Kontoor Brands reports first-quarter revenue slump, strengthens finances
Kontoor Brands is the latest company feeling the impact of the Covid-19 pandemic.
The Greensboro, North Carolina-based owner of the Lee and Wrangler denim brands announced on Thursday lacklustre first quarter results, as the Covid-19 pandemic had an adverse affect on the firm's revenue locally and beyond.
Revenue dropped 22 percent year-over-year to $504 million, on a reported and constant currency basis. Revenue declines during the quarter were primarily the result of store closures and stay-at-home orders launched across the U.S. and Europe, the company said in a statement.
During the first quarter, U.S. revenue was $379 million, down 16 percent on a reported basis. Compared with 2019 adjusted revenue, U.S. revenue declined 14 percent, once again driven primarily by the Covid-19 impacts.
These declines were partially offset by growth in digital, with U.S. digital wholesale increasing 41 percent.
International revenue was $126 million, down 37 percent on a reported basis and down 35 percent in constant currency including China revenue, which was the most impacted.
Wrangler brand global revenue decreased to $303 million, an 18 percent decline on a reported and constant currency basis, while Lee brand global revenue decreased to $183 million, a 24 percent decline.
The company recording an operating loss on a reported basis of $0.2 million and a loss per share of $0.05.
“Through February, results were in line with our expectations, but as the quarter progressed, impacts from Covid-19 became more pronounced,” explained Scott Baxter, president and CEO, Kontoor Brands, in a statement.
“We’ve implemented several strategic actions to help navigate the near-term challenges, while positioning the company for future success.”
As the company continues to navigate the Covid-19 pandemic, it has taken several actions to enhance liquidity including drawing down $475 million from its revolving credit facility prior to amendment and suspending payment of a quarterly dividend on a temporary basis.
It also announced temporary salary reductions for senior management and other key leaders as well as a reduction in fees for the board of directors, and implemented temporary furloughs for certain personnel in retail stores, distribution centers, and corporate and regional offices.
While the company is not providing full-year 2020 guidance at this time, Baxter remained optimistic: “We believe Kontoor’s key retail partners remain well positioned to navigate this environment. With more than 200 years of authentic heritage, our two iconic brands offer consumers a distinct value proposition.
"In addition, we are highly encouraged by significant new programs and distribution gains that are expected for the second half of 2020. Our iconic brands, coupled with our cost savings efforts and scaled, agile supply chain, position Kontoor well in the marketplace,” concluded Baxter.
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