Kontoor Brands Inc (KTB, Financial) released its Q3 2023 earnings report on November 2, 2023. The company reported an 8% increase in revenue, reaching $655 million compared to Q3'22. The gross margin for Q3'23 stood at 41.5%, a decrease of 200 basis points compared to Q3'22. This includes an unanticipated 200 basis point charge from duty expense related to prior periods and the impact of proactive inventory management actions.
Financial Performance
The company's Q3'23 EPS was $1.05, compared to Q3'22 reported EPS of $0.90 and adjusted EPS of $1.11. The Q3'23 EPS includes an unanticipated $0.17 charge from duty expense related to prior periods. Excluding the duty charge, EPS was $1.22, increasing 10% compared to adjusted EPS in the same period last year.
Inventory for Q3'23 was $605 million, a decrease of 11% compared to Q3'22. The company's Board of Directors declared a regular quarterly cash dividend of $0.50 per share, a 4% increase compared to Q2'23.
2023 Financial Outlook
For the full year 2023, KTB now expects revenue to increase approximately 1% compared to FY'22. This is a slight adjustment from the prior outlook of a low-single digit percentage increase. The FY'23 adjusted gross margin is now expected to approximate 42.5% compared to the prior outlook of 43.5% to 44.0%. This updated outlook includes a 40 basis point charge from duty expense related to prior periods, as well as the impact of proactive inventory management actions.
The FY'23 adjusted EPS is now expected to approximate $4.35, compared to the prior outlook of $4.55 to $4.75. This updated outlook includes a $0.15 charge from duty expense related to prior periods. Excluding the duty charge, FY’23 EPS is expected to approximate $4.50.
The company expects full year cash flow from operations of approximately $335 million and year-end FY’23 cash and cash equivalents of approximately $200 million. Inventory is expected to approximate $500 million by year-end FY’23, representing a more than 15% decline compared to FY’22.
Company Commentary
Scott Baxter, President, Chief Executive Officer, and Chair of Kontoor Brands, commented on the results,
In the third quarter, we delivered strong revenue growth and profitability that was ahead of our expectations, excluding the duty charge, reflecting the broad-based strength of our business. Supported by strategic investments in our brands, U.S. POS strength continued, driving further market share gains in core U.S. wholesale. And we delivered another solid quarter in DTC, a critical growth pillar of our diversified, accretive growth strategy."
Despite anticipating a challenging macroenvironment, Baxter expressed confidence in the company's investments in innovation and demand creation to further cement competitive separation in the marketplace and fuel the continued momentum of their brands.
Explore the complete 8-K earnings release (here) from Kontoor Brands Inc for further details.
