0001760965-26-000014
SEC filingKontoor Brands, Inc. reported strong financial results for fiscal year 2025, with net revenues increasing 21% year-over-year to $3.15 billion, driven significantly by the acquisition of Helly Hansen. Operating income was $336.8 million, a slight decrease of 2% from the prior year, impacted by acquisition and integration costs, restructuring charges, and increased investments. Net income was $227.5 million, a 7% decrease, with diluted earnings per share of $4.05. Gross margin improved 70 basis points to 45.2%, benefiting from product mix and the Helly Hansen acquisition. The company generated robust operating cash flow of $455.8 million. The acquisition diversifies Kontoor's portfolio into the outdoor and workwear markets, positioning it for future growth, though integration and macroeconomic risks remain.
Kontoor Brands delivered a year of significant transformation and growth in fiscal 2025, ending January 3, 2026. Net revenues reached $3.15 billion, a substantial 21% increase from the prior year's $2.61 billion. This growth was primarily fueled by the $957.5 million acquisition of the Helly Hansen brand, completed on May 31, 2025, which contributed $475.5 million in revenue. The year included a 53rd week, providing an approximate 2% benefit to revenues. Despite the top-line growth, profitability metrics were mixed due to acquisition and restructuring costs. Operating income was $336.8 million, a slight 2% decrease from $342.3 million in 2024. Net income was $227.5 million, down 7% from $244.9 million. Diluted earnings per share was $4.05, compared to $4.36 in the prior year. The company generated strong operating cash flow of $455.8 million, up from $368.2 million, demonstrating the underlying cash-generative strength of the business.
Revenue growth was broad-based across distribution channels but heavily influenced by the Helly Hansen acquisition. The U.S. Wholesale channel, the largest at 64% of net revenues, grew 7% year-over-year, benefiting from the acquisition and growth in the Wrangler brand's Western, workwear, and female categories. International Wholesale revenue surged 65%, largely due to Helly Hansen's established international footprint. The Direct-to-Consumer channel grew 49%, driven by the acquisition and higher e-commerce sales for Wrangler and Lee. Segment performance varied: Wrangler revenues increased 6% to $1.91 billion, Lee revenues decreased 5% to $750.4 million due to wholesale declines, and the newly acquired Helly Hansen segment contributed $459.7 million for the seven-month period. The company also reported licensing revenue of $57.7 million for the year.
Gross margin improved to 45.2%, a 70 basis point increase from 44.5% in the prior year. This improvement was driven by a favorable product and channel mix, accretion from the higher-margin Helly Hansen brand (contributing 40 basis points), and benefits from the Project Jeanius transformation initiative. These positives were partially offset by the net impact of increased tariffs and product costs, and $46.3 million in restructuring and transformation charges related to manufacturing facility closures. Selling, general, and administrative expenses increased to 34.5% of revenue from 31.4%, due to $193.7 million in operating expenses from Helly Hansen, $50.8 million in acquisition/integration costs, and $34.3 million in restructuring charges. Consequently, operating margin was 10.7%, down from 13.1% in the prior year.
Cash flow from operations was robust at $455.8 million, a significant increase from $368.2 million, and included an approximate $100 million contribution from Helly Hansen. This was driven by net income and favorable working capital changes. Cash used in investing activities was $898.8 million, primarily for the Helly Hansen acquisition. Cash provided by financing activities was $246.8 million, reflecting $1.00 billion in proceeds from new long-term debt issuance to fund the acquisition, offset by $595.0 million in term loan repayments, $116.1 million in dividends paid, and $25.0 million in share repurchases. The balance sheet shows total assets of $2.58 billion. Long-term debt increased to $1.13 billion due to the acquisition financing. Total equity was $564.9 million. The company had $108.4 million in cash and $493.3 million in available borrowing capacity under its revolving credit facility at year-end.
The company's strategic focus is on integrating Helly Hansen to diversify its portfolio across geographies and categories (outdoor and workwear), and continuing its Project Jeanius business transformation to simplify processes and enhance margins. Management anticipates continued macroeconomic uncertainty in 2026, including potential impacts from further tariff increases, but believes the company is positioned to manage operational challenges. Key risks disclosed include difficulties integrating Helly Hansen and achieving expected synergies, reliance on a small number of large customers (Walmart accounted for 30% of 2025 revenue), macroeconomic pressures impacting consumer demand, and global supply chain disruptions. The company expects capital expenditures of approximately $45.0 million in 2026 to support IT, distribution, and retail investments.