Kontoor Brands, a global lifestyle apparel company, with a portfolio led by two of the world’s most iconic consumer brands, Wrangler® and Lee®, reported financial results for its first quarter ended 28th March, 2020, and updated its impacts and actions related to COVID-19.
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Kontoor finished the first quarter with $479 million in cash and cash equivalents. Over the past sixty days, the company has taken several proactive actions to enhance liquidity.
Although Kontoor is focused on extremely tight expense controls during this extraordinary crisis, the company remains committed to and has the capacity to fund investments behind key long-term strategic initiatives, including expenditures associated with the implementation of its new global ERP and information technology infrastructure.
As COVID-19 is complex and evolving rapidly, the company’s actions as outlined above may be subject to change. The company is monitoring and complying with all governmental orders.
COVID-19 had a significant impact on first quarter 2020 revenue. However, the company continued transformational change to improve operational performance and set the stage for long-term profitable growth. While this change negatively impacted near-term revenue, quality-of-sales initiatives that focus on higher margin and faster growing lines of business, as well as the exit of select non-strategic lines of business and points of distribution, position the Company for future success.
In addition, COVID-19 impacted results beyond revenue. The first quarter was impacted by increased inventory provisions, increased allowances for credit losses and the cost of downtime in owned manufacturing facilities.
Revenue decreased to $504 million, a 22 percent year-over-year decline on a reported and constant currency basis. Compared with first quarter 2019 adjusted revenue, revenue declined 20 percent or 19 percent on a constant currency basis.
Revenue declines during the quarter, compared with first quarter 2019 adjusted revenue, were primarily the result of COVID-19 retail and owned door closures and stay-at-home orders.
During the first quarter, U.S. revenue was $379 million, down 16 percent on a reported basis. Compared with 2019 adjusted revenue, U.S. revenue declined 14 percent, driven primarily by the COVID-19 impacts. These declines were partially offset by growth in digital, with U.S. digital wholesale increasing 41 percent.
International revenue was $126 million, down 37 percent on a reported basis and down 35 percent in constant currency. Compared to first quarter 2019 adjusted revenue, the international revenue decline of 34 percent was primarily the result of COVID-19. China revenue was the most impacted.
Wrangler® brand global revenue decreased to $303 million, an 18 percent decline on a reported and constant currency basis. Compared to first quarter 2019 adjusted revenue, global Wrangler® revenue declined 17 percent and U.S. revenue declined 14 percent. Impacts from COVID-19, planned lower distressed sales and the planned exit or reduction of select non-core programs were the primary drivers of the U.S. decline.
Lee® brand global revenue decreased to $183 million, a 24 percent decline on a reported and constant currency basis. Compared to first quarter 2019 adjusted revenue, global Lee® revenue declined 24 percent and U.S. revenue declined 9 percent driven primarily by COVID-19.
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Other global revenue declined 50 percent to $18 million on a reported basis, and 30 percent compared with adjusted first quarter 2019 revenue, driven by company-owned store closures related to COVID-19, as well as planned reductions in the sale of goods manufactured for third parties, and Rock & Republic®.