GREENSBORO: Kontoor Brands, publicly traded company consisting of the Wrangler, Lee and Rock & Republic brands, and the VF Outlet business, will spinoff from VF Corp. on May 23, according to Zack Matheny, president of Downtown Greensboro Inc. The retention of Kontoor Brands is the silver lining to the news that broke in August 2018 that VF will move its headquarters from Greensboro to Denver. Simultaneously, it has also outlined its plan for the future.
The new entity, which will be independent, is expected to maintain a revenue of around US $ 2.5 billion in 2019, and then see low single digit growth in 2020 and 2021, according to a presentation and financial outlook. The initial outlook for Kontoor Brands’ first fiscal ending December 28 has adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) ranging between US $ 340 million and US $ 360 million, reflecting a mid-single-digit to low double-digit decline compared with 2018 adjusted EBITDA.
Scott Baxter, who has been named president and CEO of Kontoor Brands, said in a presentation to investors that the new company will have “compelling, durable and consistent cash flow” in excess of US $ 300 million annually and “healthy margin expansion” thanks to US $ 50 million in identified cost reductions.
The company will also establish and streamline global brand management across regions and functions, and leverage its supply chain to enhance inventory management and working capital efficiency. Kontoor said it will invest in higher growth, accretive digital and direct-to-consumer channels; elevate design, and “deliver innovation and enhance segmented offerings”.
Kontoor also has plans to scale its advantage in the core men’s denim business to “drive industry-leading innovation, elevate demand creation, leverage its leading supply chain and continue to grow in high-margin channels”.
Kontoor Brands’ initial 2020 to 2021 outlook forecasts revenue to increase at a low single-digit CAGR over the period. Adjusted EBITDA is projected to rise at a mid-single-digit CAGR. Capital expenditures are expected to range between US $ 105 million and US $ 110 million overall during the period, including approximately US $ 80 million to US $ 90 million to support the design and implementation of the global ERP system. Kontoor Brands comes into the market with a vertically integrated supply chain producing or sourcing more than 170 million units in 2018, executives said Friday, noting that it has “deep retail relationships across leading brick and mortar and e-commerce players” and a global footprint across 65 countries.
