Kontoor Brands, Inc. has reported its financial results for the fourth quarter and full year of 2023, alongside providing an outlook for 2024 and announcing a global transformation initiative, Project Jeanius.
In the fourth quarter of 2023, the company's revenue stood at $670 million, marking an 8 percent decrease from the previous year. However, reported gross margin increased by 90 basis points to 41.7 percent, while adjusted gross margin increased by 140 basis points to 42.2 percent. Adjusted EPS was reported at $1.28, including an unanticipated $0.07 charge from duty expense related to prior periods, but excluding this charge, adjusted EPS increased by 54 percent to $1.35.
Full-year 2023 revenue amounted to $2.61 billion, showing a 1 percent decrease from the previous year. Reported gross margin was 41.7 percent, while adjusted gross margin was 41.9 percent, including a 60 basis point impact from the out-of-period duty charge. Excluding this charge, adjusted gross margin decreased by 60 basis points to 42.5 percent. Adjusted EPS for the full year was reported at $4.26, including a $0.19 charge from the previously disclosed duty expense related to prior years, but excluding this charge, adjusted EPS was $4.45.
For the full year 2024, the company provided an outlook with revenue expected in the range of $2.57 billion to $2.63 billion, reflecting a decrease of 1% to an increase of 1% compared to the prior year. Adjusted gross margin is projected to be in the range of 44.2 percent to 44.4 percent, reflecting an increase of 170 to 190 basis points compared to the prior year, excluding the out-of-period duty charge. Adjusted EPS is anticipated to be in the range of $4.65 to $4.75, reflecting an increase of 4 percent to 7 percent compared to the prior year, excluding the out-of-period duty charge.
The company also announced Project Jeanius, a global transformation initiative expected to result in $50 million to $100 million of gross profit improvement and SG&A savings on a run rate basis, with impacts starting in the fourth quarter of 2024. The 2024 financial outlook does not yet reflect the anticipated impact of Project Jeanius.
Kontoor Brands' president, chief executive officer, and chair, Scott Baxter, highlighted the company's performance, stating that the U.S. wholesale environment was challenging due to retailers managing inventory levels tightly against uncertain consumer spending patterns, which negatively impacted revenue. However, he expressed satisfaction with the progress made in reducing inventory levels, driving strong gross margin expansion, and returns on capital.
In terms of its brands, the company reported that Wrangler brand global revenue decreased by 9 percent, while Lee brand global revenue decreased by 6 percent in the fourth quarter of 2023. However, international revenue saw growth in both direct-to-consumer and wholesale channels.
Kontoor Brands' 2024 outlook includes an expectation of strong gross margin expansion and operating earnings growth, strong cash generation, best-in-class returns on capital, and significant capital allocation optionality, although the operating environment is expected to remain challenging.
The company's board of directors declared a regular quarterly cash dividend of $0.50 per share and approved a new $300 million share repurchase authorization. Kontoor Brands repurchased $30 million of shares under the prior share repurchase program during the period and has $300 million remaining under its authorized share repurchase program. Following these announcements, the company's shares moved -9.8%, and are now trading at a price of $57.23. Check out the company's full 8-K submission here.
