Kontoor Brands Q2 profit beats estimates, revenue lags

Kontoor Brands reported second-quarter adjusted earnings per share that narrowly exceeded Wall Street estimates, though revenue fell short of projections as consumer spending on apparel softened.

The company, which owns brands such as Lee and Wrangler, posted adjusted EPS of $0.85, beating the $0.84 consensus forecast compiled by Refinitiv. Revenue totaled $612 million, missing the $620 million estimate.

Gross margin contracted to 39.7% from 41.2% a year earlier, reflecting higher cotton prices and elevated promotional activity to clear excess inventory. Operating income declined 11% year-over-year to $81 million, while net income fell 12% to $58 million.

Chief Executive Scott Bolden acknowledged "challenging retail conditions" and said the company was adjusting production and inventory levels to align with demand. Inventory levels rose 15% from the prior year, signaling potential margin pressure ahead if sales do not accelerate.

Kontoor maintained its full-year guidance, reiterating adjusted EPS of $3.15-$3.35 and revenue of $2.45-$2.55 billion, though management warned that macroeconomic uncertainty could weigh on consumer discretionary spending in the second half.

Shares were little changed in after-hours trading, reflecting the mixed results.