Denim Company Kontoor Brands Reports More Losses During the Pandemic
Denim-maker Kontoor Brands, parent company to the Wrangler, Lee and Rock & Republic brands, continues to struggle amid the pandemic.
The Greensboro, N.C.- based business released quarterly earnings Thursday before the bell, falling short on both the top and bottom lines.
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“In a rapidly changing operating environment, we remain focused on navigating near-term impacts associated with the COVID-19 pandemic, while also positioning Kontoor for future success,” Scott Baxter, president and chief executive officer of Kontoor Brands, said in a statement. “During the second quarter, we successfully balanced managing through short-term challenges while taking proactive measures to drive competitive separation in the global marketplace. We strengthened our liquidity position, improved our financial flexibility and paid down debt, all while investing in growth and new business development opportunities.”
For the three-month period ending June 27, total revenues were $349 million, compared with $609 million a year earlier. By brand, Wrangler’s revenues were $252 million, down from $362 million the same time last year, while revenues at Lee were $86 million, compared with $207 million last year. Kontoor had a $33 million loss during the quarter as a result, compared with profits of nearly $38 million a year earlier.
Kontoor, which was spun off from VF Corp. in May 2019, has partnered, franchised, licensed and owned branded, non-branded and outlet stores throughout the world, but does the majority of its business through various wholesale channels and its e-commerce business. The wholesale channel, for example, represented about 85 percent of Kontoor’s global revenue during the company’s 2019 fiscal year.
Like most retailers, Kontoor temporarily closed all company-owned and operated locations in North America and Europe last March in response to the coronavirus pandemic, including VF outlets, Lee Wrangler outlets, Lee Wrangler Clearance Centers, Wrangler and Hometown Studio stores.
As of early May, stores in North America and Europe were still closed, while locations in China and Kontoor distribution centers around the world had reopened.
The company said the dramatic plunge in wholesale and store shutdowns caused the biggest declines in revenue during the quarter. In addition, Kontoor was subject to roughly $33 million of additional expenses thanks to timing shifts of shipments between the second and third quarters. The retailer’s e-commerce and digital businesses grew during the quarter, 48 percent and 36 percent, respectively. But it wasn’t enough to offset losses.
The retailer ended the quarter with $256 million in cash and equivalents and about $1.1 billion in debt. Inventory fell 20 percent year-over-year to $433 million. The company is not providing forward-looking guidance.
Kontoor’s stock, which closed up 6.78 percent to $21.26 a share Wednesday, is down more than 27 percent year-over-year.
