Adjusted gross margin expanded 80 basis points (bps) to 45.8 percent, while reported gross margin stood at 41.3 percent. Adjusted operating income rose 14 percent to $122 million, and adjusted earnings per share (EPS) rose 5 percent to $1.44.
Kontoor Brands posted a 27 percent year-over-year revenue increase to $853 million in the third quarter of 2025, driven by Wrangler and Helly Hansen. Adjusted gross margin rose to 45.8 percent and adjusted earnings per share rose 5 percent to $1.44. The company raised its FY25 guidance, forecasting revenue of $3.09 billion to $3.12 billion and adjusted EPS of $5.5, citing strong brand performance and operational efficiencies.
The company made a voluntary payment on a $25 million term loan and declared a quarterly dividend of $0.53 per share, reflecting a 2 percent increase, Kontoor Brands said in a news release.
“Our third quarter results exceeded expectations driven by the strength of our expanded brand portfolio, gross margin expansion and operational execution. Wrangler delivered another quarter of growth, Helly Hansen outperformed and we improved market health through disciplined inventory management. Building on strong year-to-date performance, we are raising our full-year outlook and are positioned to finish a record year with momentum,” he said Scott Baxter, Chairman, CEO and President of Kontoor Brands.
As for the brand, Wrangler’s global revenue reached $471 million, a 2 percent year-over-year increase, despite impacts to shipping time. U.S. revenue rose 1 percent, driven by an 11 percent increase in direct-to-consumer (DTC) sales, while wholesale trade was flat.
International revenue grew 6 percent, supported by gains in wholesale and DTC channels. Lee brand’s global revenue was $187 million, down 8 percent year-on-year, impacted by proactive inventory management actions in China worth $7 million.
U.S. revenue declined 9 percent, as an 11 percent drop in wholesale sales was partially offset by a 15 percent increase in digital sales.
International revenue decreased 5 percent, reflecting inventory adjustments, and an 8 percent increase in the physical sector mitigated some declines.
Helly Hansen contributed $193 million in global revenue, of which $143 million came from sports and $42 million from workwear. The company registered 7 million dollars of the Musto brand. The brand generated $40 million in sales in the United States and $153 million internationally, performing above expectations in both revenue and profitability.
Kontoor’s adjusted gross margin improved to 45.8 percent, reflecting benefits from its Project Jeanius initiative, product mix optimization and targeted pricing actions. The company noted a 60 bp impact from the Helly Hansen acquisition. Excluding Helly Hansen, adjusted gross margin increased 140 basis points, offsetting higher product costs and new tariffs imposed, the statement added.
Selling, general and administrative (SG&A) expenses were $288 million reported and $269 million adjusted, equal to 31.5 percent of revenue. Excluding Helly Hansen, adjusted SG&A expenses were flat at $195 million, helped by reduced distribution and freight costs.
Adjusted operating income reached $122 million, an increase of 14 percent, representing a margin of 14.3 percent. Excluding Helly Hansen, operating income increased 4 percent and the margin improved to 16.9 percent. Adjusted EPS was $1.44, up 5 percent, including a $0.03 contribution from Helly Hansen.
Kontoor ended the quarter with $82 million in cash and $1.34 billion in long-term debt. The company had no outstanding borrowings under its revolving credit facility and kept $494 million available for borrowings.
Inventory totaled $765 million, including Helly Hansen. Excluding this, inventory rose 21 percent to $560 million, driven by earlier revenue due to improved supply chain delivery times and tariff effects. The company expects inventory to fall to about $645 million for the fourth quarter.
For the full fiscal year 2025 (FY25), Kontoor Brands raised its guidance, projecting revenue to hit the high end of the range of $3.09 billion to $3.12 billion, representing year-on-year growth of 19 to 20 percent. Adjusted gross margin is expected to reach 46.4 percent, an improvement of 130 basis points over 2024. Adjusted operating income is forecast to be $449 million, up 18 percent, compared to the previous outlook of $443 million. Adjusted EPS is forecast to be $5.50, up 12 percent from 2024 levels, slightly above the previous projection of $5.45.
Cash from operations is expected to reach approximately $400 million, up from a previous forecast of more than $375 million. The company plans an additional voluntary term loan repayment of $185 million in the fourth quarter, bringing total repayments in 2025 to $235 million.
Helly Hansen is expected to contribute $460 million in annual revenue and $0.20 in adjusted EPS, in line with previous guidance. Fourth-quarter revenue is projected between $970 million and $980 million, representing 39 to 40 percent growth, with profit up four points from 53third week.
Kontoor anticipates capital expenditures of about $25 million and an effective tax rate of 21 percent for the year. Interest expenses should total $50 million and other adjusted expenses approximately $11 million.
“We are raising our full-year outlook to reflect stronger revenue and earnings growth, accelerating cash generation and growing benefits from Project Jeanius,” Baxter added. “We expect the near-term environment to remain dynamic, but I am confident that our strong fundamentals, operational execution and increasing capital allocation optionality will continue to drive strong value creation for our shareholders.”
Fiber2Fashion News Desk (SG)
