Kontoor Brands Inc. (NYSE: KTB) reported Q1 EPS of $0.27, $0.02 better than the analyst estimate of $0.25. Revenue for the quarter came in at $504 million versus the consensus estimate of $522.76 million.

• Significant business impacts from COVID-19 on Q1 2020 revenue and profit
• Q1 2020 Reported Revenue of $504 million
• Q1 2020 GAAP EPS of $(0.05), Adjusted EPS of $0.27
• While Q1 2020 wholesale revenue declined due to customer door closures, digital sales increased 10 percent, including a 41 percent increase in U.S. digital wholesale
• Credit facility amended to provide leverage covenant relief in future periods
• Temporary suspension of dividend in conjunction with credit facility amendment
• Significant new distribution and program gains expected for second half 2020

“The COVID-19 global pandemic has had an unprecedented impact on the world including Kontoor’s operations and results. During the first quarter, we took decisive actions to support the health and welfare of our most important asset, our colleagues around the world, as well as to strengthen our financial flexibility,” said Scott Baxter, President and Chief Executive Officer, Kontoor Brands. “Through February, results were in line with our expectations, but as the quarter progressed, impacts from COVID-19 became more pronounced. We’ve implemented several strategic actions to help navigate the near-term challenges, while positioning the company for future success. These measures, which include the amendment of our credit facility and the related temporary dividend suspension, will provide strengthened liquidity that is paramount in these uncertain times and enable Kontoor to emerge from this crisis well positioned to best serve the future needs of our stakeholders.”

Outlook

As previously announced, and as a result of the uncertainty and significant business impacts caused by COVID-19, Kontoor has withdrawn its 2020 guidance provided on March 5, 2020, and is not providing an updated outlook at this time.

“The uncertainty of COVID-19 remains. I want to thank our colleagues around the world for their dedication and perseverance during this difficult time,” said Baxter. “We believe Kontoor’s key retail partners remain well positioned to navigate this environment. With more than 200 years of authentic heritage, our two iconic brands offer consumers a distinct value proposition. In addition, we are highly encouraged by significant new programs and distribution gains that are expected for the second half of 2020. Our iconic brands, coupled with our cost savings efforts and scaled, agile supply chain, position Kontoor well in the marketplace,” said Baxter.

While the Company is not providing full-year 2020 guidance at this time, additional perspective and assumptions are as follows:

• The Company continues to take the necessary, proactive steps to accommodate a prolonged COVID-19 environment. Negative impacts on revenue, operating income and EPS are anticipated to be most pronounced in the second quarter of 2020.
• Although the Company is not guiding on the impact of COVID-19 in the second half of 2020, underlying revenue and gross margins in the second half of 2020 are expected to benefit from new programs and distribution gains, as well as improvement of impacts from 2019 restructuring and quality-of-sales actions.
• Due to predictions of a prolonged economic downturn, the Company has performed stress testing for various demand scenarios during 2020 and believes the actions previously covered in the liquidity and financing update support liquidity requirements and provide operating flexibility.

For earnings history and earnings-related data on Kontoor Brands Inc. (KTB) click here.