Kontoor Brands sales hit by U.S inventory snags, Covid lockdowns in China
U.S denim group Kontoor Brands Inc. announced on Thursday revenues for its recently ended third quarter decreased by single-digits, hit by U.S. retailer inventory rebalancing efforts in the quarter and the impacts of lockdowns in China.
The Greensboro, North Carolina-based company said total revenues fell 7% to $607 million, while U.S. revenue dipped 8% to $452 million, with reductions in both its Wrangler and Lee brands.
Lower shipments due to retailer inventory rebalancing weighed on U.S. wholesale, which was down 9% compared to the third quarter 2021.
International revenue was $154 million, a 3% decrease. Covid lockdowns in China saw local revenues decrease 24%, compared to the third quarter 2021, sequentially improving from decreases of 50% in the second quarter of 2022. Europe increased 7%, driven by digital and aided by a shift in the timing of shipments associated with the ERP implementation last year.
By brand, Wrangler brand global revenue was $406 million, representing a 4% decrease, while Lee sales plummeted 13% to $198 million.
Other global revenue was $2 million, a 33% decrease compared to the same period in the prior year.
Net income for the three months ending September 30 fell 19% to $51.1 million.
"Despite the difficult environment, we are encouraged by the sell-through of our brands including continued POS share gains, in the third quarter in our largest market," said Scott Baxter, president, chief executive officer and chair of Kontoor Brands.
"However, as expected, sell-in was adversely impacted and global revenue tempered as U.S. retailer inventory rebalancing efforts and Covid-related lockdowns in China continued. Mix benefits, strategic pricing, and tight expense controls helped offset inflationary pressures and allowed us to deliver upside to our profit expectations."
Looking ahead, the company said it is revising its 2022 outlook. Yearly revenue is now expected to increase approximately 4%, down from its prior guidance of up approximately 6%.
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