Kontoor Brands (NYSE:KTB) stock surged 20% on Tuesday after the Lee and Wrangler parent comfortably beat earnings expectations.
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The North Carolina-based apparel manufacturer notched $0.88 in earnings per share on $732M in revenue for the fourth quarter, better than analyst expectations of $0.67 in earnings per share on $666.78M. The Wrangler brand was cited as a particular area of strength as revenue jumped 15% year over year and offset a 6% decrease in Lee sales.
Gross margin contracted 200 basis points from the prior year quarter due to inflationary pressures and inventory adjustments. Inventory at the end of fiscal 2022 was $597M, up 64% yer over year, but down $81M from a Q3 peak. Inventory levels are expected to normalize by mid-2023.
“Despite unprecedented macroeconomic challenges, we are delivering on many of our long-term goals, with 2022 revenue and earnings ahead of our Investor Day targets,” CEO Scott Baxter said. “Even as we anticipate macro headwinds to persist through the year, we begin 2023 from a position of strength.”
Revenue is expected to increase at a low-single digit percentage in 2023 as compared to 2022. Meanwhile, management forecast EPS between $4.55 and $4.75 for the full-year, above the $4.36 consensus estimate. Gross margin is expected to rise to a range between 43.5% to 44%, up from 43.1% in 2022.
Shares of the jeans manufacturer rose 19.99% in afternoon trading on Tuesday.
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