Kontoor Brands (3KO) Q3 2026 Earnings Report

The call was predominantly positive, supported by 3% third-quarter revenue growth, 40% adjusted EPS growth, gross margin expansion, successful completion of the Lee divestiture, strong Helly Hansen prospects, planned capital returns, and a favorable 2027 earnings framework. The main challenges were moderated Wrangler POS trends, conservative retail inventories, supply chain volatility, higher stranded and one-time costs, reduced cash-from-operations guidance, and tariff and freight pressures.

Kontoor expects 2026 revenue to approximate $2.68 billion, representing growth of approximately 12% compared to the prior year, including the impact of the 53rd week in 25; fourth quarter revenue is expected to increase approximately 2%, excluding the impact of the 53rd week, with Helly Hansen revenue increasing approximately 5% and Wrangler revenue increasing approximately 1%. Full year adjusted gross margin is expected to be in the range of 50.0% to 50.2%, representing an increase of 350 to 370 basis points, adjusted SG&A is expected to increase approximately 25%, adjusted operating income to approximate $400 million, representing an increase of approximately 12%, and adjusted EPS to be $5.40, representing growth of 31%, with an effective tax rate of 18.5%. The company expects to repurchase $450 million of common stock, including $400 million through an accelerated share repurchase program, end the year with less than 50 million shares outstanding, generate total cash from operations of approximately $325 million, make $280 million of voluntary term loan payments, return approximately $1 billion of capital, and return to less than 1.5x net leverage by the end of 26. For 2027, Kontoor has visibility to adjusted EPS from continuing operations of at least $6.60, representing more than 20% growth, cash flow from continuing of at least $325 million, and cash flow beyond 2027 that is expected to exceed $400 million; it anticipates more moderate levels of POS through at least the first half of next year, a modest inflationary environment excluding the impact of tariffs, approximately $30 million of incremental expense on a full year basis primarily in the first half from higher tariffs, and product costs in the second half 27 to be more inflationary relative to the first half. Helly Hansen’s 2030 commitments are revenue growth at a double digit CAGR to $1.1 billion, double the operating margin, and more than $500 million of cumulative cash flow.