholesale expansion, and demand creation. Through improved focus and increased investment capacity, we see a clear path to double-digit growth in our