Kontoor Brands Inc

Overview

Kontoor Brands, Inc. (collectively with its subsidiaries, "Kontoor," the "Company," "we," "us" or "our") is a global lifestyle apparel company, with a portfolio led by two of the world’s most iconic consumer brands: Wrangler® and Lee®. The Company designs, manufactures, procures, sells and licenses apparel, footwear and accessories, primarily under the brand names Wrangler® and Lee®. The Company’s products are sold in the United States (“U.S.”) through mass merchants, specialty stores, department stores, company-operated stores and online, including digital marketplaces. The Company’s products are also sold internationally, primarily in the Europe, Middle East and Africa ("EMEA"), Asia-Pacific (“APAC”) and Non-U.S. Americas regions, through department stores, specialty stores, company-operated stores, concession retail stores, independently-operated partnership stores and online, including digital marketplaces.

Kontoor is headquartered in the U.S. with a presence in over 70 countries. Our primary brands, Wrangler® and Lee®, have a combined heritage that spans over 200 years. During 2024, we sold approximately 147 million units of apparel across all brands. We benefit from long-standing relationships with many of our customers who we believe depend on our ability to reliably and timely replenish our high-volume products.

We focus on continuously improving the most important elements of our products, which include fit, fabric, finish and overall construction, while continuing to provide our products to consumers at attractive price points. We leverage innovation and design advancements as well as the unique heritage of our brands to create products that meet our consumers' needs.

The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to periods ended December 2024, December 2023 and December 2022 correspond to the 52-week fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively.

Global macroeconomic conditions that continued to impact the Company during 2024 included ongoing elevated interest rates, moderating inflation, fluctuating foreign currency exchange rates, supply chain issues and inconsistent consumer demand. These factors continued to contribute to uncertain global economic conditions and consumer spending patterns, which impacted retailers' and the Company's operations. Additionally, the U.S. government has recently enacted and proposed tariff increases on imports. These actions may result in reciprocal tariffs or other restrictive trade measures by foreign jurisdictions. These conditions are causing greater uncertainty in the global economy.

The macroeconomic factors discussed above, primarily interest rates and inflation, contributed to ongoing retailer actions to conservatively manage inventory levels, which impacted our results during 2024.

Our global supply chain was affected by ongoing disruptions to key trade routes such as the Red Sea and Panama Canal, political unrest in Bangladesh and port strikes on the East and Gulf Coasts of the U.S. These disruptions did not have a significant impact on results.

The Company has responded to ongoing macroeconomic conditions by controlling expenses, adjusting pricing and proactively managing our global supply chain. While we anticipate continued uncertainty related to the macroeconomic environment during 2025, including the potential impact of tariff increases on product costs, we believe we are appropriately positioned to successfully manage through operational challenges that may arise. We continue to closely monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand.

As discussed in Note 23 to the Company's financial statements in this Form 10-K, on February 18, 2025, the Company entered into a definitive agreement to acquire the global outdoor and workwear brand Helly Hansen, a wholly-owned subsidiary of Canadian Tire Corporation, Limited, for $1.276 billion Canadian dollars ("CAD") or approximately $900 million as of the agreement date, subject to working capital and other closing adjustments. On February 19, 2025, the Company entered into foreign currency exchange contracts totaling $1.275 billion CAD to mitigate any impact of foreign currency fluctuations prior to the closing date. The transaction is expected to close in the second fiscal quarter of 2025, upon receipt of required regulatory approval and completion of customary closing conditions.

2 Kontoor Brands, Inc. 2024 Form 10-K

Corporate Information

Our principal executive offices are located at 400 N. Elm Street, Greensboro, North Carolina 27401 and our telephone number is 336-332-3400. Our website is www.kontoorbrands.com. Our website and the information contained therein or connected thereto is not incorporated in this Annual Report on Form 10-K.

Our Competitive Strengths

•Iconic Brands With Significant Global Scale

The Wrangler® and Lee®brands are steeped in rich heritage and authenticity, with 78 years and 136 years of history, respectively, and have an established global presence in the apparel market across numerous categories and channels of distribution. Products bearing our brands are sold in more than 70 countries, and we believe they have strong consumer connectivity worldwide with approximately 147 million units sold in 2024. We market our brands and products to highlight their differentiated position and product attributes. We sit at the center of cultural moments and cater broadly to customers through our global and regional licensed collaborations, such as Angel Chen, Basquiat, HEYDUDE, Hot Wheels, The Hundreds and STAUD, among others. We recently launched a collaboration with country music superstar and Grammy award-winner Lainey Wilson as part of a multi-year partnership. In addition, we have been the official jeans of the Dallas Cowboys since 2023. We strive to maximize our consumer reach by leveraging each brand’s best practices to drive growth across product categories and expand our overall net revenues and earnings profile.

•Deep Relationships With Leading Brick-and-Mortar and E-Commerce Retailers

We have developed long-term relationships with many leading brick-and-mortar and e-commerce retailers, including Amazon, Kohl’s, Target and Walmart, whom we believe rely on our iconic brands, leading product quality and value and innovation to address evolving consumer needs in our product categories. Our rich global heritage across both the Wrangler® and Lee® brands also supports strong positions in growing markets, such as in the U.S. Western specialty channel and with leading retailers in Europe and China. By fostering these relationships, we have become an important vendor for many of our customers and have built leading category positions, which in turn supports the availability of our brands to consumers and our ability to introduce new products and categories. We also endeavor to provide sophisticated logistics, planning and merchandising expertise to support our customers, which we believe enables a level of insight that builds more integrated customer relationships.

•Integrated Supply Chain Built to Support Volume and Replenishment

We are continually refining our supply chain to maximize efficiency and reinforce our reputation of reliability with our customers. Through our vertically integrated supply chain, we manufacture, source and distribute a significant quantity of high-volume apparel products that are frequently replenished by our retail partners. Our product procurement and distribution strategies, combined with our internal manufacturing facilities and retail floor space management programs, create increased operating flexibility. Our supply chain is built to support large volumes and to meet customer needs while balancing cost and operational requirements across our U.S. Wholesale, Non-U.S. Wholesale and Direct-to-Consumer channels. Our internal manufacturing facilities are all located in the Western Hemisphere where their proximity to our primary markets enables us to deliver inventory in a consistent and timely manner. We also have established global third-party sourcing and distribution networks that we leverage across product categories and various regions. We currently have three technical service centers located in North Carolina, South China and Bangladesh. Additionally, we leverage our global enterprise resource planning (“ERP”) system to reduce complexity in our supply chain, create better inventory management and improve our speed in the market. We believe our flexible and balanced approach to manufacturing and distribution allows us to be agile in managing our production needs and support our strategy and growth.

•Highly Experienced Management Team and Board of Directors

We have a highly experienced senior management team and Board of Directors that continuously demonstrates an unwavering commitment to our employees, our shareholders and our business. Drawing on deep industry knowledge and diverse perspectives, they have helped navigate our business through unprecedented challenges while simultaneously evolving our strategies with agility and flexibility. As we continue our focus on catalyzing growth for our global brands, we believe our management team and Board of Directors will continue to drive the success of our company.

•Resilient Business Model That Delivers Consistent Results

Our business has historically generated consistent margins, strong cash flows and high returns on capital due to our global reach, leading market positions, deep customer relationships, and the vertical integration of our supply chain. We believe we offer high product value and quality to our consumers, who respond to our value proposition by consistently purchasing our products over time. Our strong margin profile combined with our diligent approach to operational excellence and capital management have produced strong cash flows. We believe our consistent financial results will provide us with the opportunity to invest in our business and deploy a multi-faceted capital allocation strategy. Despite the macroeconomic pressures faced by the Company in recent years, we have been resilient and agile in responding to shifting market conditions, and have continued to produce forward momentum by executing on our strategic vision discussed below, focusing on cash flow, optionality and revenue and margin growth to drive long-term acceleration.

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Our Strategies

We continue to execute on our strategic vision which focuses on four growth vectors: (i) expansion of our core U.S. Wholesale business, (ii) category extensions such as outdoor, workwear and tops, (iii) geographic expansion of our Wrangler® and Lee® brands and (iv) channel expansion focused on the digital platforms in our U.S. Wholesale and Direct-to-Consumer channels. We are focused on driving brand growth and delivering long-term value to our stakeholders including our consumers, customers, shareholders, suppliers and communities around the world. We believe the following four areas will catalyze profitable revenue growth in the future:

•Enhance and Accelerate Our Core U.S. Wholesale Business

We are focused on continuing to enhance the global strength of our brands, improve operating efficiency and increase the overall demand for our products. Within our largest market and channel, we are pursuing strategies to support and grow market share in existing distribution with leading retailers, drive business opportunities in new channels, such as premium, specialty and sporting goods, as well as accelerate complementary categories.

•Diversify Our Product Mix Through Category Extensions

We continue to enhance our existing product assortment, broaden our product offering and expand into adjacent product categories, with a focus on outdoor, workwear and tops. Within outdoor, we are bringing to market new product innovation platforms such as collections from Wrangler All Terrain Gear. Within workwear, we are leveraging our strong brand equity and innovation platforms to enter new markets and categories. And in tops, we are focusing our efforts across logo, lifestyle and licensed/collaboration content. We continue to diversify our assortment in both brands, including product extensions such as non-denim bottoms and female categories, new licensed categories such as belts, small leather goods, headwear, socks, home décor, luggage, bags, eyewear and cold weather accessories and the launch of the Wrangler Bespoke collection and Lee Xinnovation platform. Successful execution of our product expansion strategies should broaden the appeal of our brands and products to new consumers and ultimately drive the overall net revenues of the business.

•Expand Our Reach Around the Globe

We continue to pursue opportunities to evolve our business with new and existing customers and expand the international distribution of our products into new markets. We are leveraging relationships with licensees to broaden our distribution, such as the expansion of Wrangler® and Lee® branded stores in India. In Europe, we are refining our strategy to become more consumer-centric in addressing how and where our customers want to purchase our products. Approximately 90% of Wrangler® revenues are in the U.S., and thus Wrangler®has many international growth opportunities, particularly in Europe.

•Elevate Our Direct Connection With Consumers Through Channel Expansion

We are leveraging our leading brand positions to increase our digital penetration with our own e‑commerce websites as well as major global retail partners, as we continue to evolve our digital ecosystem. We also continue to focus on our brick-and-mortar strategy. For example, in the U.S. we are optimizing the location and footprint of our stores and elevating the customer experience. In Asia, we launched a retail excellence initiative with reformatted stores, improved point-of-sale technologies and enhanced assortments, and we expanded our presence on livestreaming platforms. In Europe, we are refining our brick-and-mortar strategy by leveraging best practices and continuing to invest in our digital platform. We are making progress towards these objectives through investments in advanced data analytics capabilities and unlocking insights and value through our global ERP infrastructure. In addition, we are stepping up our investment in accretive enablers, such as product and design, innovation, supply chain, talent and culture and demand creation.

Our Business Segment Information

Our two reportable segments are Wrangler® and Lee®, which primarily include sales of branded products, along with various sub-brands and collections. In addition, we present an Other category for purposes of reconciliation of reportable segment net revenues and profits to the Company's consolidated operating results, but the Other category is not considered a reportable segment. See below for additional information on the brands, channels of distribution and geographies included in each segment.

•Wrangler

Wrangler® is an iconic American heritage brand rooted in the western lifestyle, with 78 years of history offering denim, apparel, footwear and accessories for adults and children. We offer multiple sub-brands, collections and product lines within the Wrangler® brand to target specific consumer demographics and consumer end-users, including:20X®, Aura from the Women at Wrangler®, Cowboy Cut®, Premium Patch®, Riggs Workwear®, Rock 47®, Rustler®, Wrangler Retro®, Wrangler Rugged Wear® and Wrangler All Terrain Gear.

•Lee

Lee® is an iconic American brand offering denim, apparel, footwear and accessories for adults and children, with 136 years of heritage and authenticity. The Lee® brand delivers trend-forward styles with exceptional fit and comfort through innovative fabric solutions and advanced design technology. The Lee® brand offers multiple sub-brands, collections and product lines, making it attractive for a broader consumer base, including: Lee101®, Riders®, Storm Rider®, Lee MVPTM and Lee XTM.

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•Other

Other includes sales and licensing of Chic®, Rock & Republic®, other company-owned brands and private label apparel. Chic® is a traditional apparel brand and is marketed to consumers as a classic comfort solution. We distribute the brand by leveraging our e-commerce relationships. Rock & Republic® is a premium apparel brand and is marketed to consumers as a modern and active lifestyle brand. We distribute the brand through our e-commerce relationships, retail stores and our Company-operated website at www.rockandrepublic.com.

Distribution Channels and Customers

Our distribution channels include U.S. Wholesale, Non-U.S. Wholesale and Direct-to-Consumer.

•U.S. Wholesale

The U.S. Wholesale channel is our largest distribution channel and accounted for approximately 73% of our net revenues in 2024. Within this channel, our Wrangler® and Lee® branded products are marketed and sold by mass merchants, specialty stores including western specialty retail, department stores, online, including digital marketplaces, and through licensees. This channel also includes revenues related to Chic® and Rock & Republic® products sold in the U.S. A portion of our U.S. Wholesale net revenue is attributable to digital sales from our wholesale partners’ websites and third-party e-commerce platforms such as Amazon and other pure-play digital retailers. Third-party e-commerce platforms are a growing and important portion of this channel.

Our mass merchant customers include national retailers such as Target and Walmart, as well as various regional retail partners. Our department store customers include national retailers such as Kohl’s as well as other retail partners. The specialty store channel, which includes revenue from Wrangler® Riggs Workwear® and Wrangler® Western branded products, consists primarily of national accounts such as Boot Barn, Cavender's and Tractor Supply Company as well as upscale modern specialty stores.

We foster close and longstanding relationships with our top brick-and-mortar wholesale customers. In addition, we engage in an active dialogue with many of our key wholesale customers and receive proprietary insights about how our products are performing on a timely basis. Our brands’ top U.S. Wholesale customers include Amazon, Boot Barn, Cavender's, Kohl’s, Target and Walmart.

In addition, we have revenues in our U.S. Wholesale channel from licensing arrangements where we receive royalties based on a percentage of the licensed products’ net revenues. Most of the agreements provide for a minimum royalty requirement. See “Licensing Arrangements” herein for more information.

•Non-U.S. Wholesale

The Non-U.S. Wholesale channel represents the majority of our international business and accounted for approximately 15% of our net revenues in 2024. Wrangler® and Lee®branded products are available in Canada, Mexico, the United Kingdom, continental Europe, the Middle East, China, and through licensees across Australia, Asia, Africa, Mexico, Central and South America, Europe and India. The majority of the Wrangler® and Lee® international product business is located in EMEA and APAC, where we sell our products directly to our department store and specialty store wholesale customers, online, including digital marketplaces, and indirectly through our distribution and license relationships. In Canada and Mexico, our products are primarily marketed through mass merchants, department stores and specialty stores. A portion of our Non-U.S. Wholesale net revenue is attributable to digital sales from our wholesale partners’ websites, third-party e-commerce platforms, and other pure-play digital retailers. Additionally, our Non-U.S. Wholesale channel includes sales in partnership stores located across EMEA, APAC and South America. Partnership stores are owned and operated by our licensees, distributors and other independent parties. They are retail locations selling our Wrangler® and Lee® branded products that have the appearance of Kontoor-operated stores, and as such represent an important vehicle for presenting our brands to international consumers. Similar to the U.S. Wholesale channel, we use proprietary insights from our wholesale customers to strategically refine our products and adjust our go-to-market approach.

Geographically, our net revenue in EMEA is concentrated in developed markets such as France, Germany, Italy, the Netherlands, Poland, Scandinavia, Spain and the United Kingdom. We access the APAC market primarily through our business in China. Canada is the largest international market for Wrangler® branded products, while China is the largest international market for Lee® branded products.

In addition, we have revenues in our Non-U.S. Wholesale channel from international licensing arrangements where we receive royalties based on a percentage of the licensed products’ net revenues. Most of the agreements provide for a minimum royalty requirement. See “Licensing Arrangements” herein for more information.

•Direct-to-Consumer

Our Direct-to-Consumer channel accounted for approximately 12% of our net revenues in 2024 and represents sales of our products via our Wrangler® and Lee®branded full-price and outlet stores, online and via international concession arrangements.

The Direct-to-Consumer channel allows us to achieve the fullest expression of our brands by displaying our product lines in a manner that supports the brands’ positioning, providing an in-store and online user experience that enables us to address the needs and preferences of our consumers.

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As of December 28, 2024, we had 20 Company-operated full-price Wrangler® and Lee®branded retail stores, which are located in Asia, Europe and the U.S. They include mono-brand stores, which carry either Wrangler® or Lee®branded products, and dual-brand stores, which carry both Wrangler® and Lee®branded products. We also had 57 Company-operated premium outlet and clearance centers as of December 28, 2024, primarily our Lee Wrangler Outlet TM and Lee Wrangler Clearance Center TM retail stores located in the U.S., as well as outlets in Europe and Mexico.

As of December 28, 2024, we had 187 concession retail and outlet stores in Europe and Asia. Under a typical concession arrangement, we have a dedicated sales area, pay a concession fee for use of the space based on a percentage of retail sales and, in many cases, manage staffing for operation of the sales area. The concession model provides dedicated sales areas for our brands and helps differentiate and enhance the presentation of our products, generally with lower overhead than opening a separate store.

We continue to prioritize serving our customers through digital platforms that enhance the user experience and drive customer interaction in digital and physical environments. Sales from our own websites represent a growing portion of our net revenues, and help elevate the connection consumers have with our brands. Wrangler® and Lee® branded products are currently available through our own websites in 15 countries.

Licensing Arrangements

We seek to maximize our brands’ market penetration and consumer reach by entering into licensing agreements with independent parties. Pursuant to these licensing agreements, we typically grant our licensing partner an exclusive or non-exclusive license to use one or more of our brands in connection with specific licensed categories of products in specific geographic regions. Our licensing partners leverage the strength of our brands and our customer relationships to sell products in their licensed categories and geographic regions. We currently have licensing agreements in categories including denim, apparel, footwear, accessories and home décor.

We retain oversight and approvals of the design, quality control, advertising, marketing and distribution of licensed products to help maintain our brand and product quality standards. License agreements are for fixed terms of typically three to five years, and we also enter into shorter term collaboration agreements. Each licensee pays royalties based on its sales of licensed products in accordance with the terms of the agreement, with the majority of agreements requiring a minimum royalty payment. Licensing net revenue was $45.8 million in 2024.

Design, Product Development and Innovation

The design, technical design, product development, sustainability and innovation teams work closely together to implement our brands' product strategy. By leveraging their extensive experience and expertise, they create a unique product mix that provides exceptional value, quality and styling for our customers and consumers. We operate globally, designing and developing products that align with our brand positioning while meeting customer and consumer needs. Our primary selling seasons are Spring/Summer and Fall/Winter, although some product lines are available more frequently.

In addition to our global design and product development teams, we have an innovation center in Greensboro, North Carolina. This facility conducts advanced product technology research in our materials science lab, focusing on raw materials, laser processing and finishing advancements. This location is staffed with dedicated scientists and engineers who leverage consumer insights to create new products and material technologies and enhance the attributes of existing products. Our innovation network is essential to our design strategy and long-term growth, allowing us to evolve and deliver product experiences that meet our consumers' needs.

Manufacturing, Sourcing and Distribution

Our global supply chain organization is responsible for the operational planning, manufacturing, sourcing and distribution of products to our customers. We believe we have developed a high degree of expertise in managing the complexities associated with a global supply chain. During 2024, we manufactured or sourced approximately 138 million units of finished goods inventory. Our supply chain employs a centralized leadership model with localized regional expertise. Within our internal manufacturing facilities, we innovate and design proprietary equipment to drive our production output and capabilities. We focus on engineering and efficiency, which we believe provides an ongoing competitive advantage in our internal manufacturing facilities. We leverage our manufacturing expertise in our sourcing operations, where we have developed longstanding relationships with third-party contract manufacturers and distributors. This manufacturing and sourcing approach, coupled with strategic inventory and retail floor space management programs with many of our major retail customers, gives us operational flexibility as we continue to expand our distribution.

•Sourcing and Manufacturing

We believe the combination of our internal manufacturing and contract manufacturing across different geographic regions provides a well-balanced, flexible approach to product procurement. Within our own manufacturing facilities, we purchase raw materials from numerous U.S. and international suppliers to meet our production needs. Raw materials include products made from cotton, polyester, spandex and lycra blends, as well as thread and trim (such as product identification, buttons, zippers and snaps). Our top three suppliers represent 21% of our total cost of goods sold, but we are not overly reliant on any individual suppliers. We operate global sourcing hubs, which are responsible for managing contract manufacturing and procurement of product, including supplier oversight, product quality assurance, sustainability within the supply chain, responsible sourcing, and transportation and shipping functions.

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We own and operate seven manufacturing facilities in Mexico. We also source products from approximately 210 contract manufacturing facilities in 19 countries. During 2024, approximately 30% of our units were manufactured in our internal manufacturing facilities, and approximately 70% were sourced from contract manufacturers. Products obtained from contractors in the Western Hemisphere frequently have a higher cost than products obtained from contractors in Asia. However, internal manufacturing combined with contracting in the Western Hemisphere gives us greater flexibility, shorter lead times and allows for enhanced inventory management in the U.S. market. In making decisions about the location of manufacturing operations and suppliers, we consider factors including the raw material source, the market the product will be sold in, production lead times, duties and tariffs, product cost, product complexity and the ability to pursue upside demand. Additionally, we continually monitor risks and developments related to duties, tariffs, quotas and other factors and we often manufacture and source products from countries with tariff preferences and free trade agreements.

•Distribution

Products are shipped from our contract manufacturers and internal manufacturing facilities to distribution centers around the world. We directly operate our domestic distribution centers and we carefully select third-party logistic providers to partner with as needed in certain regions, primarily in EMEA and APAC. All of our distribution centers are strategically located to provide speed and service to our consumers at the most efficient cost possible. Additionally, our long-term third-party distribution relationships ensure maximum capacity, connectivity, responsiveness and overall service coverage around the globe. In international markets, our products are also marketed through our distributors, agents and licensees.

Inventory Management

Inventory management is key to the cash flows and operating results of our business. We manage our inventory levels based on existing orders, anticipated sales and the delivery requirements of our customers, which requires close coordination with our customers. For new product introductions, which often require large initial launch shipments, we may commence production before receiving orders for those products. Key areas of focus include added discipline around the purchasing of product, inventory optimization and channel placement, as well as effective planning and execution in disposition of excess inventory through our various channels. Our inventory strategy is focused on continuing to meet consumer demand, while improving our inventory efficiency over the long-term through the Company's global ERP system and inventory optimization tools.

Advertising and Customer Support

Our advertising and marketing efforts focus on differentiating our brands’ positioning and highlighting our product qualities. We are focused on creating globally unified brand messages with appropriate regional nuances in order to maximize our brand recognition, and drive brand demand from initial end-consumer awareness to long-term loyalty. By utilizing global heads of marketing, we continue to develop integrated, multi-channel marketing strategies designed to effectively reach the target consumers of each of our brands. We pursue this strategy through our use of a variety of media channels and other public endorsements, including traditional media such as television, print and radio, as well as digital media channels such as display, online video, social media, live streaming, paid search, influencers and brand ambassadors. We leverage marketing analytics to optimize the impact of advertising and promotional spending, and to identify the types of spending that provide the greatest return on our marketing investments. Our strategy also includes collaborating with other influential brands and developing new advertising campaigns that drive consumer awareness and brand equity.

We also participate in cooperative advertising on a shared cost basis with major retailers in print and digital media, radio and television. We generally provide our wholesale customers with point-of-sale fixtures and signage to enhance the presentation and brand image of our products. Our websites, www.wrangler.com, www.lee.com, www.rockandrepublic.com and corresponding regional websites, enhance consumer understanding of our brands and help consumers find and buy our products. We employ a support team for each brand that is responsible for customer service at the consumer level as well as a sales force that manages our customer relationships.

Seasonality

Our operating results are generally subject to some variability due to seasonality, with net revenues typically being slightly higher during the fall and holiday shopping seasons. This limited variation results primarily from the differences in seasonal influences on revenues between our Wrangler® and Lee®segments. With changes in our mix of business and the growth of our direct-to-consumer operations, historical quarterly revenue and profit trends may not be indicative of future trends. Working capital requirements vary throughout the year. Working capital typically increases early in the year as inventory builds to support peak shipping periods and then moderates later in the year as those inventories are sold and accounts receivable are collected. Cash provided by operating activities is usually substantially higher in the second half of the year due to higher net income during that period and reduced working capital requirements.

Competition

The apparel industry is highly competitive, highly fragmented and characterized by low barriers to entry with many local, regional and global competitors. We compete in the apparel and accessories sector by leveraging our brands, scale and ability to develop high-quality, innovative products at competitive prices that meet consumer needs.

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Our primary branded competitors are large, globally focused apparel companies that also participate in a variety of categories, including, but not limited to, denim, athletic wear, exclusive or private labels, casual lifestyle apparel, outerwear and workwear. Some of the key brands we compete with include Ariat, Calvin Klein, Carhartt, Cinch, Columbia, Dickies, Diesel, Guess, Levi’s and Tommy Hilfiger. Additionally, we see an increasing reliance on private label apparel created for retailers such as Amazon, Target, Walmart and Kohl's.

Intellectual Property

Trademarks, trade names, patents and domain names, as well as related logos, designs and graphics, provide substantial value in the development and marketing of our products, and are important to our continued success. We have registered the intellectual property associated with our brands in the U.S. and other countries where our products are manufactured and/or sold, including trademark registrations for our two key brands, Wrangler® and Lee®. Although the laws vary by jurisdiction, in general, trademarks remain valid and enforceable provided that the marks are used in connection with the related products and services and the required registration renewals are filed. Typically, trademark registrations can be renewed indefinitely as long as the trademarks are in use. We also place high importance on product innovation and design, and a number of these innovations and designs are the subject of patents. However, we do not regard any segment of our business as being dependent upon any single patent or group of related patents.

Human Capital

We understand that our greatest asset is our global employee base. As of December 28, 2024, we had approximately 13,200 employees worldwide. Geographically, approximately 1,000 employees are located in APAC, approximately 600 are located in EMEA, approximately 8,800 are located in Latin America and Mexico, primarily supporting our manufacturing facilities, and approximately 2,800 are located in the U.S. Less than 1% of employees in international markets are covered by trade-sponsored or governmental bargaining arrangements. Employee relations are considered to be good.

Supported by a leadership team that fosters a culture of collaboration, performance and entrepreneurial spirit, our employees are dedicated to harnessing design, innovation and sustainable practices to create apparel that meets the needs of our customers today, while also igniting interest from the next generation of consumers. With pride in our rich heritage and an eye toward ongoing business success, we continue to develop a high-performance culture that makes Kontoor an employer of choice in the apparel industry. We believe in developing a culture of innovation, collaboration and growth where team members have a strong sense of belonging that fuels their passion for winning. We are dedicated to putting our purpose, mission and values at the forefront of everything we do.

Moving forward, we will continue to focus our efforts on: (i) attracting and retaining high-performing people who reflect our communities and consumers, (ii) providing career development and advancement opportunities and (iii) fostering belonging through an environment where employees feel welcomed, valued and heard.

We consider health and safety to be core values in all our operations. We do not jeopardize the well-being of our employees, contractors or supply chain partners to complete any tasks, projects or other priorities. We believe the people involved in the development of our products are our most important assets; therefore, we have created and implemented strong health and safety policies and procedures that go beyond governmental standards. Our operations have an Occupational Safety and Health Administration recordable incident rate ("RIR") significantly below the average RIR of our industry; however, we strive to reach zero injuries.

Corporate Sustainability and Social Responsibility

Corporate sustainability and social responsibility are top priorities for our Company and Board of Directors. We are focused on advancing worker well-being, sourcing products and materials from companies that share our values and limiting our negative impacts on the environment while adhering to the highest ethical standards. These principles align with the essence of our brands and represent the right course of action. The Board of Directors promotes responsible corporate citizenship and oversees compliance with Kontoor’s standards. The Nominating and Governance Committee regularly reviews and evaluates the progress of sustainability, social and governance strategies, which fosters responsible growth.

At Kontoor, sustainability represents a dynamic process of continual improvement aligned with our strategic pillars of People, Product, Planet and Prosperity. We have established actions and goals for each pillar, including the preferred sourcing of raw materials for our products, reducing the use or generation of hazardous chemicals in the sourcing or manufacturing of our products, a science-based target related to our reduction of greenhouse gas emissions and savings in water consumption across our supply chain.

We articulate our corporate sustainability and social responsibility commitments in our Code of Conduct and in our 2023 Sustainability Progress Report which can be found on our website at www.kontoorbrands.com. Our website and the information contained therein or connected thereto is not incorporated in this Annual Report on Form 10-K.

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Governmental Regulations

We are subject to U.S. federal, state and local laws and regulations that could affect our business, including those promulgated under the Federal Trade Commission Act, the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission and various environmental laws and regulations, including laws and regulations relating to generating emissions, water discharges, waste, product and packaging content and workplace safety. Our international businesses are subject to similar laws and regulations in the countries in which they operate. Our operations also are subject to various international trade agreements and regulations. While we believe that we are in compliance in all material respects with all applicable governmental regulations, including environmental regulations, these regulations may change or become more stringent or unforeseen events may occur, any of which could have a material adverse effect on our financial position or results of operations.