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Premiumization Efforts, Higher AURs Paying Off for Kontoor Brands

When it’s deliver-or-die, supply chains become the lifeblood of a company. To that end, the fashion industry has embraced technology to navigate today’s hyper-complicated supply chain, with myriad solutions shaping the first, middle and last mile. Call it Sourcing 2.0.

Kontoor Brands’ efforts to elevate the Wrangler and Lee brands are paying off. During a Q4 2021 earnings call with investors on Tuesday, president and CEO Scott Baxter said those efforts, combined with category expansion and product innovation, are contributing to the company’s success and fueling his confidence for the future.

The sentiment is shared across the industry as a whole, as denim’s revived trend cycle takes hold and shoppers continue to shift to more casual styles. At Lee and Wrangler—two brands known for honoring denim’s workwear and Western roots—the success is encouraging executives to project a fruitful 2022. Baxter said the team anticipates 2022 revenue numbers to hit $2.7 billion, a full year ahead of its 2023 target set during last year’s Investor Day. “Even while supply chain challenges weighed on the top line,” revenue totaled $2.48 billion in 2021 across both brands—seven points above its original projections, he said.

“I have even greater confidence today that Kontoor and our Wrangler and Lee brands are now uniquely positioned to win in the marketplace to drive more sustainable and profitable long-term growth and to create value for all of our stakeholders,” he said.

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Wrangler

Also fueling confidence for the coming year is Wrangler’s 75th anniversary celebrations, which will see events, special partnerships and collaborations spaced out throughout 2022.

“As we begin our 75th anniversary year for Wrangler, demand for the brand has never been stronger,” said Tom Waldron, global brand president at Wrangler.

The brand started its festivities digitally with a metaverse debut featuring Grammy award-winning artist and longtime Wrangler fan Leon Bridges. The partnership included a two-part NFT drop under the name “Mr. Wrangler” that centers on a denim suit specially designed for Bridges. Wrangler auctioned 75 digitally animated NFTs featuring a ghost model of the suit reenacting one of Bridges’ signature dance moves.

Each purchase unlocked private access to digital communities, virtual Wrangler-branded metaverse wearables and a VIP pass to an exclusive performance by Bridges at New York Fashion Week in September, when the brand will unveil the second tier of the NFT offering: a physical replica of the suit delivered in a retro-futuristic case. The suit will contain a “vault of digital content” sewn into its seams, giving the buyer exclusive access to content Bridges created just for them. The accompanying one-of-one digital NFT will represent ownership on the blockchain, which will live exclusively on the LTD.INC platform. The brand will also host a “Wranglerverse” metaverse event that same month that’s open to all.

The partnership aims to reach a younger audience interested in the move to the metaverse—a goal also accomplished with its collaborations with surf brand Billabong and TV series “Yellowstone,” as well as its partnership with young British-American fashion model and designer Georgia May Jagger in 2021.

Also driving Wrangler’s success was its outdoor category expansion. Revenue from its All-Terrain Gear (ATG) outdoor line increased 45 percent in the U.S. during 2021 compared to 2019. The brand’s introduction of two new distribution partners, U.S. sporting goods store chain Academy Sports and Swiss sporting goods retailer Intersport, was a success: ATG is now available at nearly 900 retailers just three years after launch.

And while Wrangler’s men’s bottoms drove over 100 points of share gains in U.S. wholesale compared to 2019, it was the women’s category that was most popular. In fiscal 2021, Wrangler’s U.S. women’s business grew 84 percent since last year. The success was likely a result of elevated design and marketing, with more premium partnerships and marketing and higher AURs.

Lee

Lee is experiencing similar success, with a growing bottoms business despite exiting underperforming points of distribution and increasing pricing by 10 percent since 2018. Both U.S. male and female categories grew over 20 percent since last year, partially a result of a rebrand positioning the label toward new demographics.

“We had a repositioning of the Lee brand with the objective of bringing in a new younger consumer, and I’m really excited about the progress we’ve made,” said Chris Waldeck, global brand president, Lee.

The Lee Originals campaign in October featured young global activists and athletes, garnering more than 127 million digital media impressions across social and live streaming platforms targeting the key 18- to 24-year-old demographic.

In fiscal 2021, Lee’s global revenue grew 26 percent year over year. In Q4 alone, revenue was up 14 percent compared to 2020 and up 19 percent compared to 2019. And while surging raw materials prices and global events fuel uncertainty in 2022, Waldeck remains confident in the brand.

“During periods of uncertainty, consumers historically just gravitate to brands they trust,” he said. “And in this exacerbated period of rising prices, consumers look for those brands that deliver good deal performance and of course, value.”