Wrangler, a brand under Kontoor Brands, is planning to expand its presence in the direct-to-consumer market with the opening of two new stores in Texas next year. This initiative follows the positive performance of their first full-price store in Fort Worth’s stockyards, as revealed by CEO Scott Baxter.
Financial Performance and Strategic Growth
Kontoor Brands reported a strong financial performance for the second quarter of this year, with a 19% year-over-year revenue increase, reaching $584 million. This uptick was bolstered by a significant $114 million contribution from their recently acquired Helly Hansen outdoor brand. Wrangler, one of Kontoor’s primary brands, saw a global revenue rise of 2%, amounting to $469 million. However, the company’s overall net income experienced a 12% decline, falling to $64.8 million, although their gross margin expanded to 56.2%.
The company’s brands, Wrangler and Helly Hansen, have been positively affected by exchange rates. According to BNP Paribas Equity Research, without the benefit of currency exchange, Wrangler’s revenue rose by 1%, while Helly Hansen’s sales recorded a 1% decline.
Wrangler’s Direct-to-Consumer Opportunities
CEO Baxter emphasised the potential for growth within Wrangler’s women’s clothing line, which grew by 20% in the first half of the year, and non-denim categories. The brand’s core bottoms segment also expanded its market share markedly. However, Baxter noted the importance of maintaining Wrangler’s identity amidst these new ventures.
Other retailers have attempted similar direct-to-consumer strategies. Nike and Levi’s experienced variable outcomes with this approach, while Crocs continues to bolster both its direct sales and wholesale operations.
Future Projections and Leadership Changes
Kontoor remains optimistic about its future, predicting revenue growth in the mid-single digits for both Helly Hansen and Wrangler in the remaining months of the year, aside from the impact of an additional week in the fiscal year. For the full year, Kontoor anticipates a revenue increase between 12% and 13% compared to the previous year.
Despite some scepticism from analysts regarding the growth potential of Helly Hansen, Baxter confidently describes it as the company’s “growth engine.” Yet, experts such as Laurent Vasilescu from BNP Paribas warn that weather phenomena like a warmer winter could influence sales adversely.
In a strategic leadership update, CFO Joseph Alkire will also take on the role of President. Alkire, who has served as CFO for three years, will continue to manage global responsibilities for Helly Hansen while now additionally overseeing the Wrangler brand. This change shows an effort to streamline Kontoor’s leadership amid its growth strategies.
Reporting based on coverage first published by retaildive.com.