• Q4 Reported Revenue of $681 million; up 3 percent versus Q4 2020; FY Reported Revenue of $2.48 billion; up 18 percent versus FY 2020
  

• Q4 Reported EPS of $0.75; Q4 Adjusted EPS of $0.88; FY Reported EPS of $3.31; FY Adjusted EPS of $4.28
  

• 2022 Revenue is expected to approximate $2.7 billion; up high single digits versus FY 2021
  

• 2022 EPS is expected to be in the range of $4.65 to $4.75
  

“Kontoor’s solid fourth quarter and full year 2021 performance demonstrates how our strategies are working. In the quarter, we amplified strategic investments and delivered near-term results while continuing to set the foundation for greater long-term success. This execution was also a testament to our colleagues around the world, whose perseverance, collaboration and focus led our organization to new operational heights despite the ongoing dynamic macroenvironment,” said Scott Baxter, President, Chief Executive Officer and Chair of Kontoor Brands.

“Based on the breadth and diversification of growth catalysts, supported by investments in key enablers – such as the evolution of our Digital, ESG and demand creation platforms – we have confidence in our robust 2022 guidance, highlighting the continued momentum we expect in our business. As we look to the future, I’m optimistic that our growth-minded culture, as well as accelerating fundamentals and cash flow optionality, create a powerful combination for all of Kontoor’s stakeholders,” added Baxter.

This release refers to “adjusted” amounts and “constant currency” amounts, which are further described in the Non-GAAP Financial Measures section below. All per share amounts are presented on a diluted basis.

In addition, due to the significant impact of COVID-19 on prior year figures, this release also includes periodic comparisons to 2019 for additional context.

Fourth Quarter 2021 Income Statement Review

Revenue was $681 million, a 3 percent increase on a reported and constant currency basis over the same period in the prior year. Excluding revenue from the 53rd week in the prior year period, revenue increased 8 percent on a reported and constant currency basis.

Revenue increases compared to the prior year were primarily driven by strength in Digital own.com, as well as continued positive trends in the U.S. wholesale business and solid performance in international markets. Gains in the quarter were somewhat offset by the combined impacts of the previously announced strategic actions related to VF Outlet store closures, the discontinuation of the sale of third-party branded merchandise in all domestic stores and India business model changes. Excluding impacts from these strategic actions, fourth quarter reported revenue would have increased 7 percent compared to the same period in the prior year, 13 percent compared to the fourth quarter of 2019 on a reported basis and 12 percent in constant currency.

U.S. revenue was $523 million, increasing 1 percent over the same period in the prior year. Gains were driven by growth in wholesale, including new business development wins, and strength in Digital own.com, which increased 39 percent. Excluding revenue from the 53rd week in the prior year period, revenue increased 6 percent on a reported and constant currency basis. Compared to the fourth quarter of 2019, own.com revenue increased 108 percent, and total U.S. revenue increased 11 percent, excluding impacts from the VF Outlet strategic actions.

International revenue was $158 million, a 12 percent increase over the same period in the prior year on a reported and constant currency basis. Compared to the same period in the prior year, China increased 13 percent on a reported basis and 9 percent in constant currency, while the European business increased 8 percent on a reported basis and 11 percent in constant currency. Compared to the fourth quarter of 2019, International revenue increased 21 percent on a reported basis and 17 percent in constant currency, excluding the strategic actions in India.

Wrangler brand global revenue was $444 million, a 1 percent decrease over the same period in the prior year on a reported and constant currency basis. Wrangler U.S. revenue decreased 2 percent compared to the same period last year, with strength in Digital, Western and Outdoor offset by a 5-point headwind from the 53rd week in 2020. Wrangler international revenue increased 8 percent over the same period in the prior year on a reported basis and 9 percent in constant currency.

Lee brand global revenue was $233 million, a 14 percent increase over the same period in the prior year on a reported and constant currency basis. Lee U.S. revenue increased 13 percent compared to the same period last year, driven by improving sell through of new programs and increases in Digital. Lee international revenue increased 14 percent over the same period in the prior year on a reported and constant currency basis.

Other global revenue declined to $5 million driven by impacts from the strategic actions related to VF Outlet operations.

Gross margin increased 30 basis points to 42.8 percent of revenue, compared to the same period in the prior year. Adjusted gross margin decreased 60 basis points to 42.6 percent of revenue, compared to the same period in the prior year. Structural margin improvements increased 80 basis points driven by favorable customer and product mix, as well as business model changes, which more than offset the impacts of inflation, inventory adjustments, and higher distressed sales. Additionally, in support of strong demand, transitory expenses, which include air freight for expedited shipments, negatively impacted gross margin by 140 basis points in the quarter. Compared to the fourth quarter of 2019, adjusted gross margin increased 170 basis points.

Selling, General & Administrative (SG&A) expenses were $223 million on a reported basis. Adjusted SG&A was $218 million, or 32.0 percent of revenue, up 370 basis points compared to the same period in the prior year. Higher demand creation, digital investments, distribution expenses and compensation costs more than offset restructuring benefits and better fixed cost leverage on improving revenue. Prior year comparisons were also affected by reduced spending in 2020 in light of COVID uncertainty.

Operating income on a reported basis was $69 million. Adjusted operating income was $72 million, compared to $99 million in the same period in the prior year. Adjusted operating margin decreased 430 basis points to 10.6 percent of revenue, driven by amplified investments in demand creation to drive future accelerating revenue growth and higher transitory impacts to chase demand. These investments, transitory impacts such as air freight, and distribution expenses more than offset structural gross margin improvements and fixed cost leverage on improving revenue. Prior year comparisons were also impacted by reduced spending during 2020 in light of COVID uncertainty.

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) on a reported basis was $79 million. Adjusted EBITDA was $83 million, compared to $106 million in the same period in the prior year. Adjusted EBITDA margin decreased 400 basis points to 12.1 percent of revenue.

Earnings per share was $0.75 on a reported basis compared to $0.74 in the same period in the prior year. Adjusted earnings per share was $0.88 compared to $1.23 in the same period in the prior year.

Full Year 2021 Income Statement Review

Revenue was $2,476 million, an increase of 18 percent on a reported basis and 17 percent in constant currency.

Revenue increases compared to the prior year were primarily driven by strength in Digital, as well as continued positive trends in the U.S. wholesale business and solid performance in international markets. Gains for the year were somewhat offset by the impacts of the previously announced strategic actions related to VF Outlet store closures, the discontinuation of the sale of third-party branded merchandise in all domestic stores and India business model changes. Excluding impacts from these strategic actions, full year reported revenue would have increased 24 percent compared to the prior year, 6 percent compared to 2019 on a reported basis and 5 percent in constant currency.

U.S. revenue was $1,869 million, increasing 14 percent over the same period in the prior year. Gains were driven by growth in wholesale, including new business development wins, and strength in Digital, with own.com revenue increasing 43 percent. Compared to 2019, own.com increased 98 percent, and total U.S. revenue increased 7 percent, excluding impacts from the VF Outlet strategic actions.

International revenue was $607 million, a 33 percent increase over the same period in the prior year on a reported basis and a 27 percent increase in constant currency. China increased 37 percent over the same period in the prior year on a reported basis and 29 percent in constant currency. The European business increased 33 percent over the same period in the prior year on a reported basis and 28 percent in constant currency. Excluding the strategic actions in India, International revenue increased 3 percent on a reported basis and decreased 2 percent in constant currency compared to revenue in 2019.

Wrangler brand global revenue was $1,575 million, a 17 percent increase over the same period in the prior year on a reported basis and 16 percent in constant currency. Wrangler U.S. revenue increased 15 percent compared to the same period last year. Wrangler international revenue increased 27 percent over the same period in the prior year on a reported basis and 22 percent on a constant currency basis. Excluding impacts from strategic actions, Wrangler brand global revenue increased 8 percent on both a reported and constant currency basis compared to 2019 driven by Digital, Western, Outdoor and International.