Kontoor Brands Q2 2026 earnings: Margin gains support a higher EPS outlook

Kontoor Brands (NYSE: KTB) reported fiscal Q2 2026 revenue from continuing operations of $584.3 million, up 19% from $492.6 million, while diluted EPS from continuing operations was $1.03 versus $1.05 a year earlier. Adjusted EPS rose 13% to $1.06, and adjusted gross margin expanded 710 basis points as Helly Hansen, Project Jeanius, pricing and favorable mix supported profitability. Wrangler grew modestly, while Helly Hansen contributed $114 million of quarterly revenue.

Core earnings data

The revenue increase included a full-quarter contribution from Helly Hansen, which Kontoor acquired during Q2 2025. Wrangler revenue also increased 2%, providing organic growth alongside the acquired business.

Profitability was more mixed below the operating line. Reported operating income rose 59%, but income from continuing operations declined 3% as other income swung to an expense and interest costs increased.

All figures are for the 13-week quarters ended July 4, 2026 and June 28, 2025. Consolidated net income includes discontinued operations; the other earnings measures shown above relate to continuing operations.

Business and brand performance

Wrangler generated $469 million in global revenue, up 2%. U.S. revenue increased 1%, with 9% direct-to-consumer growth offset by flat wholesale revenue. International revenue rose 10%, including a 31% increase in direct-to-consumer and 7% wholesale growth.

Helly Hansen contributed $114 million, divided among $70 million from Sport, $37 million from Workwear and $7 million from Musto. Management said the business performed better than expected during the quarter and delivered double-digit pro forma revenue growth during the first half of 2026, along with improved profitability.

The brand data show that Wrangler’s faster-growing areas were direct-to-consumer, international and female products, while its core U.S. wholesale business was unchanged. Helly Hansen supplied most of the consolidated revenue increase because the prior-year quarter did not include a full contribution from the acquired company.

Profitability and financial position

Adjusted gross margin reached 53.8%, supported by Project Jeanius savings, Helly Hansen, favorable channel and product mix, and pricing. However, adjusted operating margin increased only 10 basis points to 16.0% because adjusted SG&A rose to $221 million, or 37.8% of revenue.

The increase in adjusted SG&A reflected a full quarter of Helly Hansen expenses and greater spending on direct-to-consumer operations, demand creation and technology. Project Jeanius savings partially offset those costs.

Kontoor ended the quarter with $58 million in cash and cash equivalents and $1.1 billion in long-term debt. It had no borrowings under its revolving credit facility and retained $493 million of available capacity. Inventory declined 3% to $526 million, primarily because of lower Helly Hansen inventory.

The company returned $80 million to shareholders through dividends and repurchases during the quarter, including $50 million spent repurchasing shares at an average price of $74. Its existing authorization had $700 million remaining at quarter-end.

Kontoor intends to enter a $400 million accelerated share repurchase after the planned Lee divestiture closes, with remaining proceeds allocated to voluntary debt payments. The transaction remains dependent on completion of the divestiture, which is targeted for the fourth quarter.

Operating gains did not translate into higher GAAP net income

Reported operating income increased 59%, but pre-tax income from continuing operations declined 5% to $73.0 million. Other items were the main reason: Kontoor recorded $3.7 million of other expense compared with $30.5 million of other income in the prior-year quarter, while interest expense increased to $15.7 million from $13.5 million.

Consequently, income from continuing operations fell 3% even as adjusted operating income rose 19%. Consolidated net income declined 12% because profit from discontinued operations also fell to $7.8 million from $15.2 million. The quarter therefore showed substantial operating improvement without a corresponding increase in the GAAP bottom line.

Full-year guidance

Kontoor raised its adjusted EPS and gross margin forecasts while maintaining its revenue range. The higher profitability outlook reflects stronger year-to-date results and a better contribution from Helly Hansen, even after incorporating $25 million of incremental brand-building and growth investments.

The company now expects adjusted operating income of $413 million to $420 million, representing 15% to 17% growth. Adjusted SG&A is expected to increase approximately 23%, including a full year of Helly Hansen expenses and the additional investments.

Adjusted EPS guidance includes about $0.55 per share of unmitigated overhead and other costs previously allocated to Lee, as well as $0.36 per share of incremental investment compared with the prior outlook. It excludes the effect of future repurchases, including the planned accelerated repurchase connected to the Lee sale.

Kontoor also expects approximately $30 million in capital expenditures, $56 million of interest expense and $225 million of voluntary term-loan payments. It is targeting net leverage below 1.5 times by year-end. The cash-from-operations forecast is an exception to the continuing-operations presentation because it includes the expected contribution from Lee, which is reported as discontinued operations.

The outlook assumes a 15% reciprocal tariff rate for the second half. New Section 301 rates range from 10% to 12.5% for products from most current trading partners, while qualifying imports from Mexico remain exempt under USMCA. Kontoor recognized a $54 million receivable in Q1 for recoverable IEEPA tariffs and had received $23 million of refunds in the third quarter through the release date.

Recent insider transactions

The supplied six-month insider summary classified 268,524 shares across 17 transactions as purchases and 4,000 shares in one transaction as sales, producing net purchases of 264,524 shares. Because the detailed records are dominated by zero-cost stock awards, the aggregate purchase figure should not be treated as open-market buying.

The latest listed grant and the only cash-valued sale among the most recent records were as follows:

These transactions are presented as reported and do not by themselves establish insiders’ views about the company’s prospects.

Risks investors should monitor

• Lee divestiture execution: The planned $400 million accelerated repurchase and additional debt repayment depend on the Lee sale closing. Kontoor must also mitigate overhead previously allocated to the divested business.
• Tariff uncertainty: The outlook assumes a 15% reciprocal tariff rate for the second half, while litigation, refund timing, Section 301 rates and potential Bangladesh exemptions remain unsettled.
• Expense growth: Full-year adjusted SG&A is expected to increase about 23%. Direct-to-consumer, technology and brand investments could continue to limit the conversion of gross-margin gains into operating-margin expansion.
• Helly Hansen integration: Helly Hansen improved revenue and gross margin but still reduced Q2 adjusted EPS by $0.06. Future results depend partly on continued integration progress and platform benefits.
• Debt and interest costs: Kontoor had $1.1 billion of long-term debt at quarter-end and expects approximately $56 million of full-year interest expense. Some planned debt reduction is tied to proceeds from the Lee divestiture.

Summary

Kontoor Brands’ fiscal Q2 revenue growth was driven primarily by Helly Hansen, with Wrangler adding modest growth led by direct-to-consumer and international channels. Gross margin expanded considerably, but higher SG&A and unfavorable below-the-line comparisons limited the benefit to GAAP earnings. The raised adjusted EPS and gross margin outlook points to improved operating expectations, while Lee divestiture execution, tariff assumptions, integration progress and expense growth remain the principal items to monitor.