Kontoor Brands Inc. (NYSE: KTB) reported Q1 EPS of $1.43, $0.56 better than the analyst estimate of $0.87. Revenue for the quarter came in at $652 million versus the consensus estimate of $605.88 million.

• Q1 Reported EPS of $1.09; Adjusted EPS of $1.43
• Q1 Reported Revenue of $652 million increased 29 percent compared to the prior year
• Q1 Reported Gross Margin increased 830 basis points to 46.1 percent compared to the prior year
• Strong cash generation supported discretionary debt repayments totaling $100 million in the first quarter
• Fiscal 2021 guidance raised; Adjusted EPS is now expected to be $3.70 to $3.80, up from the prior range of $3.50 to $3.60

“We started 2021 with solid momentum, as our first quarter results came in above our expectations. The strong performance in the quarter was broad-based, as evidenced by improving growth across regions, channels and categories. We continue to execute the strategic playbook we’ve communicated, as structural margin gains support focused investments in demand creation, infrastructure and technologies. These critical investments are driving accelerating fundamentals that are expected to unlock further value for all KTB stakeholders,” said Scott Baxter, President and Chief Executive Officer, Kontoor Brands.

“As we transition into our next horizon, the stage is set for us to pivot to growth. I want to thank our teams around the world for their incredible efforts over the last few years to position Kontoor for future success. We are in the very early days of our journey and remain determined to deliver on the tremendous opportunities ahead. We look forward to sharing more details on our strategic vision at our upcoming Investor Day on May 24, 2021,” added Baxter.

GUIDANCE:

Kontoor Brands Inc. sees FY2021 EPS of $3.70-$3.80, versus the consensus of $3.68.

The Company is raising its 2021 Fiscal Outlook. As previously highlighted, the ERP implementation will have timing impacts on quarterly revenue and profitability, but should have no impact on full-year 2021. While the impacts from the COVID-19 pandemic and macroeconomic factors remain uncertain, the Company is updating its fiscal 2021 guidance, including the following:

• Revenue is now expected to increase in the low-teens range over 2020, as compared to a low-double digit range in the prior guidance, including a mid-single digit impact from the VF Outlet actions and India business model change.
• Gross Margin is now expected to increase by 230 to 270 basis points, as compared to 150 to 200 basis points in the prior guidance, above the Adjusted Gross Margin of 41.2 percent achieved in 2020. The increase reflects continued benefits from ongoing restructuring and quality-of-sales initiatives, as well as higher anticipated growth in more accretive channels such as Digital and International.
• SG&A investments will continue to be made in brands and capabilities. Due to the strengthening revenue and gross margin outlook, the Company expects to amplify SG&A investments in demand creation, Digital and International expansion. These increases will be partially mitigated by ongoing tight expense controls and sustained, structural post-pandemic cost containment initiatives.
• Adjusted EPS is now expected to be in the range of $3.70 to $3.80 as compared to $3.50 to $3.60 in the prior guidance.
• Capital Expenditures are expected to be in the range of $40 million to $50 million, including $25 million to $30 million associated with the implementation of the Company’s new global ERP system.
• An effective tax rate of approximately 22 percent is expected for 2021. Interest expense is expected to be approximately $40 million to $45 million in 2021.
• The Company will host a virtual Investor Day on Monday, May 24, 2021.

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