In an earnings call on Tuesday, CEO Scott Baxter said the company surpassed its revenue, margins and cash flows for Q4 2020, highlighting a 1 percent revenue gain—a significant achievement when compared with 2020’s second and third quarters, where revenue was down 43 percent and 9 percent, respectively.
“Like most companies during 2020, we experienced challenges never seen before as the impacts of Covid-19 were far reaching,” Baxter said. “However, we were nimble and we quickly focused on supporting the safety and well-being of our associates, while also strengthening our financial and liquidity positions.”
He added that the Wrangler and Lee businesses are experiencing an increase in regions around the world, with the U.S. up 8 percent, Europe up 7 percent and China up 11 percent, which he attributed to the team’s four specific strategies: enhancing U.S. wholesale, driving direct-to-consumer efforts, expanding into China, and focusing on categories such as outdoor apparel and workwear.
Digital was a main driver of success for Kontoor in the quarter, both in terms of its owned e-commerce and digital wholesale, the latter of which increased 75 percent in the U.S. “As we think about the U.S. landscape, I want to be clear we are winning in the marketplace, taking share and adding incremental business as well,” Baxter said.
The outdoor apparel category is flourishing in the wake of Covid-19, creating a market ripe for Wrangler’s All Terrain Gear line. Tom Waldron, Wrangler’s global brand president, reported a 73 percent increase in the brand’s outdoor business in Q4, which it plans to double down on this year. “We know the category is accelerating as more people want to be outdoors, and we are leaning into this trend in building high-performance product at a great value.”
The move will help expand its core denim business and open new opportunities for selling in outdoor specialty and sporting goods stores, he said.
This falls in line with Wrangler’s increased focus on wholesale, which includes partnerships with Walmart, Amazon and Target. The brand also entered “premium points of distribution,” and now appears in elevated retailers such as Anthropologie, Nordstrom and Free People.
The partnerships help tap a younger consumer, which is underscored with the brand’s recent collaborations with Netflix’s “Stranger Things” and Adult Swim’s “Rick and Morty.”
Wrangler’s sister company Lee is also exploring new demographics with its recently launched licensing collaboration with H&M, a sustainable line featuring 100 percent recycled cotton jeans, along with cotton-free denim made with Tencel, water-saving dyes and lower-impact denim washes. This partnership brings Lee into over 1,000 doors across 61 countries, said Chris Waldeck, Lee’s global brand president, noting the “high likelihood” that Kontoor Brands will nurture additional arrangements with vertical retailers in the future.
Lee also worked with agriculture tech company AppHarvest to become its exclusive supplier of uniforms for the entire workforce of over 300 employees. Lee’s previous collaborations with streetwear brand Alife also position it in front of a new audience that’s younger and highly engaged.
Overall, Lee revenue increased 1 percent in the fourth quarter, mainly within its Chinese and European business, which increased 11 percent and 5 percent, respectively. As a result, the brand will invest in expansion efforts in China.
“China will remain a focus for strategic investment with a spotlight on highly successful partnerships with key influencers such as Eddie Peng and our Stand Tall campaign,” Waldeck said, adding that the campaign generated 340 million views on social media platforms during the quarter.
In addition to its positive financial outlook for the year, Baxter noted that sustainability would continue to be a top focus across the brands. In September 2020, Kontoor released its first-ever sustainability report and set aggressive goals extending through 2030 focused on the United Nations’ Sustainable Development Goals (SDGs).
“Despite the pandemic, in support of realizing these strategic growth opportunities, we’ve been laser-focused on ramping investments behind key enablers,” he said. “These include amplifying demand creation and marketing spend elevating innovation platforms and becoming an industry leader in sustainability.”