Unprecedented inflation, lockdowns in China, and retailers “aggressively rebalanc[ing] their inventory positioning” weighed on Kontoor Brands’ third quarter ended Oct. 1, 2022. The Greensboro, N.C.-based company’s revenue period was $607 million, a 7 percent decrease from $652 million over the same period in the prior year.
Despite the hurdles, emerging categories and channels including new brick-and-mortar concepts are proving to be brand-building opportunities for the Wrangler and Lee owner.
The company, which relocated its European headquarters from Belgium to Switzerland during the quarter, opened a dual Lee/Wrangler store in Berlin offering denim fans an immersive experience that underscores the brands’ combined “200-plus years of denim expertise.” Scott Baxter, Kontoor Brands chairman and CEO, said the company has “plans to opportunistically roll out the format [in] select markets across the European region.”
Though recovery in China is slower than expected, the company’s APAC (Asia-Pacific) team is “pushing forward” with the launch of the Retail Excellence Initiative, he said. The program aims to transform Kontoor Asia into a “world-class retailer” with a reformatted store footprint, improved POS technologies and enhanced product assortments that will amplify the consumer experience.
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“Based on the success of early testing, we are rolling out the Retail Excellence Initiative across the region now and over the next 12 to 18 months we’ll look to do so globally,” Baxter said. “The opportunities to leverage our learnings in Asia as we more fully develop our brick-and-mortar strategy globally are tremendous.”
“These retail developments in Europe and Asia will be critical as we seek to navigate the respective challenges in each market while also continuing to build our globalized platform,” he added. “These opportunities for growth across categories, channels and geographies don’t happen without the significant investments we continue to make in brand building.”
Elevated partnerships, like Lee’s collaboration with The Brooklyn Circus and Wrangler’s crossover with Gant, point to the premiumization of the brands. The collections offer items that retail for up to $1,200.
Kontoor is also encouraged by the progress it is making in non-denim categories such as outdoor, workwear and T-shirts. Baxter said more is in the pipeline for these categories as its brands have just a “small foothold” compared to their total size.
“Our folks in our demand creation teams are really dialed in,” Baxter said, adding that both Lee and Wrangler have gained relevance in the marketplace.
“The work that our demand creation teams and the work that our design teams have done is really synchronizing together at this point in time,” he said. “And we feel confident the economy will improve at some point in time and we’ll be right there with it.”