KTB

Kontoor Brands stock has delivered a strong 82.9% gain over the past three years, yet both intrinsic value work and market multiples still point to a stock that screens cheap relative to its current share price. With several valuation checks flagging possible upside, investors are weighing how much of that gap is justified by the company’s fundamentals and risk profile. The 82.9% return over three years shows long term holders have already seen substantial value created, so any further upside argument needs to clear a higher bar. Kontoor Brands can benefit if it continues to convert earnings into steady cash flows. However, any pressure on margins or cash generation could limit how much value investors are willing to ascribe to those future streams. The broader checks lean cheap, with Kontoor Brands scoring highly on valuation measures. This suggests the stock looks undervalued across several lenses. The issue now is whether the current discount to the Discounted Cash Flow, or intrinsic value, estimate and to market multiples still offers an appealing entry point after such a strong three year run. Spot opportunities beyond Kontoor Brands by scanning a curated set of value candidates in the 44 high quality undervalued stocks that also screen well on fundamentals. The Discounted Cash Flow (DCF) model values Kontoor Brands by projecting future cash that can be returned to shareholders and discounting it back to today. For Kontoor Brands, the latest twelve month free cash flow sits at about $414.8 million, and the 2 Stage Free Cash Flow to Equity model assumes cash flows that grow at a measured pace rather than rapid expansion. Based on these projections, the DCF points to an estimated intrinsic value of about $113.94 per share. Compared with the current share price, the model implies the stock trades at a 32.4% discount, which suggests the market is pricing Kontoor Brands below what its current and projected cash generation support. On this DCF view, Kontoor Brands stock appears undervalued relative to its estimated intrinsic value. Our Discounted Cash Flow (DCF) analysis suggests Kontoor Brands is undervalued by 32.4%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Kontoor Brands. The P/E ratio is a common way to value a brand like Kontoor Brands because it anchors the share price to the company’s current earnings power. Kontoor Brands trades on a P/E of about 15.2x, which is below the Luxury industry average of roughly 16.7x and well under the peer group average of about 22.1x. A more tailored yardstick is the modelled fair P/E of about 20.2x. This reflects what investors might pay given Kontoor Brands’ profitability profile, scale and risk. The gap between the current 15.2x and this fair multiple suggests the market is applying a discount relative to what these inputs support, even after the stock’s strong three year return. On this earnings multiple, Kontoor Brands stock appears undervalued compared with both sector peers and the modelled fair P/E level. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives for Kontoor Brands pick up where the valuation work leaves off. Narratives spell out the specific paths for Kontoor Brands' revenue, margins and earnings that would need to play out for the stock to be worth materially more or materially less than today's price, and they sit on Simply Wall St's Community page. Where a ratio or model gives one figure, these Narratives describe the underlying future it depends on so you can watch how that thesis plays out over time. The community is split on Kontoor Brands, with one camp focused on underappreciated earnings power and another worried that expectations already stretch too far. Bull case: 20% undervalued Read the full Bull Case to see why Kontoor Brands could be undervalued Bear case: 42% overvalued Read the full Bear Case to see why Kontoor Brands could be overvalued Do you think there's more to the story for Kontoor Brands? Head over to our Community to see what others are saying! For Kontoor Brands, both the Discounted Cash Flow (DCF) intrinsic value estimate and the earnings multiple view point to an undervalued stock, with only a moderate gap rather than an extreme dislocation. The broader valuation checks lean supportive, which gives that alignment more weight. From here, the key question is whether Kontoor Brands can sustain the cash generation and earnings profile that underpin those models, or whether changing denim demand and brand relevance erode the case for any re rating over time. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include KTB. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Image source: The Motley Fool. Wednesday, Aug. 12, 2026 at 8:30 a.m. ET Vice President, Global Head of Finance and Operations, Helly Hansen and Corporate Investor Relations - Erinn Murphy Chief Executive Officer and Chairman - Scott Baxter President and Chief Financial Officer - Joseph Alkire Operator: Greetings. Welcome to the Kontoor Brands Second Quarter 2026 Earnings Conference Call. [Operator Instructions]. Please note, this conference is being recorded. At this time, I'll now turn the conference over to Erinn Murphy, Vice President, Global Head of Finance and Operations, Helly Hansen and Corporate Investor Relations. Thank you. You may begin. Erinn Murphy: Thank you, operator, and welcome to Kontoor Brands Second 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 these reports. Amounts referred to on today's call will 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 and reported results and our outlook are stated on a continuing operations basis, unless otherwise noted. Joining me on today's call are Kontoor Brands' Chief Executive Officer and Chairman, Scott Baxter; and President and Chief Financial Officer, Joe Alkire. Following our prepared remarks, we will open the call for your questions. Scott? Scott Baxter: Thanks, Erinn, and thank you all for joining us. I am pleased to share our second quarter results and the progress we have made advancing our strategic priorities. Through the first half of the year, we've elevated the portfolio, positioned the company to accelerate revenue and profit growth and increased our capital allocation optionality. Simply said, we've reached an inflection point in our value creation journey driven by our primary initiatives: build Wrangler momentum from a position of strength and sharper focus following the lead divestiture, integrate and accelerate Helly Hansen and finish Project Genius strong. To accelerate our ambitions, I am pleased to share that Joe has been appointed to an expanded role of President and CFO. He knows our business and has been instrumental in driving our transformation. Let's begin with Helly Hansen. In June, we celebrated our one year anniversary together. When we announced the transaction, the goal was clear: drive greater value for our shareholders and structurally increase our TSR potential. To ensure we deliver on our commitment, we established a value creation framework built on four pillars: accelerate revenue growth, achieve mid-teens operating margin, increase capital allocation optionality and establish Kontoor as an employer of choice. So how are we doing? First, revenue is tracking ahead of our acquisition plan with results exceeding our expectations in every quarter under our ownership. This has continued into the first half of '26 with pro forma reported revenue growing at a low double-digit rate compared to our high single-digit outlook. We've had opportunities to grow faster, but we are committed to doing this the right way by creating a healthy foundation that supports years of sustainable growth. We're making investments in talent and separating the sport and workwear commercial organization under Board's leadership. These are distinct businesses with their own set of opportunities. In North America, we are creating two GMs to drive increased focus. We will replicate this globally over time. This is something the Helly Hansen team has discussed for years, and under Kontoor, we are making it happen. Second, expand operating margin. Through the first half of '26, operating margin expanded approximately 600 basis points to 7%, driven by gross margin expansion and expense synergies. This is our multi-brand platform in action. We are leveraging our supply chain and technology platforms to provide greater scale advantages for both organizations while driving greater back-end efficiency. At the same time, better inventory management is increasing the mix of full price selling on our digital platform, resulting in higher AURs and reduced promotional activity. This is an area where we have great expertise and has been a meaningful contributor to improved profitability. We remain committed to expanding operating margin while increasing investment capacity. Over the last 12 months, we have done just that. As we move to the second half of the year, we will deploy these resources to drive accelerating growth. Third, increased capital allocation optionality. Last year, Helly Hansen generated $100 million in cash from operations, driven by improved profitability and net working capital. We are ahead of our planned deleverage path, allowing for greater optionality even earlier than expected. Year-to-date, we have returned more than $130 million to shareholders, including $75 million of share repurchases. And finally, establish Kontoor as the employer of choice in the industry. Attracting and retaining top talent will ensure long-term success. We continue to be impressed by the Helly Hansen organization. There is depth at all levels. At the same time, we are investing in both existing and new parts of the organization to support accelerating growth. We are very encouraged by the talent pipeline and recently hired a GM of North America to lead our sport business. We look forward to introducing him at our Investor Day next month in Norway. By every measure, our first year together exceeded our expectations. We are on track to complete the majority of integration activities by year-end, apart from the systems migration, but we know the most exciting days are still ahead of us. Turning to Wrangler. For the first half of '26, global revenue increased approximately 3% on a reported basis, in line with our expectations. It starts with building on the momentum we've created in our core bottoms business. We have incredible opportunities in female, direct-to-consumer and non-denim categories, but we will not lose sight of Wrangler's identity. In the second quarter, as measured by Circana, we drove over 100 basis points of share gains in our core bottoms business. With female, our success continues. First half revenue grew 20% with trends accelerating in the second quarter. Our investments in talent, product development, design and demand creation are working. Bespoke is the number one female style at select specialty retailers and new collaborations and brand activations are elevating the brand in the marketplace. And within Western, first half revenue grew low double digits. Western sits at the heart of Wrangler's DNA, and we have never been stronger. To support this momentum, we will continue to invest behind our product innovation and demand creation platforms to solidify our position as the authority in the category. Turning to Lee. The divestiture is progressing well. We have cleared a number of important milestones and are on track to complete the transaction in the fourth quarter. Our teams are working well together, and the process with AVG has been smooth and efficient. I want to thank the Lee organization and AVG for their professionalism and dedication to supporting the brand during this important transition. We intend to use the majority of net proceeds from the divestiture to fund a new $400 million ASR with the remainder to voluntarily pay down debt and further strengthen our balance sheet. This is a hallmark of our operating model and will further support strong returns for our shareholders. Finally, let me provide an update on Project Genius. While we could not have predicted the challenges the industry would face over the last few years, we push ourselves to take initiative from our front foot. We launched Project Genius to create investment capacity to accelerate growth while expanding profitability. We are in the final stretch and are firmly on track to exceed $100 million in gross savings. Genius has been essential to the operational agility we have demonstrated over the last few years. Importantly, it has solidified a continuous improvement mindset within our culture that will yield benefits for years to come. Before turning it over to Joe, let me underscore the confidence I have in this team and our ability to achieve our 2026 plan. We are entering the second half of the year focused on our largest priorities, build Wrangler momentum from a position of strength and sharper focus following the Lee divestiture, integrate and accelerate Helly Hansen and finish Project Genius strong. These are the initiatives that will generate results going forward and deliver strong returns for our shareholders. As we move beyond 2026, we have adopted an always-on cost excellence mindset that will enable us to continue to fund our growth initiatives as we continue to transform our business. We are off to a strong start in 2026, and I would like to thank our global teams for their continued dedication and steady execution. Joe? Joseph Alkire: Thanks, Scott, and thank you all for joining us today. Before I begin, let me say how honored I am to step into this expanded leadership role as the President and CFO of Kontoor. I am energized by the opportunity ahead and deeply grateful to the talented people across the organization whose commitment to excellence has positioned Kontoor to compete and win. I look forward to continuing to partner closely with Scott and the executive leadership team as we build on our strong foundation and pursue the next horizon of growth. Since late last year, our leadership team has been developing a comprehensive strategy centered around Kontoor's next chapter, one focused on accelerated, highly profitable growth, strong cash generation and an enhanced TSR algorithm. Our growth and transformation agenda is bold and builds on our strong foundation of operational discipline, execution excellence, financial rigor and capital stewardship. Our strategy will be enabled by a more robust set of enterprise capabilities, including consumer insights, DTC excellence, product innovation, demand creation and technology, which along with our talented team and winning culture will be key ingredients to drive the success of our growth ambitions. We plan to unveil more details about our strategy in a series of upcoming events, starting with the Helly Hansen Investor Day, September 2 in Norway. Building from the strong foundation that has been established since becoming a public company, we are increasing our investment on our largest growth opportunities and driving more clarity around the roles we expect each brand to play in our portfolio moving forward. Wrangler is our balanced grower. The mandate is clear: protect and build on the core business while accelerating growth in female, DTC and adjacent non-denim categories. To support accelerated growth, we are leaning into brand building and other growth-enhancing investments while maintaining strong profitability and durable cash generation. It is imperative we continue to protect and drive our core male bottoms business, which is foundational to the brand and our economic engine. Last month, we launched TufLite, our newest material innovation for our iconic Cowboy Cut jean. Wrangler TufLite jeans are up to 20% lighter without sacrificing performance and are positioned at a premium price point. Within female, our business stands at approximately 10% of total revenue today despite female comprising over 50% of the U.S. denim market. The growth opportunity in female is massive and seizing our share of the market requires new capabilities, investment and an evolved operating model. Going forward, we are choosing to operate the female business separately from men's to intentionally drive the focus, investment and growth opportunity we see in this aspect of our business. And we recently appointed a dedicated GM for the female business and are investing in and elevating our talent in the areas of product development, design, merchandising and marketing. Building on the success of our full-price store in the Stockyards of Fort Worth, Texas, we are beginning to develop a focused retail fleet in the heartland of Wrangler Country. During the quarter, we secured two additional locations in Texas, both slated to open in early 2027. We will test, learn and scale our full-price DTC opportunity as we establish a true omnichannel brand experience for the Wrangler consumer while also investing to supercharge our digital business through improved capabilities in AI, site experience and an expanded loyalty program. Turning to Helly Hansen. Helly is our growth engine, and we are accelerating growth in both the U.S. and the Alps region in Europe, while expanding into a four season brand by winning in outdoor and disrupting the workwear market, two categories with significant white space relative to where we are today. Within sport, we intend to accelerate investment in geographic, category and channel expansion. Under the highly capable Helly leadership team, we are bolstering the organization with more meaningful investments in the commercial and product teams. As Scott mentioned, we recently hired a GM for North America, a critical leadership role the Helly business has lacked for years. In the second half of 2026, we have also identified incremental opportunities to invest behind demand creation as we scale brand awareness, particularly in the U.S., where our aided awareness is around 30% and well below our peers. Winning in the outdoor category is about extending our authority beyond ski and sailing and competing year-round. Consumers already give Helly Hansen credit for high-performance gear and protection, and we believe we can extend this proposition into the technical outdoor category. We are building the product and innovation road map, thoughtfully expanding distribution and investing in storytelling to claim that territory. Workwear is one of the most compelling growth opportunities in the entire Helly Hansen portfolio. We have built a large and profitable European business, and there is significant runway to grow in the U.S. Structural tailwinds in workwear are fueled by higher participation in skilled trades, the rising cost of higher education and stricter workplace safety standards. As Scott mentioned, we are choosing to separate sport and workwear into distinct organizations to drive more focus and better align resources against this global opportunity. From a profitability perspective, we are committed to improving Helly's operating margin into the mid-teens through a combination of gross margin expansion, operating expense leverage and synergies. We are leveraging our multi-brand platform as well as Project Genius and seeing better-than-expected profitability as a result. In the second quarter, Helly's seasonally smallest quarter, we saw notable profit improvement and delivered positive operating profit, well ahead of both our expectations and what the brand has been able to deliver historically. As an enterprise, to fund our commitment to drive brand building and growth-enabling investments across our portfolio, we have established an always-on cost excellence program to create the capacity for these investment dollars in our P&L. This program builds on the success of Project Genius and provides another layer of investment capacity and earnings power moving forward. Simply stated, our strategy will deliver accelerated revenue growth, fund the investments required while expanding profitability and continuing to drive strong cash generation. Moving on to where we are in the Lee divestiture process. We are on track to close the transaction in the fourth quarter. All work streams are progressing well, and we have clear line of sight to offset the approximate $40 million of stranded costs over a 12-month to 18-month period. Upon the closing of the transaction, we expect to enter into a $400 million accelerated share repurchase agreement and expect to use the remainder of our proceeds for voluntary debt payments as we work to exit 2026 with a net leverage ratio below 1.5 times. These strong capital deployment tools will bolster our earnings power in 2027 and beyond and will help offset near-term dilution from the lost earnings contribution of Lee. Over a 12-month to 18-month period, we continue to expect the divestiture of Lee to be immaterial to earnings per share. We look forward to delivering what we believe is a great outcome for ABG, the Lee business and Kontoor. Before I review the specifics of our second quarter results, I want to take a moment to reflect on our performance for the first half of the year. Revenue of $1.2 billion was at the high end of our previously communicated first half outlook, reflecting an increase of 31% compared to prior year. Adjusted gross margin of 52.2% was well above the high end of our previously communicated outlook of 50.5%, reflecting an increase of 590 basis points compared to prior year. Adjusted EPS of $2.12 increased 36% compared to prior year. We delivered these results while also investing more into our brands and strategic priorities relative to what was initially contemplated in our plan. The divestiture of Lee is on track. The fundamentals of our business are strong, and we are raising our full-year outlook based on the strength we have seen in our business year-to-date and our confidence and visibility as we enter the second half of the year. Now let's review our second quarter results in more detail. Starting with Wrangler, Global revenue increased 1%, driven by 12% growth in DTC. In the U.S., revenue increased 1%, driven by 9% growth in DTC as wholesale was relatively flat. Growth was broad-based, driven by double-digit growth in female and Western. As measured by Circana, we gained market share in our men's and women's bottoms business, our 17th consecutive quarter of share gains. Notably, our bottoms business has remained resilient with POS up 3% year-to-date through July despite ongoing macro volatility and conservative inventory management among our largest retail partners. Our overall POS trend remains consistent with what we've seen over the past 12 months to 24 months. Wrangler International revenue increased 8%, driven by 27% growth in DTC and 4% growth in wholesale. Wrangler is well positioned to deliver another year of broad-based growth in 2026, including mid-single-digit growth in the second half of the year, adjusted for the 53rd week impact in 2025. Turning to Helly Hansen. Global revenue of $114 million increased 6% compared to prior year on a pro forma basis, exceeding our expectations. Through the first half, global revenue increased 12% on a reported pro forma basis with underlying constant currency growth in the mid-single-digit range. Sport was $70 million and growth was strongest in the U.S., the Nordics and the Alps region in Europe. Growth was led by healthy order book conversion, solid at-once demand and e-commerce. Workwear was $37 million with growth across the U.S. and the Alps region in Europe. While small today, our Workwear e-commerce business was particularly robust in the second quarter. Moving to China. As a reminder, Helly Hansen's revenue results exclude the direct contribution of the China joint venture with our partner, Youngor, as the results are not consolidated under the equity method of accounting. Second quarter results were strong with revenue increasing close to 70%, along with further improvement in profitability. Including the revenue of the China JV, Helly Hansen global revenue increased at a mid-teen rate on a pro forma basis. While still early, the acquisition of Helly is off to a great start. We're driving strong benefits as a more synergistic brand owner and expect the business to be a significant contributor to revenue and earnings growth in the years ahead. But more on that at our Investor Day in early September. Moving to the remainder of the P&L. Adjusted gross margin increased 710 basis points to 53.8% compared to prior year, driven by the benefits from Project Genius, a stronger gross margin contribution from Helly Hansen and the favorable impact of channel mix, product mix and pricing. SG&A expenses were $221 million or 37.8% of revenue. The increase in SG&A expenses was driven by the impact of a full quarter of Helly Hansen expenses compared to prior year, increased investment in direct-to-consumer demand creation and technology, partially offset by the benefits from Project Genius. And adjusted EPS was $1.06, an increase of 13% compared to prior year. This includes a $0.06 loss per share from Helly Hansen, well ahead of our expectations. Turning to the balance sheet. Inventory at the end of the second quarter was $526 million, down 3% compared to prior year, driven primarily by inventory reductions in Helly Hansen. We remain pleased with the quality and composition of our inventory. We finished the quarter with net debt of $1.1 billion and $58 million of cash on hand. Our $500 million revolver remains undrawn. During the quarter, we repurchased $50 million of common stock. Year-to-date, we repurchased $75 million of common stock at an average price of $75 per share. We ended the quarter with $700 million remaining under our existing share repurchase authorization. And as previously announced, our Board declared a regular quarterly cash dividend of $0.53 per share. Moving to tariffs. The global trade environment remains dynamic. Following the U.S. Supreme Court's ruling that the International Emergency Economic Powers Act does not authorize tariffs, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to refund IEPA duties previously paid. As a reminder, during the first quarter of 2026, we recognized a net receivable of $54 million for IEPA tariffs previously paid. In July of 2026, we started to receive IEPA refunds and thus far have received cash of approximately $23 million in the third quarter. We expect to receive the remaining IEPA refunds by the end of fiscal 2026. In May 2026, the U.S. Court of International Trade ruled that Section 122 tariffs were also invalid and these tariffs expired in July of 2026. Year-to-date, our financial results include the previously paid and expensed tariffs under Section 122. We have not recorded a receivable related to Section 122 tariffs and continue to monitor ongoing litigation related to the potential recovery of these tariffs. Effective July 2026, the Office of the U.S. Trade Representative implemented new Section 301 tariff rates of between 10% and 12.5% on products imported from the majority of our current trading partners. The majority of the countries we source goods from remain at the 10% level with the exception of China and Vietnam, which are now at 12.5%. As a reminder, our imports from Mexico to the U.S. remain exempt under USMCA based on currently available information. Our 2026 outlook continues to assume a 15% reciprocal tariff rate for the second half of 2026. On an adjusted basis, the company has excluded any impacts of the 2025 related IEPA tariffs in its 2026 outlook. Now let's review our updated outlook. Revenue is expected to be in the range of $2.66 billion to $2.71 billion, consistent with our prior outlook. For the second half of 2026, we expect revenue to be in the range of $1.46 billion to $1.51 billion, reflecting mid-single-digit growth for both Wrangler and Helly Hansen, excluding the impact of the 53rd week in 2025. As a reminder, the 53rd week in 2025 impacted Wrangler's revenue growth by 8 percentage points in the fourth quarter. Full-year adjusted gross margin is expected to be in the range of 49.8% to 50%, representing an increase of 330 to 350 basis points compared to prior year. This compares to the prior outlook range of 48.3% to 48.5%. Our updated gross margin outlook reflects stronger-than-expected year-to-date results and a stronger contribution from Helly Hansen. Full-year adjusted SG&A expenses are expected to increase approximately 23% compared to prior year. This includes the impact of a full-year of Helly Hansen expenses. Our updated outlook also includes approximately $25 million of incremental brand building and other growth-enabling investments as compared to our prior outlook. Adjusted operating income is now expected to be in the range of $413 million to $420 million, including $25 million of incremental investment, representing an increase of 15% to 17% compared to prior year. This compares to our prior outlook range of $411 million to $418 million. Full-year adjusted EPS is now expected to be in the range of $5.25 to $5.35, reflecting growth of between 27% and 29% compared to prior year. Our updated outlook includes approximately $0.36 of incremental investments as compared to our prior outlook of $5.15 to $5.25. As a reminder, our outlook includes the impact of approximately $0.55 of unmitigated expenses that were previously allocated to the Lee business. For the full-year, we anticipate an effective tax rate of approximately 20%, reflecting tax synergy benefits as we integrate Helly Hansen into our global tax platform. We expect our diluted average share count to be approximately 55.5 million. Our outlook does not include the impact of any future share repurchases, including those from the expected proceeds of the planned divestiture of Lee. Finally, we continue to expect another year of strong cash generation. Total cash from operations is expected to approximate $450 million, including the expected contribution from the Lee business now reported in discontinued operations. Our outlook assumes voluntary term loan payments of $225 million, excluding additional voluntary debt payments with a portion of the expected proceeds from the planned divestiture of Lee. We're tracking ahead of our original deleverage plan and anticipate returning to less than 1.5 times net leverage by the end of 2026. For the full-year, including the use of proceeds from the divestiture of Lee, we expect to return more than $900 million of capital through a combination of share repurchases, dividends and voluntary debt payments. Before opening it up for questions, a few closing comments. As we look ahead, we are sharpening our portfolio focus and investment on our largest growth opportunities. The increase in our 2026 outlook reflects the strength we have delivered in our business year-to-date and our visibility as we enter the second half of the year. As we move beyond 2026, I am confident we are on a path to unlock the full potential of Kontoor Brands and create significant value for our shareholders in the years to come. This concludes our prepared remarks, and I will now turn the call back to the operator. Operator: [Operator Instructions]. First question is from the line of Matthew Boss with JPMorgan. Matthew Boss: Congrats on a nice quarter. Scott, Wrangler accelerated this quarter on a two year basis and the inflection to mid-single-digit growth in the back half of the year, as you cited. Helly exceeded expectations in the first half of the year. I think lead times you've cited point to second half opportunity for you to control or greater control of that brand. Could you just elaborate on the brand-building investments and the opportunity you see to accelerate the total portfolio top and bottom line growth into the back half of this year and multiyear? Scott Baxter: No problem. First, though, I would like to acknowledge Joe's promotion and congratulations to Joe. It's wonderful for our company, wonderful for our shareholders and so well deserved. And congratulations, Joe. Outstanding. Joseph Alkire: Thank you, Scott. Thank you. Scott Baxter: So Matt, we're really pleased with the progress we're making on both brands, and we did accelerate. Thanks for the comments. A lot of the confidence from a back half standpoint, I'm going to share with you. I also want to point out that we have a lot of confidence in '27 in our long-range plan. We've got a lot of actions that we've taken. And some of the things that are happening, for instance, in the back half and into next year are for Wrangler, they have got strong new customers, one of those being Lowe's Home Improvement. So really excited about that. Helly Hansen will be showing up this year at Dick's Sporting Goods in the House of Sport for the first time. And as you know, Dick's is a significant outdoor retailer. So really great for the Helly brand here in North America because as everyone remembers, that was one of the reasons why we bought the brand to expand in North America. So a great start there. But I'm really pleased with our continued progress in Western with TufLite as a new example of some innovation in Western. The business is strong there. We continue to have great relationships and continue to lead in both men's and women's in Western. So very exciting. D2C is doing well. And then our women's business has been growing very significantly, and we've got a great product -- new product introduction with Bespoke that's been around for a little while now, but continues to accelerate. Great product innovation from the team. And then with Helly, we've got Crew and Life of Marino, two big platforms that we're reinvigorating going into next year. But Matt, I will tell you, the single most important thing for me, which I think is going to be incremental to our business, and I am really excited about this is that we, in Q4 are going to be focused on denim brand only. So after the spin-off of Lee, we are going to turn all of our attention. We have an excellent team that's going to be focused on growing, investing and making sure that Wrangler continues to grow to its full potential. I think that's incredibly exciting, and that is right around the corner, and we're investing in that right now to make sure that really accelerates going forward. Joe, anything to add? Joseph Alkire: No, I think you covered it, Scott. Scott Baxter: That's great color. Then, Joe, so first, I'll add my congrats on your promotion. Then second, just as we think about visibility, what's your visibility today to mid-single-digit back half revenues at Helly based on order books and real-time sell-throughs? What have you embedded in the back half relative to the front half, if any improvement? Then can you just walk through drivers of further profit improvement in the back half of the year at Helly Hansen? Joseph Alkire: Yes, sure. Thanks, Matt, and I appreciate the comments. Look, based on the confidence and the visibility we have into the second half of the year really for both brands, we raised the outlook, right? We raised the outlook on the back of stronger gross margin just as we continue to execute really well on that front. And we took the opportunity to invest at least a portion of that upside back into both brands to accelerate growth into '27 and beyond as we continue to build momentum in both brands, as Scott mentioned. In terms of where those dollars are going, again, in both brands, and it's into the areas that you would expect, data and analytics, consumer insights, demand creation and talent. talent on the product side in Wrangler, for example, in the female area, we said we hired a GM of North America for Helly. And these key hires will begin to have an impact as we move into '27. In terms of the profitability improvement, our visibility is pretty high. We're now bought from an inventory standpoint into the back half of the year. We've got good visibility into the forecast for both brands and our investment dollars are committed. So from here, it's really about execution. We have not embedded an improvement in the overall environment in the back half. So the growth that we have planned is really where we have good visibility into, for example, expanded distribution at Wrangler and what we can see on the Helly side in terms of order book and the distribution expansion. Operator: The next question is from the line of Irwin Boruchow with Wells Fargo. Irwin Boruchow: Congrats to Joe. Congrats to everyone on the quarter. I guess two for me. First, I wanted to dive into Helly a little bit more -- in a more detailed way for the second quarter. Maybe this is for Joe. The profit of $2 million, it seems pretty impressive given the seasonality of the business. Can you just give more context how notable that is to you? Basically, what was that on a pro forma basis, maybe the last time the brand made a profit in the second quarter? Just curious because it seems like a notable change from a seasonality perspective. Joseph Alkire: Yes. Thanks, Ike. And again, thanks for the comment. Look, while small, it's a pretty big deal. We -- I don't know when the last time, if ever, the Helly business generated positive operating profit in its seasonally smallest quarter. Certainly, a combination of factors drove that, most notably on the gross margin side, the business is really beginning to benefit from our platform, sourcing, logistics, planning, procurement. We've got a lot more operational discipline in the business right now in terms of inventory quality and composition. That's greatly improved. We're selling through more full price. We're being less promotional. There's been a lot of work done in that area as well as pricing. And then you've got synergies. So a lot of the work that we've done with the team over the past year. The synergies are starting to manifest in the P&L, which is also giving us the opportunity to invest more back in the business. The profitability improvement is meaningful. It was meaningful for the first half. It will be meaningful for the second half. So the mid-teen operating margin target that we put out there, fair to say we've got more confidence in that, and you'll see the specifics of how we see that evolving over the next few years in a few weeks at the Investor Day. Irwin Boruchow: Then a bigger picture question. A lot of moving parts have occurred this year, while the core business is clearly outperforming. That said, I kind of want to address the go-forward plans because I think there's some confusion with the investor base. I think several months ago when the lease sale was announced, you guys said there really wasn't any reason why 2027 Street EPS needed to change. At the time, the Street was a little above $7. Today, they're a little below $6.50. I honestly just want to ask you to address the discrepancy and how you're viewing 2027 EPS power at a high level, given all the changes in the model taking place? Joseph Alkire: Sure. Thanks, Ike. Look, we're not updating the long-term algorithm today or providing specific '27 guidance, but I appreciate the significance of the moving parts to the story, and let me try to give you a high-level framework as to how to think about '27 and into '28. You've got baseline continuing operations EPS that now is in the range of $5.25 to $5.35 for 2026. That's burdened by about $0.55 of expenses that were previously allocated to the Lee business. We've said we expect to offset those costs over a 12-month to 18-month period. The planning for those actions is already well underway. That started before we even announced transaction. So that takes you to about $580 million to $590 million. From there, through strong capital deployment, we believe we can offset the $0.90 of operating earnings that Lee is contributing today. The $400 million ASR will be a part of that. That will start immediately upon closing, and then we talked about the debt repayment. So that bridges you back to $670 million to $680 million pro forma kind of run rate EPS. Then from there, we can drive more accelerated growth in the Wrangler and the Helly brands. So all that to say, this is why we keep highlighting we expect the divestiture of Lee to be immaterial to EPS on a 12-month to 18-month basis. Operator: The next question is from the line of Jonathan Komp with Baird. Jonathan Komp: I want to follow up on gross margin. Could you maybe highlight some of the areas you're seeing success driving stronger gross margin inflection year-over-year and contributing to the raised guidance? Then just on the full-year guidance range, it looks like second half consolidated is implied quite a bit below the first half. That's maybe a little bit different than the historical seasonality. Could you maybe just share some of the factors you're embedding in the second half implied gross margin? Joseph Alkire: Sure. I'll take that, John. For 2026, we now have a gross margin outlook of over 300 basis points in the 49.8% to 50% range. That's about 150 basis points above our prior outlook. Relative to the prior outlook, the stronger gross margin is really driven by Helly. That's probably the single largest driver of the increase, along with increased visibility into the second half of the year. From a year-over-year perspective, on a full-year basis, there's some pretty meaningful puts and takes within our gross margin evolution. We expect Helly to be accretive by more than 100 basis points. We've got Project Genius and the benefits of mix, both channel mix, product mix to drive more than 200 basis points of expansion combined. From a product cost standpoint, we expect the product cost environment to be fairly muted. The impact of tariffs, some of the inflation we've seen more recently is largely offset by some of the pricing actions that we've taken along with other mitigating actions. As you look to the back half, we now have about 140 basis points of gross margin expansion embedded in the outlook. That's really driven by accretion from Helly and mix. The moderation relative to the first half is really driven by the fact that we're now starting to lap the full benefits of Project Genius and the impact of tariffs. But longer term, the overall gross margin algorithm is unchanged. So structural mix, Helly, cost excellence initiatives, which we alluded to, that will drive the expansion while we neutralize any other inflationary impacts through price and other efficiency initiatives. Scott Baxter: Joe, just a quick comment in there. Jonathan, I would be remiss if I didn't call out our product and design teams at both Helly and Wrangler. The product that they're making, what they're doing, how they're listening to the consumer, the consumer team, it's just outstanding. So congratulations to that group because it doesn't work without great product, and we are producing great product. Jonathan Komp: That's great. Then I'm sure we'll hear a lot more in a few weeks. But just from a conceptual standpoint, as we think about Helly Hansen and growth beyond 2026, do you think there's still a meaningful period that's needed to drive acceleration on the top line? Should we expect to see those drivers start to line up in 2027? Just any kind of directional color to help shape our expectations. Thanks again. Scott Baxter: Yes. I think we haven't really pivoted from the reasons why we bought the company where we saw opportunity from the categories that we can enter and of course, the geographic areas that we can enter. But what we do see is that we're going to manage the business appropriately. And there was a comment in our -- I guess, our release today, we talked about the fact that we could have driven more business, but we've been really smart about where and how we're driving that business. I think that's really important because we've learned a lot of lessons from the past. What I would tell you is that we've got this set up for a long-term growth algorithm going forward, and we continue to see opportunities in all those markets that we enter in all those categories that we enter going forward and also much stronger distribution with key winners in those categories. We really like how this looks going forward, not just on an end of '26, '27, but on a nice five year algorithm going forward. Joseph Alkire: Yes. John, look, we're confident we're in the early innings of a multiyear growth acceleration for this brand as it continues on its path to becoming the next $1 billion-plus brand. You're going to see the specifics of how we see that evolving in the next couple of weeks, growth will accelerate in 2027. We're starting to see the order book come together for the first half of '27 and the indications are pretty solid. It's important to remember that when we bought the business, given the lead time, 2026 was largely set. So the growth that you're seeing now is really what the team has been able to drive on their own. With the benefit of a year plus of working with that team, we now have the ability to impact more of the future trajectory of the brand, and you'll start to get a better sense for what that means. Operator: Our next question is from the line of Adrienne Yih with Barclays. Adrienne Yih-Tennant: Congratulations, Joe, on the promotion or the additional responsibilities well deserved. Staying on the topic of Helly Hansen, I'm wondering if you can give us kind of a little sneak peek or a little bit of kind of what we're going to see in a couple of weeks. exceeded expectations again, you're talking about sort of more legacy innovation that's driving that. It's doing it across sport, workwear in all geographies. So can you sort of unpack the biggest upside drivers of kind of how you see category geo and also more detail on the timing of wholesale, how many doors? What's the opportunity on the kind of three year horizon for that? Scott Baxter: We're really excited about that. It's going to be an outstanding meeting. I think the thing that I'm most excited about is you're going to meet the team. You're going to see the people that are really making this happen. That's a team that's been around for a really long time together, and they work really well together. Then within that, we've embedded some talent from our organization and from the outside to give it a little breath of fresh air going forward. You're going to meet a team that's highly energized with great investment going in. You're going to see incredible product, and you're going to see the future of what we think product is going to look like. Then you're going to hear about our channel diversification. You're going to hear about how we're thinking about geographies and categories and the growth rates we're thinking about. I think the day is set up to be outstanding. Also here, we're going to take you into D2C, one of our stores in Oslo, so you can see how we make it all work there. So really, really a good day. We're looking forward to having you out there. But I think you'll come away very impressed with the talent that you see, the team that you meet, the product that you see. And then we'll go ahead during that time and give you a little bit more specificity around some of the metrics. Adrienne Yih-Tennant: Can you give a little bit more details on the pre-existing back half? What's the timing of entering into Dick's, how many doors? Have you already had the upfront buy? Is that forward front loaded into the current quarter? Any timing on that? Scott Baxter: We'll give you an idea. The product is on its way. It actually gets set and it will be in stores in October. You'll see it in the House of Sports in 18 doors in the House of Sports then, our first time. So that will give you an idea. Really, that -- I hope that answers your question. Adrienne Yih-Tennant: Yes. Joe, just following up on sort of inventory. Inventory was down 3% year-on-year despite the strength. Is that -- we're hearing from a lot of kind of brands that there's a little bit of conservatism by the retail channel partners. So is that sufficient to drive -- to allow for upside? Are you planning on doing a lot of replenishment? It sounds like not necessarily. So just if you can kind of qualify that between DTC and wholesale and perhaps by brand. Thank you very much. Joseph Alkire: Hi, Adrian, again, thanks for the comment. Yes, look, our inventory was down 3% year-over-year despite 19% revenue growth. The majority of that increase, really all of that increase was driven by continued improvement in the Helly brand. You'll recall that the net working capital opportunity for Helly was one of our big value drivers, and we've, in fact, gotten after that pretty quickly. On the Wrangler side, our own inventory is relatively flat. I mean, our inventory is in really good shape. We're very pleased with the quality. We're very pleased with the composition. The brands are a little different. Helly is more order book driven, and we buy to the order book that we see. We don't speculate. Wrangler is a little more replenishment driven and our manufacturing helps us in that regard, just given the short lead times. I agree with the sentiment, though, that from an environment standpoint, retailers remain incredibly cautious with how they're approaching their inventory and their forward inventory commitments, and we make our buys accordingly. Operator: Next question is from the line of Mauricio Serna with UBS. Mauricio Serna Vega: Congrats, Joe, on the expanded role. Yes, I just was wondering, first to start with Wrangler. Could you talk about what you're seeing quarter-to-date on that business? I know you talked about POS. I was just wondering also just high level what you're seeing on the wholesale environment, just given for the last quarter, the growth was relatively flattish on U.S. wholesale for that brand. How are you thinking about the opportunity maybe for like the DTC growth of that brand to -- sorry, the wholesale growth of that brand to catch up to the very good DTC trends that you're seeing -- you've seen in the last couple of quarters? Thank you. Scott Baxter: Joe, why don't you go ahead and start the DC. Joseph Alkire: I can start. Yes, Mauricio, on the wholesale side of the business, POS for Wrangler in our bottoms business increased at a low to mid-single-digit rate in the second quarter. That's consistent with the performance we saw in the first quarter and really the trends that we've seen over the past 12 months to 24 months. So really no change on the POS front. That said, we do continue to see volatility week-to-week and month-to-month. We've been fighting through that for a couple of years now. But the overall trend line has been pretty consistent. Wrangler continues to gain share and perform very well at retail. Despite the solid POS performance and continued share gains and the consistency of POS, retailers just remain very cautious with respect to inventory management and their forward inventory commitments, as I said, which does impact our sell-in quarter-to-quarter. Inventory levels at retail, for example, were down high single, if not low double digits in certain parts of the market. We would continue to characterize inventory at retail as suboptimal. We have not assumed in our forward growth plans that POS improves or inventory at retail improves from current levels. That's an approach that we've consistently taken to our outlook, and I think has served us really well. Scott Baxter: Mauricio, from a DTC standpoint, we have a store in Austin -- excuse me, a store in Fort Worth, Texas, and we have delivered a formula that really works for the Wrangler brand in that store, and we feel really confident as far as rolling out that formula. We've signed two more leases in Texas, the opening in the first quarter of '27, and we'll continue that rollout going forward, one, maybe two stores a quarter until we get it built out to where we're comfortable. As we look at the landscape, we've got years of growth there, and we've got a formula that really works. Wrangler has got great momentum, as you can imagine. We are being really thoughtful about where we're starting that rollout in one of our biggest markets, if not our biggest market in Texas. We see a really good horizon relative to how we grow, how many stores we grow and a healthy investment behind it, and we really have a formula right now that really works for us. Mauricio Serna Vega: Just a quick follow-up. Is that like the reason why you expect the Wrangler business to accelerate to like mid-single digits in the back half because of DTC? Or what's driving that acceleration? Joseph Alkire: Yes. The majority of the growth in the back half is really driven by the new distribution that we can see, right? We already have that inventory committed. Scott mentioned Lowe's. There's a few other places where we've got good visibility at this point in the year. We do expect growth in female to continue, growth in DTC to continue. The Western business continues to perform really, really well. That's really the -- those are really the drivers of the mid-single-digit growth. Like I said, from a POS inventory perspective, we've not assumed any meaningful improvement. Mauricio Serna Vega: One last quick one on Helly Hansen. Maybe could you talk a little bit more details on the growth rate that you saw by channel in the quarter on a pro forma basis? Just thinking about the back half, I think you're guiding for mid-single-digit growth. I think previously, the idea was going to be high single digits. Just trying to understand like anything that's changed on that front. Thank you. Joseph Alkire: No change to the outlook for Helly for the full-year. We said high single-digit growth on a reported basis, we've got low double-digit growth, I think, about 12% in the first half, which implies mid-single-digit growth in the second half. That's really driven by currency in terms of the reported deceleration in the growth rate from a constant currency standpoint, the growth rates are pretty similar first half to second half in that mid-single-digit range. Mauricio Serna Vega: The growth rates by channel, if you have any details on that? Joseph Alkire: We've not talked about that level of specificity, but I will say growth has been fairly broad-based for the brand globally, whether that's geographically, product category, channel, sport workwear. Growth is pretty balanced for the brand. Operator: Next question comes from the line of Robert Drbul with BTIG. Jake Petsikas: This is actually Jake Petsikas on for Bob. Wrangler and International had a nice quarter. Just curious if you could unpack which markets are kind of outperforming your expectations? And where do you believe Wrangler has the greatest white space opportunity over the next several years? Thank you. Scott Baxter: Thanks, Jake, for the question. Right now, it's really kind of a North American story. Canada and Mexico, the product is doing really well. The business is really strong. Also our Western business is really strong in both of those markets, too, which is very helpful and really good for the brand, as you can imagine. Europe was flattish to down right now, and we expect that to turn relative to the year coming in because we're going to have a focus on that brand versus having two brands going forward, but more of a North American story. Operator: The next question is from the line of Brooke Roach with Goldman Sachs. Brooke Roach: Joe, I was hoping you could provide some guardrails on how you're thinking about the pacing and the drivers of mitigating that cost overhang from the Lee business within the 12-month to 18-month period. What are the biggest opportunities? How quickly can you achieve them? How should we think about your ability to improve the underlying business margin profile in addition to this cost mitigation? Thank you. Joseph Alkire: Brooke, I can start. We've got about $0.55 of expenses that were previously allocated to Lee that have now been reclassified to continuing operations. Just to there does appear to be some confusions on what those expenses are. These are overhead and other direct costs that were historically allocated to the Lee business, the majority of which ABG or their operating partners will have to build and support on their own or we may provide support via a TSA type of arrangement for some period of time. These are expenses necessary to operate the business. We expect to mitigate these costs moving forward through a combination of restructuring and other mitigating cost actions. As I mentioned earlier, the planning for that has been well underway. That will start really upon close. We've got plans in place to begin to attack those costs, and we'll get out of those over a 12-month to 18-month period. We need a little bit of time to solidify our plans just as we continue to work with ABG on the separation and how much support they're going to need, we're committed to making sure that this transition goes as smoothly as possible. But we're very confident in our ability to get out of these stranded costs. Scott Baxter: Brooke, I would just add that we are world-class at this. We've got an incredible amount of experience on our team in M&A. I will tell you, in this process, there's nothing more important than experience, and we are really good at this part of this. We've just had a lot of times at the plate relative to how many times we've done it, and we understand what to do. So I have a high level of confidence in the team. Operator: At this time, we've reached the end of our question-and-answer session. I'll turn the floor back to Scott for closing remarks. Scott Baxter: I just want to say thank you to everybody for participating in the call today. Really appreciate your interest in our company. Again, congratulations to Joe, and we will look forward to catching up with you again next quarter. Take care, everyone, and thanks again. Operator: This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends Kontoor Brands. The Motley Fool has a disclosure policy. Kontoor Brands (KTB) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Kontoor Brands’ second quarter results were well received by the market, reflecting solid momentum across its key apparel brands. Management pointed to the integration of Helly Hansen and ongoing strength in its Wrangler business as primary drivers, particularly highlighting gains in operating margin from improved inventory management and reduced promotional activity. CEO Scott Baxter noted, “Better inventory management is increasing the mix of full price selling on our digital platform, resulting in higher AURs and reduced promotional activity.” The company’s success in expanding gross margins and leveraging its multi-brand platform contributed to the positive performance. Is now the time to buy KTB? Find out in our full research report (it’s free). Revenue: $584.3 million vs analyst estimates of $584.8 million (18.6% year-on-year growth, in line) Adjusted EPS: $1.06 vs analyst estimates of $1.04 (2.1% beat) Adjusted EBITDA: $103.4 million vs analyst estimates of $106.4 million (17.7% margin, 2.8% miss) The company dropped its revenue guidance for the full year to $2.69 billion at the midpoint from $3.44 billion, a 21.8% decrease Management lowered its full-year Adjusted EPS guidance to $5.30 at the midpoint, a 20.3% decrease Operating Margin: 15.5%, up from 11.6% in the same quarter last year Constant Currency Revenue rose 18% year on year (8% in the same quarter last year) Market Capitalization: $4.50 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Matthew Boss (JPMorgan) asked about the impact of brand-building investments and new retail partnerships on portfolio growth. CEO Scott Baxter highlighted expanded distribution, such as Lowe’s for Wrangler and Dick’s for Helly Hansen, and emphasized upcoming focus on core denim following the Lee divestiture. Irwin Boruchow (Wells Fargo) questioned Helly Hansen's profitability in a seasonally weak quarter and longer-term EPS implications post-Lee divestiture. President and CFO Joseph Alkire explained that operational discipline and supply chain synergies drove profitability, and outlined the framework for offsetting earnings dilution from Lee’s sale. Jonathan Komp (Baird) inquired about drivers behind the year-over-year gross margin improvement and back-half margin assumptions. Alkire attributed margin gains to Helly Hansen’s performance, channel and product mix, and Project Genius savings, while noting the moderation expected as the company laps these benefits. Adrienne Yih-Tennant (Barclays) requested details on Helly Hansen’s category and channel growth, as well as the timing of new U.S. distribution. Baxter explained that House of Sport locations at Dick’s will carry Helly Hansen from October, and described the importance of DTC and channel diversification. Mauricio Serna Vega (UBS) asked about Wrangler’s DTC and wholesale performance, and the drivers behind expected second-half acceleration. Alkire cited new distribution and continued DTC and women’s category momentum as primary growth drivers, while acknowledging ongoing retailer conservatism. Looking forward, the StockStory team will be monitoring (1) execution of new retail partnerships for Wrangler and Helly Hansen and their impact on channel mix, (2) the pace of margin improvement and realization of Project Genius savings amid shifts in tariff policies, and (3) the completion and financial effects of the Lee divestiture, including redeployment of proceeds into share repurchases and debt reduction. Progress in women’s and Western categories and expansion into workwear will also be closely watched. Kontoor Brands currently trades at $82.35, up from $74.96 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members). ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies. Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.

Interested in Kontoor Brands, Inc.? Here are five stocks we like better. Kontoor raised its 2026 profitability outlook while maintaining revenue guidance of $2.66 billion to $2.71 billion. Adjusted EPS is now expected at $5.25 to $5.35, supported by a higher gross-margin forecast and stronger second-quarter results. Wrangler and Helly Hansen delivered key growth: Wrangler’s direct-to-consumer revenue rose 12% and the brand gained more than 100 basis points of market share, while Helly Hansen revenue reached $114 million and operating margins improved significantly. The planned Lee divestiture to Authentic Brands Group remains on track for the fourth quarter. Kontoor expects to use most proceeds for a new $400 million accelerated share repurchase, debt reduction and broader capital returns exceeding $900 million in 2026. 5 Mid-Caps to Buy Before the Next Broad Market Sell-Off Kontoor Brands (NYSE:KTB) raised portions of its 2026 outlook after reporting second-quarter adjusted earnings per share of $1.60, up 13% from the prior year, as stronger gross margin and contributions from Helly Hansen supported results. President and CFO Joe Alkire said the company’s first-half revenue reached $1.2 billion, an increase of 31% from the prior year, while adjusted gross margin rose 590 basis points to 52.2%. First-half adjusted EPS increased 36% to $2.12. → SoundHound AI Sends a Loud Signal After Its Q2 Earnings Beat Top Three Value Stocks for 2020 For the second quarter, adjusted gross margin increased 710 basis points year over year to 53.8%. Alkire attributed the improvement to Project Genius savings, Helly Hansen’s higher gross-margin contribution, and favorable channel, product and pricing mix. SG&A expenses totaled $221 million, or 37.8% of revenue, reflecting a full quarter of Helly Hansen expenses and increased spending on direct-to-consumer, demand creation and technology initiatives. Wrangler global revenue increased 1% in the second quarter, led by 12% growth in direct-to-consumer sales. U.S. revenue also increased 1%, with DTC revenue up 9% and wholesale revenue relatively flat. International revenue increased 8%, driven by 27% DTC growth and 4% wholesale growth. → AST SpaceMobile Earnings Just Reminded Investors How Risky Space Can Be Scott Baxter, chief executive officer and chairman, said the brand gained more than 100 basis points of market share in its core bottoms business during the quarter, according to Circana. Alkire said Wrangler recorded its 17th consecutive quarter of market-share gains in men’s and women’s bottoms. Wrangler’s first-half female revenue rose 20%, with growth accelerating in the second quarter, while Western revenue grew at a low-double-digit rate in the first half. Baxter said the company continues to invest in talent, design, product development and demand creation for the female business, which represents about 10% of Wrangler revenue despite females comprising more than half of the U.S. denim market, according to Alkire. → First Solar’s Profit Engine Faces a New Policy Test in Washington The company also is expanding Wrangler’s physical retail presence. After opening a full-price store in Fort Worth, Texas, Kontoor secured two additional Texas locations scheduled to open in early 2027. Alkire said the company plans to test and scale the retail concept while investing in digital capabilities, artificial intelligence, site experience and an expanded loyalty program. Management expects Wrangler to generate mid-single-digit growth in the second half, excluding the effect of a 53rd week in 2025. Alkire said the outlook is supported largely by committed new distribution, including Lowe’s Home Improvement, as well as continuing growth in female, DTC and Western categories. Retail partners, however, remain cautious about inventory commitments, management said. Helly Hansen generated $114 million in second-quarter revenue, up 6% on a pro forma basis and above management’s expectations. First-half pro forma reported revenue increased 12%, while underlying constant-currency growth was in the mid-single-digit range. Sport revenue totaled $70 million, with the strongest growth in the U.S., Nordic countries and the Alps region of Europe. Workwear revenue was $37 million, with growth in the U.S. and the Alps region. Management said workwear e-commerce, though still small, was particularly strong in the second quarter. Alkire said Helly Hansen produced positive operating profit during what he described as its seasonally smallest quarter, helped by sourcing, logistics, planning and procurement improvements, better inventory quality, more full-price selling, less promotional activity, pricing and synergies. Through the first half, Helly Hansen’s operating margin expanded about 600 basis points to 7%, according to Baxter. The company remains committed to reaching a mid-teens operating-margin target for the brand. Management is separating Helly Hansen’s sport and workwear commercial organizations and has hired a North America general manager for the sport business. Kontoor also plans incremental spending on demand creation during the second half, particularly in the U.S., where Alkire said Helly Hansen’s aided brand awareness is about 30%. Helly Hansen will begin appearing in 18 Dick’s Sporting Goods House of Sport locations in October, Baxter said. The company plans to provide further details on the brand’s strategy at an investor day in Norway on Sept. 2. Kontoor said its divestiture of the Lee brand to Authentic Brands Group remains on track to close in the fourth quarter. The company expects to use most of the net proceeds to fund a new $400 million accelerated share repurchase program, with the remainder directed toward voluntary debt repayment. Alkire said Kontoor expects to offset approximately $40 million of stranded costs over 12 to 18 months following the sale. He said the company expects the Lee divestiture to be immaterial to EPS over that period, supported by cost actions, the anticipated share repurchase and debt reduction. Kontoor repurchased $50 million of common stock in the second quarter and $75 million year to date at an average price of $75 per share. It ended the quarter with $700 million remaining under its existing repurchase authorization. The board also declared a quarterly cash dividend of $0.53 per share. Inventory declined 3% year over year to $526 million, primarily reflecting reductions at Helly Hansen. Net debt stood at $1.1 billion, with $58 million in cash and an undrawn $500 million revolver. The company maintained its full-year revenue outlook of $2.66 billion to $2.71 billion but raised its adjusted gross-margin forecast to 49.8% to 50%, from a prior range of 48.3% to 48.5%. Adjusted operating income is now expected to be $413 million to $420 million, compared with prior guidance of $411 million to $418 million. Adjusted EPS is expected to be $5.25 to $5.35, up from prior guidance of $5.15 to $5.25. The outlook includes about $25 million of incremental brand-building and other growth investments and approximately $0.36 per share of incremental investments relative to prior guidance. Cash from operations is expected to approximate $450 million, including the Lee business contribution reported in discontinued operations. Kontoor expects to return more than $900 million of capital during 2026, including anticipated proceeds from the Lee sale, through share repurchases, dividends and voluntary debt payments. The company expects net leverage to fall below 1.5 times by year-end. Kontoor Brands, Inc is a global apparel company best known for its Wrangler and Lee denim and lifestyle brands. Established as an independent, publicly traded company in May 2019 following a spin-off from VF Corporation, Kontoor leverages a legacy that dates back to 1889 with the founding of Lee and to 1947 with the introduction of the Wrangler brand. The company focuses on designing, manufacturing and distributing premium, casual and workwear apparel, including jeans, pants, shorts, shirts, jackets and complementary accessories. Kontoor Brands operates a diversified sales model that combines wholesale partnerships with leading retailers, distribution through e-commerce channels and select direct-to-consumer formats. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Kontoor Brands Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Kontoor Brands (KTB) came out with quarterly earnings of $1.5 per share, beating the Zacks Consensus Estimate of $1.06 per share. This compares to earnings of $1.21 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +41.51%. A quarter ago, it was expected that this maker of Wrangler and Lee apparel would post earnings of $1.17 per share when it actually produced earnings of $1.55, delivering a surprise of +32.48%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Kontoor, which belongs to the Zacks Textile - Apparel industry, posted revenues of $584.29 million for the quarter ended June 2026, missing the Zacks Consensus Estimate by 1.01%. This compares to year-ago revenues of $658.26 million. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Kontoor shares have added about 22.7% since the beginning of the year versus the S&P 500's gain of 12.9%. While Kontoor has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Kontoor was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.27 on $693.66 million in revenues for the coming quarter and $5.22 on $2.7 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Textile - Apparel is currently in the bottom 28% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Lululemon (LULU), has yet to report results for the quarter ended July 2026. This athletic apparel maker is expected to post quarterly earnings of $1.79 per share in its upcoming report, which represents a year-over-year change of -42.3%. The consensus EPS estimate for the quarter has been revised 0.2% lower over the last 30 days to the current level. Lululemon's revenues are expected to be $2.47 billion, down 2.3% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Kontoor Brands, Inc. (KTB) : Free Stock Analysis Report lululemon athletica inc. (LULU) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Starz Entertainment Corp.’s STRZ second-quarter 2026 adjusted loss of $1.26 per share came much wider than the Zacks Consensus Estimate of a loss of 27 cents.The company reported a net loss of $11.27 per share. This indicates a wider loss from the year-ago quarter's loss of $2.54 per share.Revenues of $307.9 million declined 3.7% year over year but topped the consensus mark of $306 million by 0.68%. The top-line decline reflected continued pressure in linear and other revenues. OTT revenues reached $221.3 million (71.9% of total revenues), up 0.1% from $221.1 million in the year-ago quarter, reflecting positive year-over-year OTT revenue growth and strong audience engagement during the period.Linear and other revenues fell 12.2% year over year to $86.6 million from $98.6 million. The decline more than offset the modest improvement in OTT revenues and drove the overall contraction in the top line. Starz Entertainment Corp. price-consensus-eps-surprise-chart | Starz Entertainment Corp. Quote In the second quarter, total operating expenses rose 39.5% year over year to $483.4 million. Restructuring and other expenses surged to $151.2 million from $6.4 million, largely reflecting $147.2 million of contract termination fees related to certain live-action films under a post-pay-one output licensing agreement.Advertising and marketing expenses increased 10.9% year over year to $70.3 million, while general and administrative expenses rose 37.5% to $40 million. Programming amortization, however, declined to $114.1 million from $162.5 million. In the reported quarter, Adjusted OIBDA came in at $59.9 million, up 79.3% from $33.4 million in the year-ago quarter and above the $58 million reported in the first quarter of 2026.On a trailing 12-month basis, adjusted OIBDA totaled $195.2 million, translating into an adjusted OIBDA leverage ratio of 2.9x at quarter-end. As of June 30, 2026, cash and cash equivalents were $59.6 million, down from $102.1 million as of March 31, 2026. Total debt was $625.1 million and net debt stood at $565.5 million.The adjusted OIBDA leverage ratio was 2.9x at quarter-end, improving from 3.2x a year earlier and 3.1x at the end of March. The ratio is calculated using net corporate debt and trailing 12-month adjusted OIBDA. The company’s $150 million revolving credit facility remained fully undrawn.Net cash used in operating activities was $28.2 million in the second quarter of 2026. Equity-free cash flow was negative $33.4 million, while unlevered free cash flow was negative $14.7 million. For 2026, management raised its adjusted OIBDA growth outlook to mid-single digits from low-single digits. The company also lifted its unlevered free cash flow expectation to the mid-to-upper end of its previously stated $80-$120 million range.STRZ reiterated its expectations for positive year-over-year OTT revenue growth and an adjusted OIBDA leverage ratio of roughly 2.7x exiting 2026. Management also maintained its outlook for a 20% adjusted OIBDA margin in the second half of 2027. Currently, Starz carries a Zacks Rank #3 (Hold).Kontoor Brands KTB, Newsmax Inc. NMAX and Viking Holdings VIK are some better-ranked stocks that investors can consider in the broader Consumer Discretionary sector.Kontoor Brands, Newsmax and Viking Holdings carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Kontoor Brands is slated to announce second-quarter 2026 results on Aug. 12. Meanwhile, Newsmax will report on Aug. 13, and Viking Holdings is scheduled to release results on Aug. 19. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Starz Entertainment Corp. (STRZ) : Free Stock Analysis Report Kontoor Brands, Inc. (KTB) : Free Stock Analysis Report Viking Holdings Ltd. (VIK) : Free Stock Analysis Report Newsmax Inc. (NMAX) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Take-Two Interactive Software TTWO reported first-quarter fiscal 2027 adjusted earnings of 36 cents per share, beating the Zacks Consensus Estimate by 16.13%. GAAP loss widened to 18 cents per share from 7 cents a year ago.Revenues of $1.39 billion declined 2.6% year over year but topped the consensus estimate of $1.36 billion by 2.3%. Better-than-expected NBA 2K and Grand Theft Auto performance helped Net Bookings exceed management's guidance. Recurrent consumer spending accounted for 84% of Net Bookings.GAAP net revenues increased 2.0% year over year to $1.53 billion. Game revenues rose 2.9% to $1.42 billion, while advertising revenues fell 8.4% to $111.1 million.By platform, mobile revenues decreased 4.9% to $762.3 million and PC and other revenues dropped 13.5% to $131.1 million. Console revenues climbed 16.3% to $640.5 million, partly offsetting weakness elsewhere. U.S. revenues rose 2.2% to $920.0 million, while international revenues increased 1.7% to $613.9 million. NBA 2K26 sold in more than 12 million units, up 9% from NBA 2K25. Recurrent consumer spending for NBA 2K grew 7%, supported by a 15% increase in average daily active users, a 25% rise in MyCAREER daily active users and a 35% increase in average games played per user. Take-Two Interactive Software, Inc. price-consensus-eps-surprise-chart | Take-Two Interactive Software, Inc. Quote The Grand Theft Auto series also exceeded the company's expectations. Grand Theft Auto V has sold in more than 230 million units worldwide, while recurrent consumer spending for the series grew 3%. Management said Grand Theft Auto VI had an exceptional start to preorders ahead of its Nov. 19 release. Zynga performed in line with management's expectations, though mobile Net Bookings declined 7% year over year. Toon Blast Net Bookings rose 8%, Words With Friends grew 8% and Top Eleven increased 15%.NBA 2K All-Star in China surpassed 10 million registered users since launch and is generating strong profit margins. Management also noted some pressure on user acquisition but said it was not seeing a broader consumer pullback in mobile. GAAP gross profit declined 6.6% year over year to $882.5 million, while gross margin contracted to 57.5% from 62.8%. Cost of revenues rose to $651.4 million and included a $43.4 million impairment charge tied to an unannounced third-party title that the company decided not to pursue.Operating expenses edged down 0.6% to $918.0 million. Selling and marketing expenses fell 9.6% to $369.7 million, while research and development expenses increased 6.8% to $273.8 million and general and administrative expenses rose 9.1% to $226.3 million. Cash and cash equivalents were $1.36 billion as of June 30, 2026, down from $1.55 billion at March 31. Short-term investments increased to $461.7 million from $443.8 million.Operating cash outflow was $168.8 million compared with $44.7 million a year earlier. For the fiscal second quarter, management expects Net Bookings of $1.62-$1.67 billion and GAAP net revenues of $1.42-$1.47 billion. GAAP loss is forecast at 84-75 cents per share, with recurrent consumer spending expected to decline about 5%.Take-Two reiterated fiscal 2027 Net Bookings guidance of $8.0-$8.2 billion, representing roughly 20% growth at the midpoint. GAAP net revenues are still expected at $7.9-$8.1 billion, while GAAP earnings are projected at 55-75 cents per share. Recurrent consumer spending is expected to be flat year over year and represent 64% of Net Bookings.For fiscal 2027, TTWO continues to expect operating cash flow above $1 billion. Capital expenditures are now projected at approximately $290 million, up from the prior forecast because of a planned real estate purchase, while management expects to reach a net cash position by fiscal year-end. Currently, TTWO carries a Zacks Rank #2 (Buy).Kontoor Brands KTB, Newsmax Inc. NMAX and Viking Holdings VIK are some similar-ranked stocks that investors can consider in the broader Consumer Discretionary sector.Kontoor Brands, Newsmax and Viking Holdings carry a Zacks Rank #2 each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Kontoor Brands is slated to announce second-quarter 2026 results on Aug. 12. Meanwhile, Newsmax will report on Aug. 13, and Viking Holdings is scheduled to release results on Aug. 19. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Take-Two Interactive Software, Inc. (TTWO) : Free Stock Analysis Report Kontoor Brands, Inc. (KTB) : Free Stock Analysis Report Viking Holdings Ltd. (VIK) : Free Stock Analysis Report Newsmax Inc. (NMAX) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research