Kontoor Brands, Inc.

Previous wording

The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to December 31 of each year. Accordingly, this Form 10-Q presents the second quarter of the Company's fiscal year ending January 3, 2026 ("fiscal 2025"), which is a 53-week fiscal year. For presentation purposes herein, all references to periods ended June 2025, December 2024 and June 2024 correspond to the fiscal periods ended June 28, 2025, December 28, 2024, and June 29, 2024, respectively.

Current wording

The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to December 31 of each year. Accordingly, this Form 10-Q presents the third quarter of the Company's fiscal year ending January 3, 2026 ("fiscal 2025"), which is a 53-week fiscal year. For presentation purposes herein, all references to periods ended September 2025, December 2024 and September 2024 correspond to the fiscal periods ended September 27, 2025, December 28, 2024, and September 28, 2024, respectively.

Previous wording

References to fiscal 2025 foreign currency amounts herein reflect the impact of changes in foreign exchange rates from the prior year comparable period when translating foreign currencies into U.S. dollars. The Company's most significant foreign currency translation exposure is typically driven by business conducted in euro-based countries, the Chinese yuan, the Norwegian krone, the Canadian dollar and the Mexican peso. However, the Company conducts business in other developed and emerging markets around the world with exposure to other foreign currencies.

Current wording

References to fiscal 2025 foreign currency amounts herein reflect the impact of changes in foreign exchange rates from the prior year comparable period when translating foreign currencies into U.S. dollars. The Company's most significant foreign currency translation exposure is typically driven by business conducted in euro-based countries, the Norwegian krone, the Chinese yuan, the Canadian dollar and the Mexican peso. However, the Company conducts business in other developed and emerging markets around the world with exposure to other foreign currencies.

Previous wording

Global macroeconomic conditions that continued to impact the Company during the second quarter of 2025 included ongoing elevated interest rates, moderating inflation, fluctuating foreign currency exchange rates, global supply chain issues and inconsistent consumer demand.

Current wording

Global macroeconomic conditions that continued to impact the Company during the third quarter of 2025 included inconsistent consumer demand despite recent declines in interest rates, fluctuating foreign currency exchange rates, moderating inflation and global supply chain issues.

Previous wording

During 2025, the U.S. government enacted significant changes to its tariff regime which increased rates on virtually all imports. Certain foreign jurisdictions have responded with reciprocal tariffs which resulted in corresponding actions by the U.S. government. The ongoing uncertainty of tariff rates, potential retaliatory measures and outcomes of trade negotiations is contributing to macroeconomic volatility. These factors continued to contribute to uncertain global economic conditions and consumer spending patterns, which impacted retailers' and the Company's operations (which now include additional jurisdictions through the Helly Hansen acquisition).

Current wording

During 2025, the U.S. government enacted significant changes to its tariff regime which increased rates on virtually all imports, many of which have gone into effect or will go into effect during the fourth quarter of 2025. The ongoing impact of increased tariff rates and uncertainty regarding the outcomes of trade negotiations is contributing to macroeconomic volatility. Additionally, the increased tariff rates impacted gross margins during the third quarter of 2025 and are expected to continue to impact future periods. These factors continued to contribute to uncertain global economic conditions and consumer spending patterns, which impacted retailers' and the Company's operations.

Previous wording

Inflationary pressures have continued to moderate in recent quarters, and although these pressures continue to impact us, current period results reflect continued favorability from lower product costs compared to the second quarter of 2024. Retailers continued to conservatively manage inventory levels as a result of this uncertain macroeconomic environment, which impacted our results during the second quarter of 2025. The Company has responded to ongoing macroeconomic conditions by controlling expenses and proactively managing our global supply chain.

Current wording

Inflationary and interest rate pressures have moderated in recent quarters. These pressures have continued to impact us, along with recent increases in product costs and tariffs, compared to the third quarter of 2024. Retailers continued to conservatively manage inventory levels as a result of this uncertain macroeconomic environment. The Company has responded to ongoing macroeconomic conditions by controlling expenses, strategic pricing adjustments and investing in our brands and strategic priorities.

Previous wording

In connection with the recently enacted U.S. tariff regime discussed above, the Company continues to evaluate potential mitigating actions including transferring production within our global supply chain, managing our internal manufacturing operations, pricing

Current wording

In connection with the recently enacted U.S. tariff regime discussed above, the Company continues to evaluate mitigating actions including the transfer of production within our global supply chain, transformation of our supply chain capabilities, pricing adjustments,

Previous wording

Kontoor Brands, Inc. Q2 FY25 Form 10-Q 26 adjustments, supplier partnership initiatives and other proactive mitigating actions. While we anticipate continued uncertainty related to the macroeconomic environment during 2025, including the potential impacts of further 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.

Current wording

Kontoor Brands, Inc. Q3 FY25 Form 10-Q 26 supplier partnership initiatives and other proactive mitigating actions. While we anticipate continued uncertainty related to the macroeconomic environment during the remainder of 2025 and into 2026, including the potential impacts of further tariff increases, 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.

Previous wording

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. Through our three global brands, we are focused on accelerating growth, increasing capital allocation optionality and establishing the Company as the employer of choice in the industry. Additionally, the integration of the recently completed acquisition of Helly Hansen is a strategic focus for the Company, with an emphasis on operating margin growth.

Current wording

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. Through our three global brands, we are focused on accelerating growth, expanding operating margin, increasing capital allocation optionality and establishing the Company as the employer of choice in the industry. Additionally, the integration of the recently completed acquisition of Helly Hansen is a strategic focus for the Company, with an emphasis on growth and operating margin expansion. The Company also continues to execute on Project Jeanius, a comprehensive end-to-end business transformation focused on simplifying processes, optimizing systems and enhancing our global operating model with the goal of creating significant investment capacity through gross and operating margin expansion.

Previous wording

The acquisition of Helly Hansen (the "Acquisition") was completed on May 31, 2025, with cash consideration paid of $1.3 billion CAD (approximately $960.0 million U.S. dollars), subject to adjustments for finalization of working capital and other closing adjustments. The purchase price was funded by indebtedness and cash on hand.

Current wording

The acquisition of Helly Hansen (the "Acquisition") was completed on May 31, 2025, with cash consideration paid of $1.3 billion CAD, equivalent to $957.5 million U.S. dollars. The purchase price was funded by indebtedness and cash on hand. During the three months ended September 2025, the Company recorded measurement period adjustments, primarily to working capital estimates, resulting in an increase to goodwill of $27.9 million. The final determination of the purchase price allocation will be completed as soon as practicable, and within the measurement period of up to one year from the Closing Date. During the third quarter of 2025, the Company incurred acquisition and integration-related costs of $12.0 million comprised primarily of professional and other fees. We expect to incur additional integration-related costs associated with the Acquisition in future periods.

Previous wording

During the second quarter of 2025, the Company incurred restructuring and transformation charges of $7.4 million, of which $3.3 million relates to costs associated with restructuring activities as disclosed in Note 16 to the Company's financial statements in this Form 10-Q. Restructuring and transformation charges included $6.9 million related to business optimization activities associated with the continued execution of Project Jeanius and $0.5 million related to streamlining and transferring select production within our internal manufacturing network. Project Jeanius is a comprehensive end-to-end business transformation focused on simplifying processes, optimizing systems and enhancing our global operating model with the goal of creating significant investment capacity through gross and operating margin expansion. We anticipate continued transformation costs associated with Project Jeanius as we execute on this multi-year initiative.

Current wording

Additionally, during the third quarter of 2025, the Company incurred restructuring and transformation charges of $7.6 million related to business optimization activities associated with the continued execution of Project Jeanius and $0.4 million related to streamlining and transferring select production within our internal manufacturing network. We anticipate continued transformation costs associated with Project Jeanius as we execute on this multi-year initiative.

Previous wording

SECOND QUARTER OF FISCAL 2025 SUMMARY

Current wording

THIRD QUARTER OF FISCAL 2025 SUMMARY

Previous wording

•The Helly Hansen acquisition was completed on May 31, 2025, and the results of operations have been included since that date. Helly Hansen operating results were driven by seasonality of the business and the impact of purchase accounting adjustments.

Current wording

•The Helly Hansen acquisition was completed on May 31, 2025, and the results of operations have been included since that date. Helly Hansen operating results were driven by seasonality of the business. During the three months ended September 2025, the Company incurred $12.0 million of charges related to acquisition and integration-related activities.

Previous wording

•U.S. Wholesale revenues increased 6% compared to the three months ended June 2024, and represented 73% of total revenues in the current period. Helly Hansen U.S. Wholesale revenues were $2.9 million.

Current wording

•U.S. Wholesale revenues increased 4% compared to the three months ended September 2024, and represented 59% of total revenues in the current period. Helly Hansen U.S. Wholesale revenues were $30.6 million.

Previous wording

•International Wholesale revenues increased 14% compared to the three months ended June 2024, and represented 14% of total revenues in the current period. Helly Hansen International Wholesale revenues were $17.9 million.

Current wording

•International Wholesale revenues increased 109% compared to the three months ended September 2024, and represented 29% of total revenues in the current period. Helly Hansen International Wholesale revenues were $129.1 million.

Previous wording

•Direct-to-Consumer revenues increased 20% compared to the three months ended June 2024, and represented 13% of total revenues in the current period. Helly Hansen Direct-to-Consumer revenues were $8.4 million.

Current wording

•Direct-to-Consumer revenues increased 53% compared to the three months ended September 2024, and represented 13% of total revenues in the current period. Helly Hansen Direct-to-Consumer revenues were $33.0 million.

Previous wording

•Selling, general and administrative expenses as a percentage of net revenues increased to 34.4% compared to 32.3% for the three months ended June 2024, and included $20.5 million of acquisition and integration-related, restructuring and transformation charges and $20.4 million of operating expenses attributable to Helly Hansen.

Current wording

•Selling, general and administrative expenses as a percentage of net revenues increased to 33.8% compared to 30.0% for the three months ended September 2024, and included $73.8 million of operating expenses attributable to Helly Hansen and the charges incurred during the period as discussed above.

Previous wording

•Diluted earnings per share was $1.32 in the second quarter, compared to $0.92 in the same period last year, and included a $0.12 diluted loss per share attributable to Helly Hansen.

Current wording

•Diluted earnings per share was $0.66 in the third quarter, compared to $1.26 in the same period last year, and included $0.03 of diluted earnings per share attributable to Helly Hansen.

Previous wording

•Cash provided by operating activities was $103.3 million as compared to $152.7 million in the same period last year.

Current wording

•Cash provided by operating activities was $167.5 million as compared to $286.3 million in the same period last year.

Previous wording

Additionally, the following table presents a summary of the changes in net revenues for the three and six months ended June 2025 as compared to June 2024:

Current wording

Additionally, the following table presents a summary of the changes in net revenues for the three and nine months ended September 2025 as compared to September 2024:

Previous wording

Net revenues increased 8%, including a 4% increase attributable to Helly Hansen. The increase in net revenues was driven by a 6% increase in U.S. Wholesale revenues due to category growth and a timing shift in revenue, partially offset by a decrease in our digital wholesale business. Global Direct-to-Consumer revenues increased 20% attributable to Helly Hansen and higher e-commerce and retail store sales for the Wrangler® and Lee®brands. International Wholesale revenues increased 14%, primarily attributable to Helly Hansen.

Current wording

Net revenues increased 27%, primarily attributable to Helly Hansen. The increase in net revenues was driven by a 109% increase in International Wholesale revenues, primarily attributable to Helly Hansen. Global Direct-to-Consumer revenues increased 53%, attributable to Helly Hansen along with higher e-commerce and retail store sales for the Wrangler® and Lee®brands. U.S. Wholesale revenues grew 4% attributable to Helly Hansen and growth in our Wrangler wholesale business, driven by category growth in Western, partially offset by a decrease in our Lee wholesale business and a shift in the timing of shipments.

Previous wording

Gross margin increased 200 basis points, primarily related to 100 basis points from lower product costs and favorable product and channel mix, 60 basis points of favorability due to the benefits of Project Jeanius, 30 basis points of favorability from a decrease in restructuring and transformation charges and 10 basis points of favorability attributable to Helly Hansen. These benefits were partially offset by a 20 basis point impact from pricing reductions.

Current wording

Gross margin decreased 340 basis points, primarily related to the 450 basis point impact of restructuring and transformation costs from the closure of a portion of our manufacturing facilities, 180 basis points due to tariffs, 80 basis points due to higher product costs, and 60 basis points attributable to Helly Hansen. These decreases were partially offset by 310 basis points from favorable product and channel mix and pricing initiatives and 90 basis points due to the benefits of Project Jeanius.

Previous wording

Selling, general and administrative expenses increased $30.2 million, from 32.3% to 34.4% of net revenues, driven by $20.4 million of Helly Hansen operating expenses, $14.0 million of acquisition and integration-related costs and a $5.2 million increase in restructuring and transformation charges, partially offset by declines in discretionary spending and benefits of Project Jeanius.

Current wording

Selling, general and administrative expenses increased $87.1 million, from 30.0% to 33.8% of net revenues, driven by a 320 basis point impact from Helly Hansen operating expenses of $73.8 million. In addition, expenses increased related to acquisition and integration-related charges of $12.0 million, higher restructuring and transformation charges and incentive compensation, which were partially offset by declines in discretionary spending and benefits of Project Jeanius.

Previous wording

Net revenues increased 3%, including a 2% increase attributable to Helly Hansen. The increase in net revenues was driven by a 3% increase in U.S. Wholesale revenues due to category growth and an increase in our digital wholesale business. Global Direct-to-Consumer revenues increased 12%, attributable to Helly Hansen and higher e-commerce and retail store sales. International Wholesale revenues increased 1%, primarily attributable to Helly Hansen revenues, partially offset by lower sales in Mexico.

Current wording

Net revenues increased 12%, primarily attributable to Helly Hansen. The increase in net revenues was driven by a 42% increase in International Wholesale revenues, primarily attributable to Helly Hansen. Global Direct-to-Consumer revenues increased 26%, attributable to Helly Hansen and higher e-commerce and retail store sales for Wrangler and Lee. U.S. Wholesale revenues increased 3% attributable to Helly Hansen and growth in our Wrangler wholesale business, with category growth in Western and Workwear, which was partially offset by a decrease in our Lee wholesale business.

Previous wording

Additional details on changes in net revenues for the six months ended June 2025 as compared to June 2024 are provided in the section titled “Information by Business Segment.”

Current wording

Additional details on changes in net revenues for the nine months ended September 2025 as compared to September 2024 are provided in the section titled “Information by Business Segment.”

Previous wording

Gross margin increased 160 basis points, primarily related to 90 basis points of favorability due to the benefits of Project Jeanius and lower product costs, 30 basis points of favorability from a decrease in restructuring and transformation charges and 20 basis points of favorability attributable to Helly Hansen.

Current wording

Gross margin decreased 30 basis points, primarily related to the 180 basis point impact of restructuring and transformation costs from the closure of a portion of our manufacturing facilities and 70 basis points due to tariffs. These decreases were partially offset by 140 basis points from favorable product and channel mix and pricing initiatives and 70 basis points due to the benefits of Project Jeanius.

Previous wording

Selling, general and administrative expenses increased $51.8 million, from 32.1% to 35.0% of net revenues, driven by $24.4 million of acquisition and integration-related costs, $20.4 million of Helly Hansen operating expenses, an $11.3 million increase in restructuring and transformation charges, a $6.3 million increase in incentive compensation expense and a $3.1 million increase in demand creation investments, partially offset by declines in discretionary spending and benefits of Project Jeanius.

Current wording

Selling, general and administrative expenses increased $138.9 million, from 31.3% to 34.5% of net revenues, driven by a 220 basis point impact from Helly Hansen operating expenses of $94.2 million. In addition, expenses increased related to $36.3 million of acquisition and integration-related costs, a $10.7 million increase in restructuring and transformation charges and a $11.8 million increase in incentive compensation, which were partially offset by declines in discretionary spending and benefits of Project Jeanius.

Previous wording

Other income (expense), net reflected a favorable change of $24.7 million, driven by $24.1 million of gains related to foreign currency exchange contracts to hedge the purchase price of the Acquisition.

Current wording

Other income (expense), net reflected a favorable change of $24.1 million, driven entirely by gains related to foreign currency exchange contracts to hedge the purchase price of the Acquisition.

Previous wording

The effective income tax rate for the six months ended June 2025 was 24.2% compared to 20.0% in the 2024 period. The six months ended June 2025 included a net discrete tax expense primarily related to an increase in valuation allowances in a foreign jurisdiction, partially offset by a discrete tax benefit related to stock-based compensation, the net impact of which increased the effective income tax rate by 0.7%. The six months ended June 2024 included a net discrete tax benefit primarily related to stock-based compensation which decreased the effective income tax rate by 1.2%. The effective tax rate without discrete items for the six months ended June 2025 was 23.5% compared to 21.2% in the 2024 period. The increase was primarily due to changes in our jurisdictional mix of earnings and estimated non-deductible transaction costs incurred in conjunction with the Acquisition.

Current wording

The effective income tax rate for the nine months ended September 2025 was 22.1% compared to 19.5% in the 2024 period. The nine months ended September 2025 included a net discrete tax benefit primarily related to stock-based compensation, one-time benefits related to the release of tax reserves and the remeasurement of deferred tax assets, partially offset by an increase in valuation allowances in a foreign jurisdiction, the net impact of which decreased the effective income tax rate by 0.5%. The nine months ended September 2024 included a net discrete tax benefit primarily related to stock-based compensation which decreased the effective income tax rate by 0.7%. The effective tax rate without discrete items for the nine months ended September 2025 was 22.6% compared to 20.2% in the 2024 period. The increase was primarily due to changes in our jurisdictional mix of earnings and estimated non-deductible transaction costs incurred in conjunction with the Acquisition.

Previous wording

The following tables present a summary of the changes in segment revenues and segment profit for the three and six months ended June 2025 as compared to the three and six months ended June 2024:

Current wording

The following tables present a summary of the changes in segment revenues and segment profit for the three and nine months ended September 2025 as compared to the three and nine months ended September 2024:

Previous wording

Global revenues for the Wrangler® brand increased 7%, due to growth in the U.S. Wholesale and Direct-to-Consumer channels, partially offset by a decline in the International Wholesale channel.

Current wording

Global revenues for the Wrangler® brand increased 2%, due to growth in the U.S. Wholesale, International Wholesale and Direct-to-Consumer channels.

Previous wording

Global revenues for the Wrangler® brand increased 5%, due to growth in the U.S. Wholesale and Direct-to-Consumer channels, partially offset by a decline in the International Wholesale channel.

Current wording

Global revenues for the Wrangler® brand increased 4%, due to growth in the U.S. Wholesale and Direct-to-Consumer channels.

Previous wording

•Revenues in the Americas region increased 5%, primarily due to growth in the U.S. Wholesale channel and our U.S. direct-to-consumer business. Growth in wholesale was driven by category growth and an increase in our U.S. digital wholesale business. Growth in our U.S. direct-to-consumer business was primarily driven by higher e-commerce sales.

Current wording

•Revenues in the Americas region increased 4%, primarily due to growth in the U.S. Wholesale and U.S. direct-to-consumer business. Growth in wholesale was driven by category growth and increases in our U.S. licensing and digital wholesale businesses. Growth in our U.S. direct-to-consumer business was primarily driven by higher e-commerce sales.

Previous wording

Operating margin increased to 22.1%, compared to 19.4% for the 2024 period, primarily attributable to lower product costs, favorable product and channel mix, benefits from Project Jeanius and a decrease in restructuring and transformation charges, partially offset by higher investments in demand creation and information technology and pricing actions.

Current wording

Operating margin increased to 23.0%, compared to 20.0% for the 2024 period. Gross margin increased primarily due to favorable product and channel mix, pricing initiatives and lower product costs, partially offset by increased tariffs. Other operating costs decreased due to benefits from Project Jeanius and a decrease in restructuring and transformation charges which were partially offset by higher investments in demand creation and information technology.

Previous wording

Global revenues for the Lee® brand decreased 6%, due to declines in the U.S. Wholesale and International Wholesale channels, partially offset by growth in the Direct-to-Consumer channel.

Current wording

Global revenues for the Lee® brand decreased 8%, due to declines in the U.S. Wholesale and International Wholesale channels, partially offset by growth in the Direct-to-Consumer channel.

Previous wording

•Revenues in the Americas region decreased 6%, driven by a decline in the U.S. Wholesale channel, partially offset by growth in our U.S. direct-to-consumer business. The decrease in the U.S. Wholesale channel was driven by a decrease in shipments. Growth in our U.S. direct-to-consumer business was due to higher e-commerce sales.

Current wording

•Revenues in the Americas region decreased 7%, driven by a decline in the U.S. Wholesale channel, partially offset by growth in our U.S. direct-to-consumer business. The decrease in the U.S. Wholesale channel was driven by a decrease in wholesale shipments. Growth in our U.S. direct-to-consumer business was due to higher e-commerce sales.

Previous wording

Operating margin decreased to 7.5%, compared to 7.6% for the 2024 period, primarily attributable to deleverage of fixed expenses on lower revenues and unfavorable channel and product mix, partially offset by lower distribution costs and benefits from Project Jeanius.

Current wording

Operating margin decreased to 8.9%, compared to 11.5% for the 2024 period. Gross margin decreased primarily due to higher tariffs and product costs and unfavorable product and channel mix which were partially offset by pricing initiatives. Other operating costs increased primarily due to deleverage of fixed expenses on lower revenues, partially offset by lower distribution costs and benefits from Project Jeanius.

Previous wording

Global revenues for the Lee® brand decreased 7%, due to declines in the U.S. Wholesale and International Wholesale channels, partially offset by growth in the Direct-to-Consumer channel.

Current wording

Global revenues for the Lee® brand decreased 8%, due to declines in the U.S. Wholesale and International Wholesale channels, partially offset by growth in the Direct-to-Consumer channel.

Previous wording

•Revenues in the Americas region decreased 8%, driven by a decline in the U.S. Wholesale channel and lower sales in Mexico, partially offset by growth in our U.S. direct-to-consumer business. The decrease in the U.S. Wholesale channel was due to lower wholesale shipments. Growth in our U.S. direct-to-consumer business was due to higher e-commerce sales.

Current wording

•Revenues in the Americas region decreased 8%, driven by a decline in the U.S. Wholesale channel, partially offset by growth in our U.S. direct-to-consumer business. The decrease in the U.S. Wholesale channel was due to lower wholesale shipments and a decline in our digital wholesale business. Growth in our U.S. direct-to-consumer business was due to higher e-commerce sales which were partially offset by lower retail store sales.

Previous wording

•Revenues in the EMEA region decreased 6%, attributable to a decline in our wholesale business, partially offset by growth in retail store sales.

Current wording

•Revenues in the EMEA region decreased 1%, driven by a decline in our wholesale business partially offset by growth in our direct-to-consumer business due to higher retail store and e-commerce sales.

Previous wording

In addition, we report an "Other" category to reconcile the Company's segment revenues to total revenues and segment profit to income before income taxes. Other includes sales and licensing of the Musto®, Chic® and Rock & Republic® brands, as well as other company-owned brands and private label apparel, and the associated costs. The businesses within the Other category, either individually or in the aggregate, do not meet the criteria to be considered reportable segments.

Current wording

In addition, we report an "Other" category to reconcile the Company's segment revenues to total revenues and segment profit to income before income taxes. Other includes sales and licensing of the Musto®, Chic® and Rock & Republic® brands, as well as other company-owned brands and private label apparel, and the associated costs. Results of the Musto® brand have been included since the Helly Hansen acquisition on May 31, 2025. The businesses within the Other category, either individually or in the aggregate, do not meet the criteria to be considered reportable segments.