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What changed in Kontoor Brands, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Kontoor Brands, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+325 added−312 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-28)

Top changes in Kontoor Brands, Inc.'s 2024 10-K

325 paragraphs added · 312 removed · 249 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

78 edited+17 added−17 removed32 unchanged
Biggest changeRock & Republic ® is a premium apparel brand and is marketed to consumers as a modern and active lifestyle brand. We distribute the brand in the U.S. by leveraging our retail and e-commerce relationships, as well as through our Company-operated website at rockandrepublic.com. Distribution Channels and Customers Our distribution channels include U.S. Wholesale, Non-U.S. Wholesale and Direct-to-Consumer. • U.S.
Biggest changeWe distribute the brand through our e-commerce relationships, retail stores and our Company-operated website at www.rockandrepublic.com. Distribution Channels and Customers Our distribution channels include U.S. Wholesale, Non-U.S. Wholesale and Direct-to-Consumer. • U.S. Wholesale The U.S. Wholesale channel is our largest distribution channel and accounted for approximately 73% of our net revenues in 2024.
The Company’s products are also sold internationally, primarily in the Europe, Middle East and Africa ("EMEA"), Asia-Pacific (“APAC”) and Non-U.S. Americas regions, through department, specialty, company-operated, concession retail and independently-operated partnership stores and online, including digital marketplaces. Kontoor is headquartered in the U.S. with a presence in over 70 countries.
The Company’s products are also sold internationally, primarily in the Europe, Middle East and Africa ("EMEA"), Asia-Pacific (“APAC”) and Non-U.S. Americas regions, through department stores, specialty stores, company-operated stores, concession retail stores, independently-operated partnership stores and online, including digital marketplaces. Kontoor is headquartered in the U.S. with a presence in over 70 countries.
Our websites, www.wrangler.com, www.lee.com and corresponding regional websites, enhance consumer understanding of our brands and help consumers find and buy our products. We employ a support team for each brand that is responsible for customer service at the consumer level as well as a sales force that manages our customer relationships.
Our websites, www.wrangler.com, www.lee.com, www.rockandrepublic.com and corresponding regional websites, enhance consumer understanding of our brands and help consumers find and buy our products. We employ a support team for each brand that is responsible for customer service at the consumer level as well as a sales force that manages our customer relationships.
We believe we offer high product value and quality to our consumers, who respond to our value proposition by consistently purchasing our products over time. Our strong margin profile combined with our diligent approach to operational excellence and capital management have produced meaningful cash flows.
We believe we offer high product value and quality to our consumers, who respond to our value proposition by consistently purchasing our products over time. Our strong margin profile combined with our diligent approach to operational excellence and capital management have produced strong cash flows.
In making decisions about the location of manufacturing operations and suppliers, we consider several factors including the raw material source, the market the product will be sold in, production lead times, duties and tariffs, product cost, product complexity and the ability to pursue upside demand.
In making decisions about the location of manufacturing operations and suppliers, we consider factors including the raw material source, the market the product will be sold in, production lead times, duties and tariffs, product cost, product complexity and the ability to pursue upside demand.
Within our largest market and channel, we are pursuing strategies to support and grow market share in existing distribution with leading retailers, drive business opportunities in new channels, such as premium, specialty and sporting goods, as well as accelerate complementary categories. • Diversify Our Product Mix Through Category Extensions We continue to enhance our existing product assortment, broaden our product offering and expand into adjacent product categories, with a focus on outdoor, workwear and t-shirts.
Within our largest market and channel, we are pursuing strategies to support and grow market share in existing distribution with leading retailers, drive business opportunities in new channels, such as premium, specialty and sporting goods, as well as accelerate complementary categories. • Diversify Our Product Mix Through Category Extensions We continue to enhance our existing product assortment, broaden our product offering and expand into adjacent product categories, with a focus on outdoor, workwear and tops.
Key areas of focus include added discipline around the purchasing of product, inventory optimization and channel placement, as well as better planning and execution in disposition of excess inventory through our various channels.
Key areas of focus include added discipline around the purchasing of product, inventory optimization and channel placement, as well as effective planning and execution in disposition of excess inventory through our various channels.
The Company designs, manufactures, procures, sells and licenses apparel, footwear and accessories, primarily under the brand names Wrangler ® and Lee ® . The Company’s products are sold in the United States (“U.S.”) through mass merchants, specialty stores, mid-tier and traditional department stores, company-operated stores and online, including digital marketplaces.
The Company designs, manufactures, procures, sells and licenses apparel, footwear and accessories, primarily under the brand names Wrangler ® and Lee ® . The Company’s products are sold in the United States (“U.S.”) through mass merchants, specialty stores, department stores, company-operated stores and online, including digital marketplaces.
Within outdoor, we are bringing to market new product innovation platforms such as collections from Wrangler All Terrain Gear . Within workwear, we are leveraging our strong brand equity and innovation platforms to enter new markets and categories. And in t‑shirts, we are focusing our efforts across logo, lifestyle and licensed/collaboration content.
Within outdoor, we are bringing to market new product innovation platforms such as collections from Wrangler All Terrain Gear . Within workwear, we are leveraging our strong brand equity and innovation platforms to enter new markets and categories. And in tops, we are focusing our efforts across logo, lifestyle and licensed/collaboration content.
Seasonality Our operating results are generally subject to some variability due to seasonality, with net revenues typically being slightly higher during the back-to-school and holiday shopping seasons. This limited variation results primarily from the differences in seasonal influences on revenues between our Wrangler ® and Lee ® segments.
Seasonality Our operating results are generally subject to some variability due to seasonality, with net revenues typically being slightly higher during the fall and holiday shopping seasons. This limited variation results primarily from the differences in seasonal influences on revenues between our Wrangler ® and Lee ® segments.
Successful execution of our product expansion strategies should broaden the appeal of our brands and products to new consumers and ultimately drive the overall net revenues of the business. • Expand Our Reach Around the Globe We continue to pursue opportunities to expand the international distribution of our products with new and existing customers.
Successful execution of our product expansion strategies should broaden the appeal of our brands and products to new consumers and ultimately drive the overall net revenues of the business. • Expand Our Reach Around the Globe We continue to pursue opportunities to evolve our business with new and existing customers and expand the international distribution of our products into new markets.
See below for additional information on the brands, channels of distribution and geographies included in each segment. • Wrangler Wrangler ® is an iconic American heritage brand rooted in the western lifestyle, with 77 years of history offering denim, apparel and accessories for adults and children.
See below for additional information on the brands, channels of distribution and geographies included in each segment. • Wrangler Wrangler ® is an iconic American heritage brand rooted in the western lifestyle, with 78 years of history offering denim, apparel, footwear and accessories for adults and children.
Our primary brands, Wrangler ® and Lee ® , have a combined heritage that spans over 200 years. During 2023, we sold approximately 149 million units of apparel across all brands. We benefit from long-standing relationships with many of our customers who we believe depend on our ability to reliably and timely replenish our high-volume products.
Our primary brands, Wrangler ® and Lee ® , have a combined heritage that spans over 200 years. During 2024, we sold approximately 147 million units of apparel across all brands. We benefit from long-standing relationships with many of our customers who we believe depend on our ability to reliably and timely replenish our high-volume products.
We also continue to focus on our brick-and-mortar strategy. For example, in the U.S. we are optimizing the location and footprint of our stores and elevating the customer experience. In Asia, we launched a retail excellence initiative with reformatted stores, improved point-of-sale technologies and enhanced assortments.
We also continue to focus on our brick-and-mortar strategy. For example, in the U.S. we are optimizing the location and footprint of our stores and elevating the customer experience. In Asia, we launched a retail excellence initiative with reformatted stores, improved point-of-sale technologies and enhanced assortments, and we expanded our presence on livestreaming platforms.
We believe we have developed a high degree of expertise in managing the complexities associated with a global supply chain. During 2023, we manufactured or sourced approximately 141 million units of finished goods inventory. Our supply chain employs a centralized leadership model with localized regional expertise.
We believe we have developed a high degree of expertise in managing the complexities associated with a global supply chain. During 2024, we manufactured or sourced approximately 138 million units of finished goods inventory. Our supply chain employs a centralized leadership model with localized regional expertise.
The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to periods ended December 2023, December 2022 and December 2021 correspond to the 52-week fiscal years ended December 30, 2023, December 31, 2022 and January 1, 2022, respectively.
The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to periods ended December 2024, December 2023 and December 2022 correspond to the 52-week fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively.
In Europe, we are refining our brick-and-mortar strategy by leveraging best practices from our Asia market and continuing to invest in our digital platform. We are making progress towards these objectives through investments in advanced data analytics capabilities and unlocking new value through our global ERP infrastructure.
In Europe, we are refining our brick-and-mortar strategy by leveraging best practices and continuing to invest in our digital platform. We are making progress towards these objectives through investments in advanced data analytics capabilities and unlocking insights and value through our global ERP infrastructure.
The concession model provides dedicated sales areas for our brands and helps differentiate and enhance the presentation of our products, generally without incurring the full overhead of opening a separate store. We continue to prioritize serving our customers through digital platforms that enhance the user experience and drive customer interaction in digital and physical environments.
The concession model provides dedicated sales areas for our brands and helps differentiate and enhance the presentation of our products, generally with lower overhead than opening a separate store. We continue to prioritize serving our customers through digital platforms that enhance the user experience and drive customer interaction in digital and physical environments.
We are leveraging relationships with licensees to broaden our distribution, such as opening Wrangler ® and Lee ® branded flagship stores in India. In Europe, we are refining our strategy to become more consumer-centric in addressing how and where our customers want to purchase our products.
We are leveraging relationships with licensees to broaden our distribution, such as the expansion of Wrangler ® and Lee ® branded stores in India. In Europe, we are refining our strategy to become more consumer-centric in addressing how and where our customers want to purchase our products.
Digitally-enabled transactions generated from our own websites represent a growing portion of our net revenues, and help elevate the connection consumers have with our brands. Wrangler ® and Lee ® branded products are currently available through our own websites in 15 countries.
Sales from our own websites represent a growing portion of our net revenues, and help elevate the connection consumers have with our brands. Wrangler ® and Lee ® branded products are currently available through our own websites in 15 countries.
Western specialty channel and with leading retailers in China. By fostering these relationships, we have become an important vendor for many of our customers and have built leading category positions, which in turn supports the availability of our brands to consumers and our ability to introduce new products and categories.
By fostering these relationships, we have become an important vendor for many of our customers and have built leading category positions, which in turn supports the availability of our brands to consumers and our ability to introduce new products and categories.
Our innovation network is integral to our design approach and long-term growth, allowing us to evolve and deliver product experiences that meet our consumer needs. Manufacturing, Sourcing and Distribution Our global supply chain organization is responsible for the operational planning, manufacturing, sourcing and distribution of products to our customers.
Our innovation network is essential to our design strategy and long-term growth, allowing us to evolve and deliver product experiences that meet our consumers' needs. Manufacturing, Sourcing and Distribution Our global supply chain organization is responsible for the operational planning, manufacturing, sourcing and distribution of products to our customers.
Kontoor Brands, Inc. 2023 Form 10-K 5 Table of Contents As of December 30, 2023, we had 25 Company-operated full-price Wrangler ® and Lee ® branded retail stores, which are located in Asia, Europe and the U.S.
Kontoor Brands, Inc. 2024 Form 10-K 5 Table of Contents As of December 28, 2024, we had 20 Company-operated full-price Wrangler ® and Lee ® branded retail stores, which are located in Asia, Europe and the U.S.
Wrangler ® , which is currently approximately 90% U.S. domestic, has many international growth opportunities, particularly in China and Europe. • Elevate Our Direct Connection With Consumers Through Channel Expansion We are leveraging our leading brand positions to increase our digital penetration with our own e‑commerce websites as well as major global retail partners, as we continue to evolve our digital ecosystem.
Approximately 90% of Wrangler ® revenues are in the U.S., and thus Wrangler ® has many international growth opportunities, particularly in Europe. • Elevate Our Direct Connection With Consumers Through Channel Expansion We are leveraging our leading brand positions to increase our digital penetration with our own e‑commerce websites as well as major global retail partners, as we continue to evolve our digital ecosystem.
We offer multiple sub-brands and collections within the Wrangler ® brand to target specific consumer demographics and consumer end-users, including: 20X ® , Aura from the Women at Wrangler ® , Cowboy Cut ® , Premium Patch ® , Riggs Workwear ® , Rock 47 ® , Rustler ® , Wrangler Retro ® , Wrangler Rugged Wear ® and Wrangler All Terrain Gear . • Lee Lee ® is an iconic American denim and apparel brand, with 135 years of heritage and authenticity.
We offer multiple sub-brands, collections and product lines within the Wrangler ® brand to target specific consumer demographics and consumer end-users, including: 20X ® , Aura from the Women at Wrangler ® , Cowboy Cut ® , Premium Patch ® , Riggs Workwear ® , Rock 47 ® , Rustler ® , Wrangler Retro ® , Wrangler Rugged Wear ® and Wrangler All Terrain Gear . • Lee Lee ® is an iconic American brand offering denim, apparel, footwear and accessories for adults and children, with 136 years of heritage and authenticity.
Drawing on deep industry knowledge and diverse perspectives, they have helped navigate our business through unprecedented challenges spurred by a global pandemic, while simultaneously evolving our strategies with agility and flexibility.
Drawing on deep industry knowledge and diverse perspectives, they have helped navigate our business through unprecedented challenges while simultaneously evolving our strategies with agility and flexibility.
Products bearing our brands are sold in more than 70 countries, and we believe they have strong consumer connectivity worldwide. We market our brands and products to highlight their differentiated position and product attributes.
Products bearing our brands are sold in more than 70 countries, and we believe they have strong consumer connectivity worldwide with approximately 147 million units sold in 2024. We market our brands and products to highlight their differentiated position and product attributes.
We believe this manufacturing and sourcing approach, coupled with strategic inventory and retail floor space management programs with many of our major retail customers, gives us operational flexibility as we continue to expand our distribution. 6 Kontoor Brands, Inc 2023 Form 10-K Table of Contents • Sourcing and Manufacturing We believe the combination of our internal manufacturing and contract manufacturing across different geographic regions provides a well-balanced, flexible approach to product procurement.
This manufacturing and sourcing approach, coupled with strategic inventory and retail floor space management programs with many of our major retail customers, gives us operational flexibility as we continue to expand our distribution. • Sourcing and Manufacturing We believe the combination of our internal manufacturing and contract manufacturing across different geographic regions provides a well-balanced, flexible approach to product procurement.
The Lee ® brand offers multiple sub-brands and collections, making it attractive for a broader consumer base, including: Lee101 TM , Riders ® by Lee ® Indigo and Chic by Lee TM . 4 Kontoor Brands, Inc 2023 Form 10-K Table of Contents • Other Other includes sales and licensing of Rock & Republic ® , other company-owned brands and private label apparel.
The Lee ® brand offers multiple sub-brands, collections and product lines, making it attractive for a broader consumer base, including: Lee101 ® , Riders ® , Storm Rider ® , Lee MVP TM and Lee X TM . 4 Kontoor Brands, Inc 2024 Form 10-K Table of Contents • Other Other includes sales and licensing of Chic ® , Rock & Republic ® , other company-owned brands and private label apparel.
The specialty store channel, which includes revenue from Wrangler ® Riggs Workwear ® and Wrangler ® Western branded products, consists primarily of national accounts such as Boot Barn, Cavender's and Tractor Supply Company as well as upscale modern specialty stores.
Our department store customers include national retailers such as Kohl’s as well as other retail partners. The specialty store channel, which includes revenue from Wrangler ® Riggs Workwear ® and Wrangler ® Western branded products, consists primarily of national accounts such as Boot Barn, Cavender's and Tractor Supply Company as well as upscale modern specialty stores.
As of December 30, 2023, we had approximately 13,700 employees worldwide. Geographically, approximately 1,000 employees are located in APAC, approximately 600 are located in EMEA, approximately 9,300 are located in Latin America and Mexico, primarily supporting our manufacturing facilities, and approximately 2,800 are located in the U.S.
As of December 28, 2024, we had approximately 13,200 employees worldwide. Geographically, approximately 1,000 employees are located in APAC, approximately 600 are located in EMEA, approximately 8,800 are located in Latin America and Mexico, primarily supporting our manufacturing facilities, and approximately 2,800 are located in the U.S.
See “Licensing Arrangements” herein for more information. • Direct-to-Consumer Our Direct-to-Consumer channel accounted for approximately 12% of our net revenues in 2023 and represents sales of our products via our Wrangler ® and Lee ® branded full-price and outlet stores, online and via international concession arrangements.
Most of the agreements provide for a minimum royalty requirement. See “Licensing Arrangements” herein for more information. • Direct-to-Consumer Our Direct-to-Consumer channel accounted for approximately 12% of our net revenues in 2024 and represents sales of our products via our Wrangler ® and Lee ® branded full-price and outlet stores, online and via international concession arrangements.
A small portion of employees in international markets are covered by trade-sponsored or governmental bargaining arrangements. Employee relations are considered to be good.
Less than 1% of employees in international markets are covered by trade-sponsored or governmental bargaining arrangements. Employee relations are considered to be good.
We also source products from approximately 185 contract manufacturing facilities in 18 countries. During 2023, approximately 33% of our units were manufactured in our internal manufacturing facilities, and approximately 67% were sourced from contract manufacturers. Products obtained from contractors in the Western Hemisphere frequently have a higher cost than products obtained from contractors in Asia.
We also source products from approximately 210 contract manufacturing facilities in 19 countries. During 2024, approximately 30% of our units were manufactured in our internal manufacturing facilities, and approximately 70% were sourced from contract manufacturers. Products obtained from contractors in the Western Hemisphere frequently have a higher cost than products obtained from contractors in Asia.
Additionally, our established long-term third-party distribution relationships ensure maximum capacity, connectivity, responsiveness and overall service coverage around the globe. In international markets where we do not have brick-and-mortar or wholesale operations, our products are often marketed through our distributors, agents and licensees. Inventory Management Inventory management is key to the cash flows and operating results of our business.
Additionally, our long-term third-party distribution relationships ensure maximum capacity, connectivity, responsiveness and overall service coverage around the globe. In international markets, our products are also marketed through our distributors, agents and licensees. Inventory Management Inventory management is key to the cash flows and operating results of our business.
We also had 55 Company-operated premium outlet and clearance centers as of December 30, 2023, primarily our Lee Wrangler Outlet TM and Lee Wrangler Clearance Center TM retail stores located in the U.S., as well as locations in Europe and Mexico. As of December 30, 2023, we had 182 concession retail and outlet stores in Europe and Asia.
We also had 57 Company-operated premium outlet and clearance centers as of December 28, 2024, primarily our Lee Wrangler Outlet TM and Lee Wrangler Clearance Center TM retail stores located in the U.S., as well as outlets in Europe and Mexico. As of December 28, 2024, we had 187 concession retail and outlet stores in Europe and Asia.
With changes in our mix of business and the growth of our direct-to-consumer operations, historical quarterly revenue and profit trends may not be indicative of future trends. Working capital Kontoor Brands, Inc. 2023 Form 10-K 7 Table of Contents requirements vary throughout the year.
With changes in our mix of business and the growth of our direct-to-consumer operations, historical quarterly revenue and profit trends may not be indicative of future trends. Working capital requirements vary throughout the year.
In addition, a small portion of sales in our Non-U.S. Wholesale channel are from international licensing arrangements where we receive royalties based on a percentage of the licensed products’ net revenues. Most of the agreements provide for a minimum royalty requirement.
In addition, we have revenues in our U.S. Wholesale channel from licensing arrangements where we receive royalties based on a percentage of the licensed products’ net revenues. Most of the agreements provide for a minimum royalty requirement. See “Licensing Arrangements” herein for more information. • Non-U.S. Wholesale The Non-U.S.
Our operations have an Occupational Safety and Health Administration recordable incident rate ("RIR") significantly below the average RIR of our industry; however, we strive to reach zero injuries.
Our operations have an Occupational Safety and Health Administration recordable incident rate ("RIR") significantly below the average RIR of our industry; however, we strive to reach zero injuries. Corporate Sustainability and Social Responsibility Corporate sustainability and social responsibility are top priorities for our Company and Board of Directors.
We foster close and longstanding relationships with our wholesale customers, having partnered with each of our top three brick-and-mortar wholesale customers for over 30 years. In addition, we engage in an active dialogue with many of our key wholesale customers and receive proprietary insights about how our products are performing on a timely basis. Our brands’ top U.S.
We foster close and longstanding relationships with our top brick-and-mortar wholesale customers. In addition, we engage in an active dialogue with many of our key wholesale customers and receive proprietary insights about how our products are performing on a timely basis. Our brands’ top U.S. Wholesale customers include Amazon, Boot Barn, Cavender's, Kohl’s, Target and Walmart.
We believe our consistent financial results will provide us with the opportunity to invest in our business and deploy a multi-faceted capital allocation strategy. Despite the macroeconomic pressures faced by the Company in recent years, we have been resilient.
We believe our consistent financial results will provide us with the opportunity to invest in our business and deploy a multi-faceted capital allocation strategy.
We articulate our corporate sustainability and social responsibility commitments in our Code of Conduct on our website at www.kontoorbrands.com. Our website and the information contained therein or connected thereto is not incorporated in this Annual Report on Form 10-K.
Our website is www.kontoorbrands.com. Our website and the information contained therein or connected thereto is not incorporated in this Annual Report on Form 10-K.
We have registered our intellectual property in the U.S. and in other countries where our products are manufactured and/or sold. In particular, our trademark portfolio consists of over 8,100 trademark registrations and applications in the U.S. and other countries around the world, including U.S. and foreign trademark registrations for our two key brands, Wrangler ® and Lee ® .
We have registered the intellectual property associated with our brands in the U.S. and other countries where our products are manufactured and/or sold, including trademark registrations for our two key brands, Wrangler ® and Lee ® .
The majority of the Wrangler ® and Lee ® international product business is located in EMEA and APAC, where we sell our products directly to our department store and specialty store wholesale customers, and indirectly through our distribution and license relationships. In Canada and Mexico, our products are marketed through mass merchants, department stores and specialty stores. Additionally, our Non-U.S.
The majority of the Wrangler ® and Lee ® international product business is located in EMEA and APAC, where we sell our products directly to our department store and specialty store wholesale customers, online, including digital marketplaces, and indirectly through our distribution and license relationships.
Third-party e-commerce platforms and pure-play digital retailers are a growing and important portion of this channel. Our mass merchant customers include national retailers such as Target and Walmart, as well as various regional retail partners. Our mid-tier and traditional department store customers include national retailers such as Kohl’s as well as other retail partners.
Wholesale net revenue is attributable to digital sales from our wholesale partners’ websites and third-party e-commerce platforms such as Amazon and other pure-play digital retailers. Third-party e-commerce platforms are a growing and important portion of this channel. Our mass merchant customers include national retailers such as Target and Walmart, as well as various regional retail partners.
Governmental Regulations We are subject to U.S. federal, state and local laws and regulations that could affect our business, including those promulgated under the Federal Trade Commission Act, the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission and various environmental laws and regulations, including laws and regulations relating to generating emissions, water discharges, waste, product and packaging content and workplace safety.
Our website and the information contained therein or connected thereto is not incorporated in this Annual Report on Form 10-K. 8 Kontoor Brands, Inc 2024 Form 10-K Table of Contents Governmental Regulations We are subject to U.S. federal, state and local laws and regulations that could affect our business, including those promulgated under the Federal Trade Commission Act, the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission and various environmental laws and regulations, including laws and regulations relating to generating emissions, water discharges, waste, product and packaging content and workplace safety.
We operate global sourcing hubs, which are responsible for managing contract manufacturing and procurement of product, including supplier oversight, product quality assurance, sustainability within the supply chain, responsible sourcing, and transportation and shipping functions. We operate nine manufacturing facilities, comprised of seven owned facilities in Mexico and two leased facilities in Nicaragua.
We operate global sourcing hubs, which are responsible for managing contract manufacturing and procurement of product, including supplier oversight, product quality assurance, sustainability within the supply chain, responsible sourcing, and transportation and shipping functions. 6 Kontoor Brands, Inc 2024 Form 10-K Table of Contents We own and operate seven manufacturing facilities in Mexico.
Our licensing partners leverage the strength of our brands and our customer relationships to sell products in their licensed categories and geographic regions. We currently have licensing agreements in categories including jeanswear, casual apparel, workwear, belts, footwear, small leather goods, headwear, socks, home décor, luggage, bags, watches, eyewear and cold weather accessories.
Our licensing partners leverage the strength of our brands and our customer relationships to sell products in their licensed categories and geographic regions. We currently have licensing agreements in categories including denim, apparel, footwear, accessories and home décor.
We also have established global third-party sourcing and distribution networks that we leverage across product categories and various regions. We currently have three technical service centers located in North Carolina, South China and Bangladesh. We believe our flexible and balanced approach to manufacturing and distribution allows us to better manage our production needs and to support expanded digital distribution.
We also have established global third-party sourcing and distribution networks that we leverage across product categories and various regions. We currently have three technical service centers located in North Carolina, South China and Bangladesh.
Wrangler ® and Lee ® branded products are available in Canada and Mexico, the United Kingdom and continental Europe, the Middle East, China, and through licensees across Australia, Asia, Africa, Mexico, Central and South America, Europe and India.
Wholesale channel represents the majority of our international business and accounted for approximately 15% of our net revenues in 2024. Wrangler ® and Lee ® branded products are available in Canada, Mexico, the United Kingdom, continental Europe, the Middle East, China, and through licensees across Australia, Asia, Africa, Mexico, Central and South America, Europe and India.
The research focus includes raw materials, garment construction, laser processing and wash-finishing advancements. This location is staffed with dedicated scientists and engineers who leverage consumer insights to create new products and material technologies, enhance attributes of existing products and improve manufacturing techniques.
This facility conducts advanced product technology research in our materials science lab, focusing on raw materials, laser processing and finishing advancements. This location is staffed with dedicated scientists and engineers who leverage consumer insights to create new products and material technologies and enhance the attributes of existing products.
We do not jeopardize the well-being of our employees, contractors or supply chain partners to complete any tasks, projects or other priorities. We believe the people involved in the development of our products are our most important assets; therefore, we have created and implemented strong health and safety policies and procedures that go beyond governmental standards.
We believe the people involved in the development of our products are our most important assets; therefore, we have created and implemented strong health and safety policies and procedures that go beyond governmental standards.
They are retail locations selling our Wrangler ® and Lee ® branded products that have the appearance of Kontoor-operated stores, and as such represent an important vehicle for presenting our brands to international consumers. Similar to the U.S. Wholesale channel, we use proprietary insights from our wholesale customers to strategically refine our products and adjust our go-to-market approach.
Partnership stores are owned and operated by our licensees, distributors and other independent parties. They are retail locations selling our Wrangler ® and Lee ® branded products that have the appearance of Kontoor-operated stores, and as such represent an important vehicle for presenting our brands to international consumers. Similar to the U.S.
Additionally, we see a large and growing offering from private label apparel created for retailers such as Amazon, Target, Walmart and Kohl's. Intellectual Property Trademarks, trade names, patents and domain names, as well as related logos, designs and graphics, provide substantial value in the development and marketing of our products, and are important to our continued success.
Intellectual Property Trademarks, trade names, patents and domain names, as well as related logos, designs and graphics, provide substantial value in the development and marketing of our products, and are important to our continued success.
Our primary branded competitors are large, globally focused apparel companies that also participate in a variety of categories, including, but not limited to, athletic wear, denim, exclusive or private labels, casual lifestyle apparel, outerwear and workwear. A select list of key competitors includes Calvin Klein, Carhartt, Columbia, Diesel, Guess, Levi’s and Tommy Hilfiger.
Kontoor Brands, Inc. 2024 Form 10-K 7 Table of Contents Our primary branded competitors are large, globally focused apparel companies that also participate in a variety of categories, including, but not limited to, denim, athletic wear, exclusive or private labels, casual lifestyle apparel, outerwear and workwear.
We are focused on the following four areas that we believe will catalyze profitable revenue growth in the future: • Enhance and Accelerate Our Core U.S. Wholesale Business We are focused on continuing to enhance the global strength of our brands, improve operating efficiency and increase the overall demand for our products.
Wholesale Business We are focused on continuing to enhance the global strength of our brands, improve operating efficiency and increase the overall demand for our products.
Geographically, our net revenue in EMEA is concentrated in developed markets such as France, Germany, Italy, Poland, Scandinavia, Spain and the United Kingdom. We access the APAC market primarily through our business in China. Canada is the largest international market for Wrangler ® branded products, while China is the largest international market for Lee ® branded products.
Wholesale channel, we use proprietary insights from our wholesale customers to strategically refine our products and adjust our go-to-market approach. Geographically, our net revenue in EMEA is concentrated in developed markets such as France, Germany, Italy, the Netherlands, Poland, Scandinavia, Spain and the United Kingdom. We access the APAC market primarily through our business in China.
We retain oversight and approvals of the design, quality control, advertising, marketing and distribution of licensed products to help maintain our brand and product quality standards. License agreements are for fixed terms of typically two to five years. Each licensee pays royalties based on its sales of licensed products, with the majority of agreements requiring a minimum royalty payment.
We retain oversight and approvals of the design, quality control, advertising, marketing and distribution of licensed products to help maintain our brand and product quality standards. License agreements are for fixed terms of typically three to five years, and we also enter into shorter term collaboration agreements.
Lee ® collections include a uniquely styled range of jeans, pants, shirts, shorts and jackets for adults and children. The Lee ® brand delivers trend-forward styles with exceptional fit and comfort through innovative fabric solutions and advanced design technology.
The Lee ® brand delivers trend-forward styles with exceptional fit and comfort through innovative fabric solutions and advanced design technology.
We are now in Horizon 2, which is focused on driving brand growth and delivering long-term value to our stakeholders including our consumers, customers, shareholders, suppliers and the communities where we do business around the world.
We are focused on driving brand growth and delivering long-term value to our stakeholders including our consumers, customers, shareholders, suppliers and communities around the world. We believe the following four areas will catalyze profitable revenue growth in the future: • Enhance and Accelerate Our Core U.S.
With pride in our rich heritage and an eye toward ongoing business success, we continue to develop a high-performance culture that makes Kontoor an employer of choice in the apparel industry. We are dedicated to putting our purpose, mission and values at the forefront of everything we do.
With pride in our rich heritage and an eye toward ongoing business success, we continue to develop a high-performance culture that makes Kontoor an employer of choice in the apparel industry. We believe in developing a culture of innovation, collaboration and growth where team members have a strong sense of belonging that fuels their passion for winning.
We have two primary selling seasons, Spring/Summer and Fall/Winter, although some product lines are offered more frequently. In addition to our global design and product development functions, we operate an innovation center in Greensboro, North Carolina. Research for advanced product technology takes place in our material science lab.
We operate globally, designing and developing products that align with our brand positioning while meeting customer and consumer needs. Our primary selling seasons are Spring/Summer and Fall/Winter, although some product lines are available more frequently. In addition to our global design and product development teams, we have an innovation center in Greensboro, North Carolina.
Additionally, we expect to further leverage our global enterprise resource planning (“ERP”) system to deliver global cost savings, reduce complexity in our supply chain, create better inventory management and improve our speed in the market. • Highly Experienced Management Team and Board of Directors We have a highly experienced senior management team and Board of Directors that continuously demonstrates an unwavering commitment to our employees, our shareholders and our business.
Additionally, we leverage our global enterprise resource planning (“ERP”) system to reduce complexity in our supply chain, create better inventory management and improve our speed in the market.
This channel also includes revenues related to Rock & Republic ® products sold in the U.S. A portion of our U.S. Wholesale net revenue is attributable to digital sales from our wholesale partners’ websites, third-party e-commerce platforms such as Amazon, and other pure-play digital retailers.
In Canada and Mexico, our products are primarily marketed through mass merchants, department stores and specialty stores. A portion of our Non-U.S. Wholesale net revenue is attributable to digital sales from our wholesale partners’ websites, third-party e-commerce platforms, and other pure-play digital retailers. Additionally, our Non-U.S. Wholesale channel includes sales in partnership stores located across EMEA, APAC and South America.
Licensing net revenue was $37.1 million in 2023. Design, Product Development and Innovation The design, technical design, product development, sustainability and innovation teams work together to deliver our brands' product strategy, combining extensive experience and know-how to create a unique product combination of world-class value, quality and styling for our customers and consumers.
Design, Product Development and Innovation The design, technical design, product development, sustainability and innovation teams work closely together to implement our brands' product strategy. By leveraging their extensive experience and expertise, they create a unique product mix that provides exceptional value, quality and styling for our customers and consumers.
Our website and the information contained therein or connected thereto is not incorporated in this Annual Report on Form 10-K. 2 Kontoor Brands, Inc. 2023 Form 10-K Table of Contents Our Competitive Strengths • Iconic Brands With Significant Global Scale The Wrangler ® and Lee ® brands are steeped in rich heritage and authenticity, with 77 years and 135 years of history, respectively, and have an established global presence in the apparel market.
Our Competitive Strengths • Iconic Brands With Significant Global Scale The Wrangler ® and Lee ® brands are steeped in rich heritage and authenticity, with 78 years and 136 years of history, respectively, and have an established global presence in the apparel market across numerous categories and channels of distribution.
We responded with agility to shifting market conditions, continued to produce forward momentum and transitioned to our Horizon 2 strategy discussed below, focusing on cash flow, optionality and revenue and margin growth to drive long-term acceleration. Our Strategies Our management team continues to focus on the long-term strategic initiatives we introduced in 2019, when we became a standalone public company.
Despite the macroeconomic pressures faced by the Company in recent years, we have been resilient and agile in responding to shifting market conditions, and have continued to produce forward momentum by executing on our strategic vision discussed below, focusing on cash flow, optionality and revenue and margin growth to drive long-term acceleration.
Wholesale The U.S. Wholesale channel is our largest distribution channel and accounted for approximately 72% of our net revenues in 2023. Within this channel, our Wrangler ® and Lee ® branded products are marketed and sold by mass and mid-tier retailers, specialty stores including western specialty retail, department stores, retailer-owned and third-party e-commerce sites and through licensees.
Within this channel, our Wrangler ® and Lee ® branded products are marketed and sold by mass merchants, specialty stores including western specialty retail, department stores, online, including digital marketplaces, and through licensees. This channel also includes revenues related to Chic ® and Rock & Republic ® products sold in the U.S. A portion of our U.S.
We foster close and long-standing relationships with our wholesale customers, having partnered with each of our top three brick-and-mortar wholesale customers for over 30 years and with Amazon for over 15 years. Our rich global heritage across both the Wrangler ® and Lee ® brands also supports strong positions in growing markets, such as in the U.S.
Our rich global heritage across both the Wrangler ® and Lee ® brands also supports strong positions in growing markets, such as in the U.S. Western specialty channel and with leading retailers in Europe and China.
Moving forward, we will continue to focus our efforts on: (i) attracting critical talent that reflects our communities, consumers and customers, (ii) ensuring equitable access to advancement opportunities and (iii) fostering inclusion through creating an environment where employees feel welcomed, valued and heard. We consider health and safety core values in all our operations.
We are dedicated to putting our purpose, mission and values at the forefront of everything we do. Moving forward, we will continue to focus our efforts on: (i) attracting and retaining high-performing people who reflect our communities and consumers, (ii) providing career development and advancement opportunities and (iii) fostering belonging through an environment where employees feel welcomed, valued and heard.
We continue to diversify our assortment in both brands, including product extensions such as non-denim bottoms and female categories.
We continue to diversify our assortment in both brands, including product extensions such as non-denim bottoms and female categories, new licensed categories such as belts, small leather goods, headwear, socks, home décor, luggage, bags, eyewear and cold weather accessories and the launch of the Wrangler Bespoke collection and Lee X innovation platform.
These macroeconomic factors contributed to uncertain consumer spending patterns leading to retailer actions to tightly manage inventory levels, which impacted our results during 2023.
The macroeconomic factors discussed above, primarily interest rates and inflation, contributed to ongoing retailer actions to conservatively manage inventory levels, which impacted our results during 2024.
Macroeconomic Environment and Other Recent Developments Macroeconomic conditions, including inflation, elevated interest rates, recessionary concerns and fluctuating foreign currency exchange rates, as well as continuing global supply chain issues and uneven post-pandemic economic recovery in China, continue to adversely impact global economic conditions, as well as the Company's operations.
Macroeconomic Environment and Other Recent Developments Global macroeconomic conditions that continued to impact the Company during 2024 included ongoing elevated interest rates, moderating inflation, fluctuating foreign currency exchange rates, supply chain issues and inconsistent consumer demand. These factors continued to contribute to uncertain global economic conditions and consumer spending patterns, which impacted retailers' and the Company's operations.
Wholesale customers include Amazon, Boot Barn, Cavender's, Kohl’s, Target and Walmart. In addition, a small portion of sales in our U.S. Wholesale channel are from domestic licensing arrangements where we receive royalties based on a percentage of the licensed products’ net revenues. Most of the agreements provide for a minimum royalty requirement.
Canada is the largest international market for Wrangler ® branded products, while China is the largest international market for Lee ® branded products. In addition, we have revenues in our Non-U.S. Wholesale channel from international licensing arrangements where we receive royalties based on a percentage of the licensed products’ net revenues.
While we anticipate continued uncertainty related to the macroeconomic environment during 2024, we believe we are appropriately positioned to successfully manage through known operational challenges. We continue to closely monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand. Corporate Information Our principal executive offices are located at 400 N.
The Company has responded to ongoing macroeconomic conditions by controlling expenses, adjusting pricing and proactively managing our global supply chain. While we anticipate continued uncertainty related to the macroeconomic environment during 2025, including the potential impact of tariff increases on product costs, we believe we are appropriately positioned to successfully manage through operational challenges that may arise.
We sit at the center of cultural moments and cater broadly to customers through our global and regional licensed collaborations, such as Sandro, STAUD, Mini Rodini, Barbie, Buffalo Trace, ROARINGWILD and Daydreamer, among others, as well as becoming the official jeans of the Dallas Cowboys.
We sit at the center of cultural moments and cater broadly to customers through our global and regional licensed collaborations, such as Angel Chen, Basquiat, HEYDUDE, Hot Wheels, The Hundreds and STAUD, among others. We recently launched a collaboration with country music superstar and Grammy award-winner Lainey Wilson as part of a multi-year partnership.
Social Responsibility, Community Outreach and Sustainability We are a purpose-led organization committed to protecting the environment, sourcing products and materials from companies that share our values and operating with the highest standards of ethics. We believe these values are consistent with what our brands represent and are the right thing to do to enhance global welfare.
We are focused on advancing worker well-being, sourcing products and materials from companies that share our values and limiting our negative impacts on the environment while adhering to the highest ethical standards. These principles align with the essence of our brands and represent the right course of action.
The Nominating and Governance Committee reviews and evaluates the strategies, programs, policies and practices relating to environmental, social and governance issues and impacts to support the sustainable and responsible growth of our business. 8 Kontoor Brands, Inc 2023 Form 10-K Table of Contents At Kontoor, sustainability means the dynamic process of continual improvement for people, our product and the planet, enabling shared prosperity for all.
The Board of Directors promotes responsible corporate citizenship and oversees compliance with Kontoor’s standards. The Nominating and Governance Committee regularly reviews and evaluates the progress of sustainability, social and governance strategies, which fosters responsible growth. At Kontoor, sustainability represents a dynamic process of continual improvement aligned with our strategic pillars of People, Product, Planet and Prosperity.
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Additionally, the conflicts in the Ukraine and Middle East are causing disruption in the surrounding areas and greater uncertainty in the global economy. Inflationary pressures have moderated throughout 2023, but continued to impact us in most jurisdictions where we operate. Additionally, global interest rates increased in the first half of 2023 and remained elevated through the end of the year.
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Additionally, the U.S. government has recently enacted and proposed tariff increases on imports. These actions may result in reciprocal tariffs or other restrictive trade measures by foreign jurisdictions. These conditions are causing greater uncertainty in the global economy.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe market price of our common stock has fluctuated significantly, and may continue to fluctuate significantly, due to a number of factors, many of which are beyond our control, including: • Fluctuations in our quarterly or annual earnings results or those of other companies in our industry; • Failures of our operating results to meet the estimates of securities analysts or the expectations of our shareholders, or changes by securities analysts in their estimates of our future earnings; • Significant changes announced by our customers, suppliers or competitors; • Changes in market valuations or earnings of other companies in our industry; • Changes in laws or regulations which adversely affect our industry or us; • General economic, industry and stock market conditions, including inflation, rising interest rates and recessionary concerns; • Future significant sales of our common stock by our shareholders or the perception in the market of such sales; • Future issuances of our common stock by us; and • The other factors described in these “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Biggest changeThe market price of our common stock has fluctuated significantly, and may continue to fluctuate significantly, due to a number of factors, many of which are beyond our control, including: • Fluctuations in our quarterly or annual earnings results or those of other companies in our industry; • Failures of our operating results to meet the estimates of securities analysts or the expectations of our shareholders, or changes by securities analysts in their estimates of our future earnings; • Significant changes announced by our customers, suppliers or competitors; • Changes in market valuations or earnings of other companies in our industry; • Changes in laws or regulations which adversely affect our industry or us; • General economic, industry and stock market conditions, including inflation and elevated interest rates; • Future significant sales of our common stock by our shareholders or the perception in the market of such sales; • Future issuances of our common stock by us; and • The other factors described in these “Risk Factors” and elsewhere in this Annual Report on Form 10-K. 20 Kontoor Brands, Inc 2024 Form 10-K Table of Contents These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.
The U.S. government has instituted or proposed changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the U.S. and other countries where we conduct our business.
The U.S. government has instituted and proposed changes in trade policies that include the imposition of higher tariffs on imports into the U.S., the negotiation or termination of trade agreements, economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the U.S. and other countries where we conduct our business.
These events could also compound adverse economic conditions and impact consumer confidence and discretionary spending. As a result, the physical effects of climate change could have a long-term adverse impact on our business, results of operations, cash flows and financial condition.
These events could also compound economic conditions and impact consumer confidence and discretionary spending. As a result, the physical effects of climate change could have a long-term adverse impact on our business, results of operations, cash flows and financial condition.
Fluctuations in the price, availability and quality of fabrics such as denim, including cottons, blends, synthetics and wools, or other raw materials used by us in our manufactured products, or of purchased finished goods, could have a material adverse effect on our cost of goods sold or our ability to meet our customers’ demands.
Fluctuations in the price, availability and quality of fabrics such as denim, including cottons, blends, synthetics and wools, or other raw materials used by us in our manufactured products, or of purchased finished goods, could have a material adverse effect on our cost of goods sold and/or our ability to meet our customers’ demands.
Failure to compete effectively or to keep pace with rapidly changing consumer preferences, markets and product trends could have a material adverse effect on our results of operations, cash flows and financial condition. Moreover, there have been, and continue to be, significant shifts in the wholesale and retail (e-commerce and retail store) channels.
Failure to compete effectively or to keep pace with rapidly changing consumer preferences, markets and product trends could have a material adverse effect on our results of operations, cash flows and financial condition. Moreover, there have been, and continue to be, significant shifts in the wholesale and direct-to-consumer (e-commerce and retail store) channels.
On the other hand, if we underestimate demand for our products, our manufacturing facilities or third-party manufacturers may not be able to produce products to meet consumer requirements, and this could result in delays in the shipment of products and lost revenues, higher costs for our freight or expedited shipments, as well as damage to our reputation and relationships.
On the other hand, if we underestimate demand for our products, our manufacturing facilities or third-party manufacturers may not be able to produce products to meet consumer requirements, and this could result in delays in the shipment of products and lost revenues, higher costs for expedited shipments, as well as damage to our reputation and relationships.
Risks include, but are not limited to, (i) U.S. or international resellers purchasing merchandise and reselling it overseas outside of our control, (ii) failure of the systems that operate the stores and websites, and their related support systems, including computer viruses, theft of customer information, privacy concerns, telecommunication failures and electronic break-ins and similar disruptions, (iii) credit card fraud and (iv) risks related to our direct-to-consumer distribution centers and processes.
Risks include, but are not limited to, (i) U.S. or international resellers purchasing merchandise and reselling it overseas outside of our control, (ii) failure of the systems that operate the stores and websites, and their related support systems, including, but not limited to, computer viruses, theft of customer information, privacy concerns, telecommunication failures and electronic break-ins and similar disruptions, (iii) credit card and other payment fraud and (iv) risks related to our direct-to-consumer distribution centers and processes.
In addition, as a result of recent security breaches at a number of prominent retailers, the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become increasingly uncertain, rigorous and complex.
In addition, as a result of security breaches at a number of prominent retailers, the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become increasingly uncertain, rigorous and complex.
There is increasing concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe, an increase in the frequency, severity and duration of extreme weather conditions and natural disasters, and water scarcity and poor water quality.
There is significant concern that a gradual rise in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause substantial changes in weather patterns around the globe, an increase in the frequency, severity and duration of extreme weather conditions and natural disasters, and water scarcity and poor water quality.
The costs of compliance with, or the violation of, such laws and regulations by us or by independent suppliers who manufacture products for us could have a material adverse effect on our operations and cash flows, as well as on our reputation.
The costs of compliance with, or the violation of, such laws and regulations by us or by independent suppliers who manufacture products for us could have a material adverse effect on our operations, cash flows and financial condition, as well as on our reputation.
Such products may be available, in the short-term, from only one or a very limited number of sources. In 2023, approximately 49% of our raw materials were provided by our top three suppliers in North America. We have no long-term contracts with our suppliers or manufacturing sources, and we compete with other companies for raw materials, production and quota capacity.
Such products may be available, in the short-term, from only one or a very limited number of sources. In 2024, approximately 56% of our raw materials were provided by our top three suppliers in North America. We have no long-term contracts with our suppliers or manufacturing sources, and we compete with other companies for raw materials, production and quota capacity.
Any of the following could impact our ability to produce or deliver our products or our cost of producing or delivering products and, as a result, our profitability: • political or labor instability in countries where our facilities, contractors and suppliers are located; • changes in local economic conditions, including as a result of macroeconomic pressures or geopolitical events, in countries where our facilities, contractors and suppliers are located; • political or military conflict could cause a delay in the transportation of raw materials and products to us and an increase in transportation costs; • disruption at domestic and foreign ports of entry could cause delays in product availability and increase transportation times and costs; • heightened terrorism or security concerns could subject imported or exported goods to additional, more frequent or lengthier inspections, leading to delays in deliveries or impoundment of goods for extended periods; • decreased scrutiny by customs officials for counterfeit goods, leading to more counterfeit goods and reduced sales of our products, increased costs for our anti-counterfeiting measures and damage to the reputation of our brands; • disruptions at suppliers and manufacturing or distribution facilities caused by natural and man-made disasters; • epidemics or other public health crises have resulted and could in the future result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargo of our goods produced in infected areas; • imposition of regulations and quotas relating to imports and our ability to adjust timely to changes in trade regulations could limit our ability to produce products in cost-effective countries that have the required labor and expertise; • imposition of duties, taxes and other charges on imports; and • imposition or the repeal of laws that affect intellectual property rights.
Any of the following could impact our ability to produce or deliver our products or our cost of producing or delivering products and, as a result, our profitability: • political or labor instability in countries where our facilities, contractors and suppliers are located; • changes in local economic conditions, including as a result of macroeconomic pressures or geopolitical events, in countries where our facilities, contractors and suppliers are located; • imposition of tariffs, duties, taxes and other charges on imports; • political or military conflict could cause a delay in the transportation of raw materials and products to us and an increase in transportation costs; • disruption at domestic and foreign ports of entry or with shipping routes could cause delays in product availability and increase transportation times and costs; • heightened terrorism or security concerns could subject imported or exported goods to additional, more frequent or lengthier inspections, leading to delays in deliveries or impoundment of goods for extended periods; Kontoor Brands, Inc. 2024 Form 10-K 13 Table of Contents • decreased scrutiny by customs officials for counterfeit goods, leading to more counterfeit goods and reduced sales of our products, increased costs for our anti-counterfeiting measures and damage to the reputation of our brands; • disruptions at suppliers and manufacturing or distribution facilities caused by natural and man-made disasters; • epidemics or other public health crises have resulted and could in the future result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargo of our goods produced in infected areas; • imposition of regulations and quotas relating to imports and our ability to adjust timely to changes in trade regulations could limit our ability to produce products in cost-effective countries that have the required labor and expertise; and • imposition or the repeal of laws that affect intellectual property rights.
INFORMATION TECHNOLOGY RISKS We rely significantly on information technology. Any inadequacy, interruption, integration failure or security failure of this technology could harm our ability to effectively operate our business or report our financial results accurately or timely. Our ability to effectively manage and operate our business and report our financial results accurately and timely depends significantly on information technology systems.
Any inadequacy, interruption, integration failure or security failure of this technology could harm our ability to effectively operate our business or report our financial results accurately or timely. Our ability to effectively manage and operate our business and report our financial results accurately and timely depends significantly on information technology systems.
Any disruption in the capital markets, including as a result of rising interest rates and other macroeconomic pressures and geopolitical events like the conflicts in the Ukraine and Middle East, could limit the availability of funds or the ability or willingness of financial institutions or investors to extend capital in the future.
Any disruption in the capital markets, including as a result of macroeconomic pressures and/or geopolitical events like the conflicts in Ukraine and the Middle East, could limit the availability of funds or the ability or willingness of financial institutions or investors to extend capital in the future.
During 2023, approximately 67% of our units were purchased from independent manufacturers primarily located in Asia, with substantially all of the remainder produced by company-owned and -operated manufacturing facilities located in Mexico and Nicaragua.
During 2024, approximately 70% of our units were purchased from independent manufacturers primarily located in Asia, with substantially all of the remainder produced by company-owned and -operated manufacturing facilities located in Mexico.
The success of our business depends on consumer spending on apparel, and there are a number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer income, consumer discretionary spending patterns, interest rates, inflation, recessionary concerns, the uneven economic recovery following the COVID-19 pandemic in China, consumer credit availability and consumer debt levels, fuel and other energy costs, unemployment, stock market performance, weather conditions and tax rates in the international, national, regional and local markets where our products are sold.
The success of our business depends on consumer spending on apparel, and there are a number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer income, consumer discretionary spending patterns, interest rates, inflation, recessionary concerns, consumer credit availability and consumer debt levels, tariffs and import/export regulations, fuel and other energy costs, unemployment, stock market performance, weather conditions and tax rates in the international, national, regional and local markets where our products are sold.
These include provisions: • Providing that the removal of our directors with or without cause must be approved by the holders of at least 80% of the voting power; • Providing the right to our Board of Directors to issue one or more classes or series of preferred stock without shareholder approval; • Authorizing a large number of shares of stock that are not yet issued, which would allow our Board of Directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us; • Prohibiting shareholders from calling special meetings of shareholders and requiring unanimous shareholder action by written consent; • Establishing advance notice and other requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by shareholders at our annual shareholder meetings; and • Requiring the affirmative vote of the holders of at least 80% of the voting power to approve certain business combinations.
These include provisions: • Providing the right to our Board of Directors to issue one or more classes or series of preferred stock without shareholder approval; • Authorizing a large number of shares of stock that are not yet issued, which would allow our Board of Directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us; • Prohibiting shareholders from calling special meetings of shareholders and requiring unanimous shareholder action by written consent; and • Establishing advance notice and other requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by shareholders at our annual shareholder meetings.
Although a charge would be non-cash, a future impairment charge for goodwill or intangible assets could have a material effect on our results of operations or financial condition. 18 Kontoor Brands, Inc 2023 Form 10-K Table of Contents Our ability to obtain short-term or long-term financing on favorable terms, if needed, could be adversely affected by geopolitical events and volatility in the capital markets.
Although a charge would be non-cash, a future impairment charge for goodwill or intangible assets could have a material effect on our results of operations or financial condition. Our ability to obtain short-term or long-term financing on favorable terms, if needed, could be adversely affected by geopolitical events and volatility in the capital markets.
For example, if we miss the delivery date requirements of our customers, they may cancel orders, refuse to accept deliveries, impose non-compliance charges, demand reduced prices, or reduce future orders, any of which could harm our sales and margins.
For example, if we miss the delivery date requirements of our customers, they may cancel orders, refuse to accept deliveries, impose non-compliance charges, demand reduced prices, or reduce future orders, any of which could harm our results of operations, cash flows and financial condition.
The apparel industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, rising commodity and conversion costs, pressure from retailers to reduce the costs of products, the impact of inflation, rising interest rates and recessionary concerns, changes in consumer demand and shifts to online shopping and purchasing.
The apparel industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, rising commodity and conversion costs, pressure from retailers to reduce the costs of products, the impact of inflation, elevated interest rates, tariffs, changes in consumer demand and continued or accelerated shifting to online shopping and purchasing.
In addition, brand value is based in part on consumer perceptions on a variety of qualities, including merchandise quality and corporate integrity. Negative claims or publicity regarding us, our brands or our products could adversely affect our reputation and sales regardless of whether such claims are accurate.
In addition, brand value is based in part on consumer perceptions on a variety of qualities, including merchandise quality and corporate integrity. Negative claims or publicity regarding us, our brands or our products could adversely affect our reputation and sales Kontoor Brands, Inc. 2024 Form 10-K 11 Table of Contents regardless of whether such claims are accurate.
On November 18, 2021, we entered into an indenture (the “Indenture”) pursuant to which we issued and sold $400.0 million aggregate principal amount of unsecured senior notes bearing interest at a rate of 4.125% per annum (the “Notes”) and concurrently entered into an amended and restated credit agreement (the “Credit Agreement”), which provides for (i) a five-year $400.0 million term loan A facility (“Term Loan A”) and (ii) a five-year $500.0 million revolving credit facility (the “Revolving Credit Facility”) (collectively, the “Credit Facilities”), with the lenders and agents party thereto.
On November 18, 2021, we entered into an indenture (the “Indenture”) pursuant to which we issued $400.0 million of unsecured senior notes due 2029, bearing interest at a rate of 4.125% per annum and concurrently entered into an amended and restated credit agreement (the “Credit Agreement”), which provides for (i) a five-year $400.0 million term loan A facility and (ii) a five-year $500.0 million revolving credit facility, with the lenders and agents party thereto.
Our ability to compete within the apparel industry depends on our ability to: • anticipate and respond to changing consumer preferences and product trends in a timely manner; • develop attractive, innovative and high-quality products that meet consumer needs; • maintain strong brand recognition; • price products appropriately; • provide best-in-class marketing support and intelligence; • ensure product availability and optimize supply chain efficiencies; • adapt to a more digitally driven consumer landscape; • produce or procure quality products on a consistent basis; and • obtain sufficient retail store space and effectively present our products at retail.
Our ability to compete within the apparel industry depends on our ability to: • anticipate and respond to changing consumer preferences and product trends in a timely manner; • develop attractive, innovative and high-quality products that meet consumer needs; • maintain strong brand recognition; • price products appropriately; • provide best-in-class marketing support and intelligence; • ensure product availability and optimize supply chain efficiencies; • adapt to changes in technology, including successful utilization of data analytics, artificial intelligence and machine learning; • produce or procure quality products on a consistent basis; and • obtain sufficient retail store space and effectively present our products at retail.
Kontoor Brands, Inc. 2023 Form 10-K 9 Table of Contents The current global economic environment is unpredictable, and adverse economic trends or other factors could negatively impact the level of consumer spending, which could have a material adverse impact on us. A significant portion of our revenues and gross profit is derived from a small number of large customers.
The current global economic environment is unpredictable, and adverse economic trends or other factors could negatively impact the level of consumer spending, which could have a material adverse impact on us. A significant portion of our revenues and gross profit is derived from a small number of large customers.
Our larger customers generally have the scale to develop supply chains that enable them to change their buying patterns, or develop and market their own private label and other economy brands that compete with some of our products.
Our larger customers generally have the scale to develop supply chains that enable them to change their buying patterns, or develop and market their own private label and other Kontoor Brands, Inc. 2024 Form 10-K 9 Table of Contents economy brands that compete with some of our products.
The misuse of a 12 Kontoor Brands, Inc 2023 Form 10-K Table of Contents brand by a licensee, including through the marketing of products under one of our brand names that do not meet our quality standards, could have a material adverse effect on that brand and on us. Our revenues and cash requirements are affected by seasonality.
The misuse of a brand by a licensee, including through the marketing of products under one of our brand names that do not meet our quality standards, could have a material adverse effect on that brand and on us. Our revenues and cash requirements are affected by seasonality.
Our trademarks, trade names, patents and other intellectual property rights are important to our success and our competitive position. We are susceptible to others copying our products and infringing, misappropriating or otherwise violating our intellectual property rights, especially with the shift in product mix to higher-priced brands and innovative new products in recent years.
We are susceptible to others copying our products and infringing, misappropriating or otherwise violating our intellectual property rights, especially with the shift in product mix to higher-priced brands and innovative new products in recent years.
If we, our suppliers or our contract manufacturers are required to comply with these laws and regulations, or if we choose to take voluntary steps to reduce or mitigate our impact on climate change, we may experience transition risks such as increases in energy, production, transportation and raw material costs, capital expenditures or insurance premiums and deductibles, which could adversely impact our operations.
Compliance with these laws and regulations, as well as voluntary steps to reduce or mitigate our impact on climate change, may subject us, our suppliers or our contract manufacturers to transition risks such as increases in energy, production, transportation and raw material costs, capital expenditures or insurance premiums and deductibles, which could adversely impact our operations.
Cyber-attacks are increasingly sophisticated, and if unauthorized parties gain access to our networks or databases, or those of our third-party service providers, they may be able to steal, access, publish, use, delete or modify confidential and sensitive information, including credit card information and personal information, that we have obligations to protect.
Cyber-attacks, including phishing and other forms of social engineering, denial-of-service attacks and the deployment of ransomware and other malware, are increasingly sophisticated and may utilize artificial intelligence, and if unauthorized parties gain access to our networks or databases, or those of our third-party service providers, they may be able to steal, access, publish, use, delete or modify confidential and sensitive information, including credit card information and personal information, that we have obligations to protect.
Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, cash flows and financial condition, as well as require additional resources to rebuild our reputation. We may be unable to protect, enforce or defend our trademarks and other intellectual property rights.
Damage to our reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on our results of operations, cash flows and financial condition, as well as require additional resources to rebuild our reputation.
Kontoor Brands, Inc. 2023 Form 10-K 15 Table of Contents Tariffs and other changes in U.S. trade policy have in the past and could continue to trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing retaliatory measures on certain U.S. goods.
Tariffs and other changes in U.S. trade policy have in the past and could continue to trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing retaliatory measures on certain U.S. goods.
Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand for our products, and as a result, could have a material adverse effect on our results of operations, cash flows and financial condition. Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business.
Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand for our products, and as a result, could have a material adverse effect on our results of operations, cash flows and financial condition. Our operations and earnings may be affected by legal, regulatory, political and economic risks.
Kontoor Brands, Inc. 2023 Form 10-K 13 Table of Contents If we encounter problems with our distribution system, our ability to deliver our products to the market could be adversely affected. We rely on owned or independently-operated distribution facilities to warehouse and ship product to our customers.
If we encounter problems with our distribution system, our ability to deliver our products to the market could be adversely affected. We rely on owned or independently-operated distribution facilities to warehouse and ship product to our customers.
Any of the above-listed factors could have a material adverse effect on our results of operations, cash flows and financial condition. We may also incur substantial additional indebtedness in the future.
Any of the above-listed factors could have a material adverse effect on our results of operations, cash flows and financial condition. We may also incur substantial additional indebtedness in the future. RISKS RELATING TO OUR COMMON STOCK The price of our common stock has fluctuated significantly and may continue to fluctuate significantly.
We may be adversely affected by unseasonal or severe weather conditions. Our business may be adversely affected by unseasonal or severe weather conditions. Periods of unseasonably warm weather in the fall or winter, or periods of unseasonably cool and wet weather in the spring or summer, can negatively impact retail traffic and consumer spending.
Our business may be adversely affected by unseasonal or severe weather conditions. Periods of unseasonably warm weather in the fall or winter, or periods of unseasonably cool and wet weather in the spring or summer, can negatively impact retail traffic and consumer spending. In addition, severe weather events such as snowstorms or hurricanes typically lead to temporarily reduced retail traffic.
We seek to grow organically and potentially, in the future, through acquisitions. We seek to grow by expanding our share with winning customers; stretching brands to new regions, channels, and categories; managing costs; leveraging our supply chain across the Company; and expanding our direct-to-consumer business with emphasis on our e-commerce business.
We seek to grow by expanding our share with winning customers; stretching our brands to new regions, channels, and categories; managing costs; leveraging our supply chain across the Company; and expanding our direct-to-consumer business with emphasis on our e-commerce business. However, we may not be able to grow our existing businesses.
If these developments occur, our inability to shift sales to other customers or to collect on our trade accounts receivable could have a material adverse effect on our results of operations, cash flows and financial condition. We may not succeed in our business strategy. One of our key strategic objectives is growth.
If these developments occur, our inability to shift sales to other customers or to collect on our trade accounts receivable could have a material adverse effect on our results of operations, cash flows and financial condition.
We have debt obligations, including our senior notes, that could restrict our business and adversely impact our results of operations, cash flows or financial condition.
Kontoor Brands, Inc. 2024 Form 10-K 19 Table of Contents We have debt obligations, including our senior notes, that could restrict our business and adversely impact our results of operations, cash flows or financial condition.
Macroeconomic conditions, including inflation, elevated interest rates, recessionary concerns and fluctuating foreign currency exchange rates, as well as continuing global supply chain issues and uneven post-pandemic economic recovery in China, continue to adversely impact global economic conditions and have had, and may continue to have, a negative impact on our business, results of operations, cash flows and financial condition.
Global macroeconomic conditions, including ongoing elevated interest rates, moderating inflation, fluctuating foreign currency exchange rates, supply chain issues and inconsistent consumer demand, continue to adversely impact global economic conditions and have had, and may continue to have, a negative impact on our business, results of operations, cash flows and financial condition.
Our revenues and profits depend on the level of consumer spending for apparel, which is sensitive to global economic conditions and other factors. A decline in consumer spending could have a material adverse effect on us.
Continuing or worsening inflation and/or supply chain disruptions may have a material adverse impact on our results of operations, cash flows and/or financial condition. Our revenues and profits depend on the level of consumer spending for apparel, which is sensitive to global economic conditions and other factors. A decline in consumer spending could have a material adverse effect on us.
Any delays, interruption or increased costs in the supply of raw materials or manufacture of our products could have a material adverse effect on our ability to meet customer demand for our products and could result in lower net revenue and income from operations both in the short and long term.
Any delays, interruption or increased costs in the supply of raw materials or manufacture of our products could have a material adverse effect on our ability to meet customer demand for our products and could result in lower net revenue and income from operations both in the short and long term. 14 Kontoor Brands, Inc 2024 Form 10-K Table of Contents We may be adversely affected by unseasonal or severe weather conditions.
The failure of these systems to operate effectively, improper design or configuration, problems with transitioning to upgraded or replacement systems, difficulty in integrating new systems or systems of acquired businesses or a breach in security of these systems could adversely impact the operations of our business, including management of inventory, ordering and replenishment of products, manufacturing and distribution of products, e-commerce operations, retail business credit card transaction authorization and processing, tracking and recording of accounting transactions, corporate email communications and our interaction with the public on social media. 14 Kontoor Brands, Inc 2023 Form 10-K Table of Contents We are subject to data security and privacy risks that could negatively affect our business operations, results of operations or reputation.
The failure of these systems to operate effectively, improper design or configuration, problems with transitioning to upgraded or replacement systems, our inability to keep up with rapid technological change (including the successful utilization of data analytics, artificial intelligence and machine learning), difficulty in integrating new systems or systems of acquired businesses or a breach in security of these systems could adversely impact the operations of our business, including management of inventory, ordering and replenishment of products, manufacturing and distribution of products, e-commerce operations, retail business credit card transaction authorization and processing, tracking and recording of accounting transactions, corporate email communications and our interaction with the public on social media.
In addition, severe weather events such as snowstorms or hurricanes typically lead to temporarily reduced retail traffic. Physical risks from climate change may result in these weather events occurring more often and more acutely. Any of these conditions could result in negative point-of-sale trends for our merchandise and reduced replenishment shipments to our wholesale customers.
Physical risks from climate change may result in these weather events occurring more often and more acutely. Any of these conditions could result in negative point-of-sale trends for our merchandise and reduced replenishment shipments to our wholesale customers. INFORMATION TECHNOLOGY RISKS We rely significantly on information technology.
While enactment of any such change is not certain, if such changes were adopted, our costs could increase, which would reduce our earnings. Changes to trade policy, including tariff and import/export regulations, may have a material adverse effect on our results of operations, cash flows and financial condition.
While enactment of any such change is not certain, if such changes were adopted, our costs could increase, which could have a material adverse effect on our results of operations, cash flows and financial condition. Climate change, and related legislative and regulatory responses to climate change, may adversely impact our business.
The forum selection clause in our articles of incorporation may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us and limit the market price of our common stock. We cannot assure shareholders that our Board of Directors will declare dividends or that we will repurchase shares in the foreseeable future.
The forum selection clause in our articles of incorporation may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us and limit the market price of our common stock.
We compete with numerous apparel brands and manufacturers. Competition is generally based upon brand name recognition, price, design, product quality, selection, service and purchasing convenience. Some of our competitors are larger and have more resources than us in certain product categories and regions. In addition, we compete directly with the private label brands of our wholesale customers.
Some of our competitors are larger and have more resources than us in certain product categories and regions. In addition, we compete directly with the private label brands of our wholesale customers.
While many of the global supply chain disruptions seen in 2022 were less prevalent during 2023, we and our third-party manufacturing partners and other vendors have experienced, and may continue to experience, supply chain disruption and shipping disruptions.
We and our third-party manufacturing partners and other vendors have experienced, and may continue to experience, supply chain disruption and shipping disruptions.
The GloBE rules implement a new global minimum tax of 15% on all large multinational corporations with revenues above certain thresholds. Under Pillar Two, adopting countries have the right to impose "top-up taxes" on low-taxed foreign income earned by multinational companies to which they have a connection, up to the agreed 15%.
Under Pillar Two, adopting countries have the right to impose “top-up taxes” on low-taxed foreign income earned by multinational companies to which they have a connection, up to the agreed 15%. These new global minimum tax rules began taking place in 2024.
This analysis requires a significant amount of judgment and estimation and is often based on various assumptions about the future actions of the local tax authorities. These determinations are the subject of periodic U.S. and international tax audits. Although we accrue for uncertain tax positions, our accrual may be insufficient to satisfy unfavorable findings.
These determinations are the subject of periodic U.S. and international tax audits. Although we accrue for uncertain tax positions, our accrual may be insufficient to satisfy unfavorable findings.
Any such violation, or allegations of such violation, could result in sanctions or other penalties and have an adverse effect on our business, reputation and operating results.
Any such violation, or allegations of such violation, could result in sanctions or other penalties and have an adverse effect on our business, reputation and operating results. FINANCIAL RISKS Fluctuations in wage rates and the price, availability and quality of raw materials, including commodity costs and finished goods, could increase costs.
Sales to our ten largest customers accounted for 62% of total net revenues in 2023, and our top customer, Walmart, accounted for 36% of our total net revenues in both 2023 and 2022, and 34% of our total net revenues in 2021.
Sales to our ten largest customers accounted for 62% of total net revenues in 2024, and our top customer, Walmart, accounted for 36% of our total net revenues in 2024, 2023 and 2022. We expect that these customers will continue to represent a significant portion of our net sales in the future.
We expect that these customers will continue to represent a significant portion of our net sales in the future. Sales to our wholesale customers are generally on a purchase order basis and not subject to long-term agreements.
Sales to our wholesale customers are generally on a purchase order basis and not subject to long-term agreements.
Unfavorable audit findings and tax rulings may result in payment of taxes, fines and penalties for prior periods and higher tax rates in future periods, which may have a material adverse effect on our results of operations, cash flows or financial condition. 16 Kontoor Brands, Inc 2023 Form 10-K Table of Contents Our business is subject to national, state and local laws and regulations for environmental, consumer protection, employment, data protection, privacy, safety and other matters.
Unfavorable audit findings and tax rulings may result in payment of taxes, fines and penalties for prior periods and higher tax rates in future periods, which may have a material adverse effect on our results of operations, cash flows or financial condition.
In the normal course of business, we collect, store, use, process, disclose and transmit (“Process”) certain sensitive, personal, regulated and/or confidential employee and customer information, including credit card information, over public networks. There is a significant concern by consumers and employees over the security of personal information, including with respect to identity theft and user privacy.
We are subject to data security and privacy risks that could negatively affect our business operations, results of operations or reputation. In the normal course of business, we collect, store, use, process, disclose and transmit (“Process”) certain sensitive, personal, regulated and/or confidential employee and customer information, including credit card and other payment information, over public networks.
These risks could have a material adverse effect on our brand image as well as our results of operations, cash flows and financial condition. 10 Kontoor Brands, Inc 2023 Form 10-K Table of Contents The apparel industry is highly competitive, and our success depends on our ability to gauge consumer preferences and product trends, and to respond to constantly changing markets.
These risks could have a material adverse effect on our brand image as well as our results of operations, cash flows and financial condition. 10 Kontoor Brands, Inc 2024 Form 10-K Table of Contents The retail industry has experienced financial difficulty that could adversely affect our business.
However, these provisions apply even if a takeover offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our Board of Directors determines is not in our and our shareholders’ best interests. 20 Kontoor Brands, Inc 2023 Form 10-K Table of Contents Our articles of incorporation designate North Carolina as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us and limit the market price of our common stock.
Our articles of incorporation designate North Carolina as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us and limit the market price of our common stock.
Failure to implement our strategic objectives may have a material adverse effect on our business. We are subject to the risk that our licensees may not generate expected sales or maintain the value of our brands.
This could have a material adverse effect on our results of operations, cash flows and financial condition. 12 Kontoor Brands, Inc 2024 Form 10-K Table of Contents We are subject to the risk that our licensees may not generate expected sales or maintain the value of our brands.
Changes in currency exchange rates affect the U.S. dollar value of the foreign currency-denominated amounts at which our international businesses purchase products, incur costs or sell products. In addition, for our U.S.-based businesses, the majority of products are sourced from independent contractors or our manufacturing facilities located in foreign countries.
Approximately 20% of our total net revenues in 2024 are derived from markets outside the U.S. Most of our international businesses operate in functional currencies other than the U.S. dollar. Changes in currency exchange rates affect the U.S. dollar value of the foreign currency-denominated amounts at which our international businesses purchase products, incur costs or sell products.
In accordance with our operating practices, we hedge a significant portion of our foreign currency transaction exposures arising in the ordinary course of business to reduce risks in our cash flows and earnings. Our hedging strategy may not be effective in reducing all risks, and no hedging strategy can completely insulate us from foreign exchange risk.
Changes in foreign currency exchange rates could have an adverse impact on our results of operations, cash flows and financial condition. In accordance with our operating practices, we hedge a significant portion of our foreign currency transaction exposures arising in the ordinary course of business to reduce risks in our cash flows and earnings.
In the future, we may not be able to offset cost increases with other cost reductions or efficiencies or pass higher costs on to our customers. This could have a material adverse effect on our results of operations, liquidity and financial condition. Our business is exposed to the risks of foreign currency exchange rate fluctuations.
This could have a material adverse effect on our results of operations, liquidity and financial condition. 18 Kontoor Brands, Inc 2024 Form 10-K Table of Contents Our business is exposed to the risks of foreign currency exchange rate fluctuations. Our hedging strategies may not be effective in mitigating those risks.
We anticipate continued uncertainty related to the macroeconomic environment during 2024 and we continue to closely monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand. Continuing or worsening inflation, recessionary concerns and/or supply chain disruptions may have a material adverse impact on our results of operations, cash flows and/or financial condition.
We anticipate continued uncertainty related to the macroeconomic environment during 2025, including the impact of future tariff increases, and we continue to closely monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand.
As a result, the costs of these products are affected by changes in the value of the relevant currencies. Furthermore, much of our licensing net revenue is derived from sales in foreign currencies. Changes in foreign currency exchange rates could have an adverse impact on our results of operations, cash flows and financial condition.
In addition, for our U.S.-based businesses, the majority of products are sourced from independent contractors or our manufacturing facilities located in foreign countries. As a result, the costs of these products are affected by changes in the value of the relevant currencies. Furthermore, much of our licensing net revenue is derived from sales in foreign currencies.
The continued optimization and change management related to the ERP software system may prove to be more difficult, costly or time-consuming than expected, and it is possible that the system will not yield the benefits anticipated.
The implementation of Project Jeanius may prove to be more difficult, costly or time consuming than expected, and it is possible that the initiative will not yield the gross profit improvement and selling, general and administrative expense savings in the amounts or on the timeline originally anticipated.
The Organisation for Economic Co-operation and Development ("OECD") in a joint initiative with G20, has developed a two-pillar framework on Base Erosion and Profit Shifting ("BEPS"). Pillar One contains revised profit allocation and nexus rules while Pillar Two provides proposed global anti-base erosion ("GloBE") rules.
Any changes in tax laws in one or more of these jurisdictions could adversely impact our business and financial results. The Organisation for Economic Co-operation and Development (“OECD”) in a joint initiative with G20, has developed a two-pillar framework on Base Erosion and Profit Shifting (“BEPS”).
Further, our use of derivative financial instruments may expose us to counterparty risks.
Our hedging strategy may not be effective in reducing all risks, and no hedging strategy can completely insulate us from foreign exchange risk. Further, our use of derivative financial instruments may expose us to counterparty risks.
These new global minimum tax rules are expected to take place beginning in 2024. The Company will continue to monitor the developing laws. We may have additional tax liabilities. As a global company, we determine our income tax liability in various tax jurisdictions based on an analysis and interpretation of local tax laws and regulations.
As a global company, we determine our income tax liability in various tax jurisdictions based on an analysis and interpretation of local tax laws and regulations. This analysis requires a significant amount of judgment and estimation and is often based on various assumptions about the future actions of the local tax authorities.
Our failure to successfully respond to these risks might adversely affect sales in our e-commerce business, as well as damage our reputation and brands. Kontoor Brands, Inc. 2023 Form 10-K 11 Table of Contents The retail industry has experienced financial difficulty that could adversely affect our business.
Our failure to successfully respond to these risks might adversely affect sales in our e-commerce business, as well as damage our reputation and brands. We may not succeed in our business strategy. One of our key strategic objectives is growth. We seek to grow organically and through acquisitions.
Additionally, global interest rates increased in the first half of 2023 and remained elevated through the end of the year. These macroeconomic factors contributed to uncertain consumer spe nding patterns leading to retailer actions to tightly manage inventory levels, which impacted our results during 2023.
For instance, the macroeconomic factors discussed above, primarily interest rates and inflation, contributed to ongoing retailer actions to conservatively manage inventory levels, which impacted our results during 2024.
Removed
Additionally, the conflicts in the Ukraine and Middle East are causing disruption in the surrounding areas, including key trade routes, and greater uncertainty in the global economy. For instance, although inflationary pressures moderated in 2023, they continued to impact us in most jurisdictions where we operate.
Added
In addition, the U.S. government recently announced tariffs on products manufactured in several jurisdictions, including China, Mexico and Canada, and has made announcements regarding the potential imposition of tariffs on other jurisdictions.
Removed
Further, inflation in product and input costs, such as cotton and labor, which began in 2022 and moderated in 2023, continued to impact our 2023 financial results as we sold through the higher cost products.
Added
While certain of the announced tariffs have been delayed, the U.S. government may in the future pause, reimpose or increase tariffs, and countries subject to such tariffs have and in the future may impose reciprocal tariffs or other restrictive trade measures in response. These conditions are causing greater uncertainty in the global economy.
Removed
Finally, sales and operations in APAC, particularly China, continue to be impacted by uncertainty in the broader economic conditions and the resulting impact on consumer behavior in the post-pandemic environment.
Added
Additionally, our global supply chain was affected by ongoing disruptions to key trade routes such as the Red Sea and Panama Canal, political unrest in Bangladesh and port strikes on the East and Gulf Coasts of the U.S.
Removed
However, we may not be able to grow our existing businesses.
Added
We may have difficulty in completing the acquisition of Helly Hansen, in successfully integrating it and/or in achieving the expected growth, cost savings and/or synergies from such acquisition. We recently announced our intent to acquire Helly Hansen, the global outdoor and workwear brand.
Removed
We recently implemented an ERP software system, and challenges with ongoing optimization and change management may impact our business and operations. We recently implemented a company-wide ERP software system and the related infrastructure to support future growth and to integrate our processes.
Added
Even though we have executed a definitive agreement for the acquisition, there can be no assurance that we will be able to consummate the transaction. In addition, even if we complete the acquisition, we may not be able to successfully address inherent risks in a timely manner, or at all.
Removed
Any disruptions, delays or deficiencies related to our new ERP software system could materially impact our operations and adversely affect our ability to process orders, manage our inventory, ship products, provide customer support, fulfill contractual obligations or otherwise operate our business. LEGAL, COMPLIANCE, AND SUSTAINABILITY RISKS Our operations and earnings may be affected by legal, regulatory, political and economic risks.
Added
These inherent risks include, among other things: failure to achieve all or any expected growth, cost savings, synergies or other anticipated benefits of the acquisition; failure to successfully integrate the purchased operations and maintain uniform standard controls, policies and procedures; substantial unanticipated integration costs; loss of key employees, including those of the acquired business; diversion of management’s attention from other business concerns; failure to retain the customers of the acquired business; additional debt and the assumption of known and potentially unknown liabilities; a potential write-off of goodwill, customer lists, other intangibles; and amortization of expenses.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company’s Chief Executive Officer and Chief Financial Officer each hold undergraduate and graduate degrees in their respective fields, and each have over 10 years of experience managing risks at the Company and at similar companies, including risks arising from cybersecurity threats. 22 Kontoor Brands, Inc 2023 Form 10-K Table of Contents Notwithstanding any of these measures, our systems, networks, products and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows.
Biggest changeNotwithstanding any of these measures, our systems, networks, products and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows. We have experienced, and will continue to experience, cyber incidents in the normal course of our business.
Through ongoing communications with these teams, the CISO monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and reports such threats and incidents to the Audit Committee when appropriate.
Through ongoing communications with these teams, the CISO monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and reports such threats and incidents to the Audit Committee and the Board of Directors when appropriate.
In the event that the Company experiences a cybersecurity incident it will take steps to contain, assess and remediate the incident. • Technical Safeguards The Company deploys technical safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence. • Incident Response and Recovery Planning The Company has established and maintains comprehensive incident response and recovery plans that fully address the Company’s response to a cybersecurity incident, and such plans are tested and evaluated on a regular basis. • Third-Party Risk Management The Company maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other external users of the Company’s systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems. • Education and Awareness The Company provides regular, mandatory training for personnel regarding cybersecurity threats as a means to equip the Company’s personnel with effective tools to address cybersecurity threats, and to communicate the Company’s evolving information security policies, standards, processes and practices.
In the event the Company experiences a cybersecurity incident, it will take steps to contain, assess and remediate the incident. • Technical Safeguards The Company deploys technical safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence. • Incident Response and Recovery Planning The Company has established and maintains comprehensive incident response and recovery plans that fully address the Company’s response to a cybersecurity incident, and such plans are tested and evaluated on a regular basis. 22 Kontoor Brands, Inc 2024 Form 10-K Table of Contents • Third-Party Risk Management The Company maintains a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other external users of the Company’s systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems. • Education and Awareness The Company provides regular, mandatory training for personnel regarding cybersecurity threats as a means to equip the Company’s personnel with effective tools to address cybersecurity threats, and to communicate the Company’s evolving information security policies, standards, processes and practices.
The CISO also has attained the professional certification of Certified Information Systems Security Professional (CISSP). The CIO holds an undergraduate degree in business and has served in various roles in information technology for over 30 years, including serving as either the Chief Technology Officer or Chief Information Officer of four public companies.
The CIO holds an undergraduate degree in business and has served in various roles in information technology for over 30 years, including serving as either the Chief Technology Officer or Chief Information Officer of four public companies.
The CISO has served in various roles in information technology and information security for over 25 years, including serving as the Chief Information Security Officer of two large international companies. The CISO holds an undergraduate degree in business and is pursuing a master's degree in business.
The CISO has served in various roles in information technology and information security for over 25 years, including serving as the Chief Information Security Officer of two large international companies. The CISO holds an undergraduate degree in business and a master's degree in business administration. The CISO also has attained the professional certification of Certified Information Systems Security Professional (CISSP).
Risk Management and Strategy As one of the critical elements of the Company’s overall ERM approach, the Company’s cybersecurity program is focused on the following key areas: • Governance As discussed in more detail under the heading “Governance,” The Board of Directors' oversight of cybersecurity risk management is led by the Audit Committee of the Board of Directors (the “Audit Committee”), which interacts quarterly with the Company’s ERM function, the Company’s Chief Information Security Officer (“CISO”), other members of management and relevant management committees and councils.
Risk Management and Strategy As one of the critical elements of the Company’s overall ERM approach, the Company’s cybersecurity program is focused on the following key areas: • Governance As discussed in more detail below under the heading “Governance,” the Board of Directors' oversight of cybersecurity risk management is led by the Audit Committee of the Board of Directors (the “Audit Committee”), which interacts quarterly with the Company’s ERM function, the Company’s Chief Information Security Officer (“CISO”), other members of management and relevant management committees and councils. • Collaborative Approach The Company has implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
Removed
Kontoor Brands, Inc. 2023 Form 10-K 21 Table of Contents • Collaborative Approach The Company has implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
Added
The Company’s Chief Executive Officer and Chief Financial Officer each hold undergraduate and graduate degrees in their respective fields, and each have over 10 years of experience managing risks at the Company and at similar companies, including risks arising from cybersecurity threats.
Removed
We have experienced, and will continue to experience, cyber incidents in the normal course of our business.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table presents our principal properties as of December 30, 2023: Location Approximate Square Feet Use Owned or Leased Greensboro, North Carolina 140,000 Global Headquarters Owned Greensboro, North Carolina 47,000 Office Leased Antwerp, Belgium 11,000 Office Leased Geneva, Switzerland 19,000 Office Leased Shanghai, China 16,000 Office Leased Mexico City, Mexico 13,000 Office Leased Dhaka, Bangladesh 10,500 Office and Technical Service Center Leased Hong Kong, China 44,000 Office and Sourcing Hub Leased Panama City, Panama 5,000 Office and Sourcing Hub Leased Foshan, China 48,000 Technical Service Center Leased Greensboro, North Carolina 173,000 Technical Service and Innovation Center Owned Mocksville, North Carolina 503,000 Distribution Center Owned Hackleburg, Alabama 443,000 Distribution Center Owned Seminole, Oklahoma 394,000 Distribution Center Owned El Paso, Texas 385,000 Distribution Center Leased Luray, Virginia 435,000 Distribution Center Owned Mexico City, Mexico 162,000 Distribution Center Leased Acanceh, Mexico 306,000 Manufacturing Facility Owned Torreon, Mexico 304,000 Manufacturing Facility Owned Izamal, Mexico 93,000 Manufacturing Facility Owned Tekax, Mexico 92,000 Manufacturing Facility Owned La Rosita, Mexico 90,000 Manufacturing Facility Owned San Pedro, Mexico 88,000 Manufacturing Facility Owned San Antonio del Coyote, Mexico 88,000 Manufacturing Facility Owned Managua, Nicaragua 129,000 Manufacturing Facility Leased San Marcos, Nicaragua 145,000 Manufacturing Facility Leased As of December 30, 2023, we operated 80 retail stores across the Americas, EMEA and APAC regions.
Biggest changeKontoor Brands, Inc. 2024 Form 10-K 23 Table of Contents The following table presents our principal properties as of December 28, 2024: Location Approximate Square Feet Use Owned or Leased Greensboro, North Carolina 140,000 Global Headquarters Owned Greensboro, North Carolina 48,000 Office Leased Geneva, Switzerland 19,000 Office Leased Shanghai, China 16,000 Office Leased Mexico City, Mexico 13,000 Office Leased Antwerp, Belgium 11,000 Office Leased Dhaka, Bangladesh 14,000 Office and Technical Service Center Leased Hong Kong, China 44,000 Office and Sourcing Hub Leased Panama City, Panama 7,000 Office and Sourcing Hub Leased Foshan, China 49,000 Technical Service Center Leased Greensboro, North Carolina 173,000 Technical Service and Innovation Center Owned Mocksville, North Carolina 503,000 Distribution Center Owned Hackleburg, Alabama 482,000 Distribution Center Owned Luray, Virginia 435,000 Distribution Center Owned Seminole, Oklahoma 401,000 Distribution Center Owned El Paso, Texas 317,000 Distribution Center Leased Mexico City, Mexico 162,000 Distribution Center Leased Acanceh, Mexico 306,000 Manufacturing Facility Owned Torreon, Mexico 304,000 Manufacturing Facility Owned Izamal, Mexico 93,000 Manufacturing Facility Owned Tekax, Mexico 92,000 Manufacturing Facility Owned La Rosita, Mexico 90,000 Manufacturing Facility Owned San Pedro, Mexico 88,000 Manufacturing Facility Owned San Antonio del Coyote, Mexico 88,000 Manufacturing Facility Owned As of December 28, 2024, we operated 77 retail stores across the Americas, EMEA and APAC regions.
ITEM 2. PROPERTIES. We conduct manufacturing, distribution and administrative activities in owned and leased facilities. We operate nine manufacturing-related facilities and six distribution centers around the world. To manage distribution in our APAC and EMEA regions, we partner with third-party logistics providers primarily in Shanghai, China and Prague, Czech Republic.
ITEM 2. PROPERTIES. We conduct manufacturing, sourcing, distribution and administrative activities in owned and leased facilities. We operate seven manufacturing-related facilities and six distribution centers around the world. In addition, we partner with third-party logistics providers to manage distribution in our APAC and EMEA regions, primarily in Shanghai, China and Prague, Czech Republic.
Retail stores are typically leased under operating leases and include renewal options. We believe that all of our facilities, whether owned or leased, are well maintained and in good operating condition and expect they will accommodate our ongoing and foreseeable business needs. Kontoor Brands, Inc. 2023 Form 10-K 23 Table of Contents
Retail stores are typically leased under operating leases and include renewal options. We believe that all of our facilities, whether owned or leased, are well maintained and in good operating condition and expect they will accommodate our ongoing and foreseeable business needs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 2023 Repurchase Program does not have an expiration date but may be suspended, modified or terminated at any time without prior notice. As of December 30, 2023, the Company had not made any share repurchases under the 2023 Repurchase Program. Kontoor Brands, Inc. 2023 Form 10-K 25 Table of Contents ITEM 6. RESERVED. Not applicable.
Biggest changeThe 2023 Repurchase Program does not have an expiration date but may be suspended, modified, or terminated at any time without prior notice.
(3) On December 11, 2023, the Company announced that its Board of Directors approved a new share repurchase program (the "2023 Repurchase Program") which replaced all remaining shares under the 2021 Repurchase Program. The 2023 Repurchase Program authorizes the repurchase of up to $300.0 million of the Company's outstanding Common Stock through open market or privately negotiated transactions.
(2) On December 11, 2023, the Company announced that its Board of Directors approved a share repurchase program (the "2023 Repurchase Program"). The 2023 Repurchase Program authorizes the repurchase of up to $300.0 million of the Company's outstanding Common Stock through open market or privately negotiated transactions.
The graph assumes that $100.00 was invested on May 9, 2019 (first day of trading activity) in KTB stock or April 30, 2019 in index, and all dividends and other distributions were reinvested. Past performance is not necessarily indicative of future performance.
The graph assumes that $100.00 was invested on December 28, 2019 in KTB stock and each index, and all dividends and other distributions were reinvested. Past performance is not necessarily indicative of future performance.
Stock Performance Graph The following graph compares the cumulative total shareholder return of Kontoor's Common Stock with that of the S&P 500 Index and the S&P 1500 Apparel Retail Index for the period from May 7, 2019 (the effective date of the registration of KTB Common Stock) to December 30, 2023.
Stock Performance Graph The following graph compares the cumulative total shareholder return of Kontoor's Common Stock with that of the S&P 500 Index and the S&P 1500 Apparel Retail Index for the period from December 28, 2019 (the last day of the 2019 fiscal year) to December 28, 2024.
ITEM 5. MARKET FOR KONTOOR’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market for Common Stock Kontoor’s Common Stock is listed on the NYSE under the symbol “KTB”. Kontoor began to trade as a standalone public company on May 23, 2019. As of February 23, 2024, there were 2,406 holders of record of our Common Stock.
ITEM 5. MARKET FOR KONTOOR’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market for Common Stock Kontoor’s Common Stock is listed on the NYSE under the symbol “KTB”. As of February 21, 2025, there were 2,257 holders of record of our Common Stock.
Issuer Purchases of Equity Securities Fourth quarter fiscal 2023 Total number of shares purchased (1) Weighted average price paid per share Total number of shares purchased as part of publicly announced program (2) (3) Dollar value of shares that may yet be purchased under the program October 1 - October 28 — $ — — $ 62,044,756 October 29 - November 25 459,805 51.28 459,805 38,465,466 November 26 - December 30 119,037 53.94 119,037 300,000,000 Total 578,842 $ 51.83 578,842 (1) The total number of shares repurchased excludes shares withheld upon the vesting of share-based awards.
Issuer Purchases of Equity Securities Fourth quarter fiscal 2024 Total number of shares purchased (1) Weighted average price paid per share Total number of shares purchased as part of publicly announced program (2) Dollar value of shares that may yet be purchased under the program September 29 - October 26 — $ — — $ 214,979,702 October 27 - November 23 — — — 214,979,702 November 24 - December 28 — — — 214,979,702 Total — $ — — (1) The total number of shares repurchased excludes shares withheld upon the vesting of share-based awards.
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(2) On August 5, 2021, the Company announced that its Board of Directors approved a share repurchase program (the "2021 Repurchase Program"). The 2021 Repurchase Program authorized the repurchase of up to $200.0 million of the Company's outstanding Common Stock through open market or privately negotiated transactions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTotal restructuring charges discussed above were $14.3 million in 2023, of which $8.5 million were reflected within "selling, general and administrative expenses" and $5.8 million were reflected within "cost of goods sold." Total net restructuring charges discussed above were $12.6 million in 2022, reflecting $15.6 million of charges within "selling, general and administrative expenses," partially offset by $2.6 million of pension curtailment gain and $0.4 million of other benefit within "other expense, net." Refer to N ote 2 2 to the Company's financial statements for additional information related to restructuring charges.
Biggest changeOf the $14.3 million of restructuring charges recognized during 2023, $8.5 million were reflected within "selling, general and administrative expenses" and $5.8 million were reflected within "cost of goods sold". Refer to Note 22 to the Company's financial statements in this Form 10-K for additional information related to restructuring charges.
Americas regions, through department, specialty, company-operated, concession retail and independently-operated partnership stores and online, including digital marketplaces. Fiscal Year and Basis of Presentation The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to December 31 of each year.
Americas regions, through department stores, specialty stores, company-operated stores, concession retail stores, independently-operated partnership stores and online, including digital marketplaces. Fiscal Year and Basis of Presentation The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to December 31 of each year.
The 2023 effective income tax rate included a net discrete tax benefit primarily related to changes in deferred tax valuation allowances, a decrease in unrecognized tax benefits and interest as well as benefits from stock-based compensation. The net discrete tax benefit for the year ended December 2023 decreased the effective income tax rate by 4.1%.
The year ended December 2023 included a net discrete tax benefit primarily related to changes in deferred tax valuation allowances, a decrease in unrecognized tax benefits and interest as well as benefits from stock-based compensation. These net discrete tax benefits for the year ended December 2023 decreased the effective income tax rate by 4.1%.
The estimated undiscounted cash flows of the asset or asset group through the end of its useful life are compared to its carrying value. If the undiscounted cash flows of the asset or asset group exceed its carrying value, there is no impairment charge.
Initially, the estimated undiscounted cash flows of the asset or asset group through the end of its useful life are compared to its carrying value. If the undiscounted cash flows of the asset or asset group exceed its carrying value, there is no impairment charge.
Corporate and other expenses, including certain restructuring costs, and interest income and expense are not controlled by segment management and therefore are excluded from the measurement of segment profit.
Corporate and other expenses, including certain restructuring and transformation costs, and interest income and expense are not controlled by segment management and therefore are excluded from the measurement of segment profit.
Kontoor Brands, Inc. 2023 Form 10-K 33 Table of Contents Critical Accounting Policies and Estimates We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with Generally Accepted Accounting Principles. We apply these accounting policies in a consistent manner.
Kontoor Brands, Inc. 2024 Form 10-K 33 Table of Contents Critical Accounting Policies and Estimates We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with Generally Accepted Accounting Principles. We apply these accounting policies in a consistent manner.
On December 11, 2023, the Company announced that its Board of Directors approved a new share repurchase program ("the 2023 Repurchase Program") which authorized the repurchase of up to $300.0 million of the Company's outstanding Common Stock through open market or privately negotiated transactions.
On December 11, 2023, the Company announced that its Board of Directors approved a new share repurchase program (the "2023 Repurchase Program") which authorizes the repurchase of up to $300.0 million of the Company's outstanding Common Stock through open market or privately negotiated transactions.
Other obligations represent other binding commitments for the expenditure of funds, including (i) amounts related to contracts not involving the purchase of inventories, such as the noncancelable portion of service or maintenance agreements for management information systems, (ii) capital spending and (iii) advertising. Refer to Note 2 1 to the Company's financial statements in this Form 10-K for additional information.
Other obligations represent other binding commitments for the expenditure of funds, including (i) amounts related to contracts not involving the purchase of inventories, such as the noncancelable portion of service or maintenance agreements for management information systems, (ii) capital spending and (iii) advertising. Refer to Note 21 to the Company's financial statements in this Form 10-K for additional information.
As of December 2023, the Company was in compliance with all applicable covenants under the Credit Agreement and expects to maintain compliance with the applicable covenants for at least one year from the issuance of these financial statements.
As of December 2024, the Company was in compliance with all applicable covenants under the Credit Agreement and expects to maintain compliance with the applicable covenants for at least one year from the issuance of these financial statements.
If the Company elects to perform a qualitative analysis and determines that it is not more likely than not that the fair value of an asset or reporting unit is less than its carrying value, then no further testing is required. Otherwise, the assets must be quantitatively tested for possible impairment.
If the Company elects to perform a qualitative analysis and determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then no further testing is required. Otherwise, the asset must be quantitatively tested for possible impairment.
We anticipate that we will have sufficient cash flows from operations, along with existing borrowing capacity, to support continued investments in our brands, infrastructure, talent and capabilities, dividend payments to shareholders, repayment of our current and long-term debt obligations when due and repurchases of Common Stock.
We anticipate that we will have sufficient cash flows from operations, along with existing borrowing capacity, to support continued investments in our brands, infrastructure, talent and capabilities, dividend payments to shareholders, repayment of our debt obligations when due and repurchases of Common Stock.
Impairment Testing of Long-Lived Assets, Including Intangible Assets and Goodwill Long Lived Assets — Property, Plant and Equipment and Operating Lease Assets Description Our policy is to review property, plant and equipment and operating lease assets for potential impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.
Impairment Testing of Long-Lived Assets Long Lived Assets — Property, Plant and Equipment and Operating Lease Assets Description Our policy is to review property, plant and equipment and operating lease assets for potential impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.
The Company's products are sold in the U.S. through mass merchants, specialty stores, mid-tier and traditional department stores, company-operated stores and online, including digital marketplaces. The Company’s products are also sold internationally, primarily in the Europe, Middle East and Africa ("EMEA"), Asia-Pacific (“APAC”) and Non-U.S.
The Company's products are sold in the U.S. through mass merchants, specialty stores, department stores, company-operated stores and online, including digital marketplaces. The Company’s products are also sold internationally, primarily in the Europe, Middle East and Africa ("EMEA"), Asia-Pacific (“APAC”) and Non-U.S.
In addition, we would use current liquidity as well as access to capital markets to fund any strategic investment opportunities that may arise.
In addition, we would use current liquidity as well as access to capital markets to fund any strategic acquisition opportunities that may arise.
Judgments and Uncertainties The calculation of income tax liabilities involves uncertainties in the application of complex tax laws and regulations, which are subject to legal interpretation and significant management judgment. The Company’s income tax returns are regularly examined by federal, state and foreign tax authorities, and those audits may result in proposed adjustments.
The calculation of liabilities for unrecognized tax benefits involves uncertainties in the application of complex tax laws and regulations, which are subject to legal interpretation and significant management judgment. The Company’s income tax returns are regularly examined by federal, state and foreign tax authorities, and those audits may result in proposed adjustments.
If in a future period management determines that the amount of deferred tax assets to be realized differs from the net recorded amount, the Company would record an adjustment to income tax expense in that future period.
If management determines in a future period that the amount of deferred tax assets to be realized differs from the net recorded amount, the Company would record an adjustment to the valuation allowance and income tax expense in that future period.
Income tax expense could be materially affected to the extent the Company prevails in a tax position or when the statute of limitations expires for a tax position for which a liability for unrecognized tax benefits or valuation allowances have been established, or to the extent the Company is required to pay amounts greater than the established liability for unrecognized tax benefits.
Income tax expense could be materially affected to the extent the Company prevails in a tax position or when the statute of limitations expires for a tax position for which a liability for unrecognized tax benefits has been established, or to the extent the Company is required to pay amounts greater than the established liability for unrecognized tax benefits.
In addition, we may retain outside specialists to assist in impairment testing of goodwill and intangible assets. Several of the estimates and assumptions we are required to make relate to future events and are therefore inherently uncertain, especially as it relates to events outside of our control.
In addition, we may retain outside specialists to assist in impairment testing of long-lived assets. Several of the estimates and assumptions we are required to make relate to future events and are therefore inherently uncertain, especially as it relates to events outside of our control.
Judgments and Uncertainties When testing property, plant and equipment or operating lease assets for potential impairment, management uses the income-based discounted cash flow method using the estimated cash flows of the respective asset or asset group. We include assumptions about sales growth and operating margins, considered against our budgets, business plans and economic projections.
Judgments and Uncertainties When testing property, plant and equipment or operating lease assets for potential impairment, management uses the income-based discounted cash flow method using the estimated cash flows of the respective asset or asset group. We include assumptions about sales growth and operating margins, which are compared to our budgets, business plans and economic projections.
During 2023, management identified inaccuracies in processing certain transactions with U.S. Customs and Border Protection ("U.S. Customs") arising from the implementation of the Company's enterprise resource planning system, which resulted in an underpayment of duties owed to U.S. Customs for the 2021 to 2023 periods.
Out-of-Period Duty Expense Recorded in 2023 During 2023, management identified inaccuracies in processing certain transactions with U.S. Customs and Border Protection ("U.S. Customs") arising from the implementation of the Company's enterprise resource planning system, which resulted in an underpayment of duties owed to U.S. Customs for the 2021 to 2023 periods.
There can be no Kontoor Brands, Inc. 2023 Form 10-K 35 Table of Contents assurance that the estimates and assumptions used in our goodwill and intangible asset impairment testing will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of net revenues and EBITDA.
There can be no assurance that the estimates and assumptions used in our goodwill impairment testing will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of net revenues and EBITDA.
Year Ended December (Dollars in millions) 2023 2022 Percent Change Other revenues $ 10.8 $ 11.3 (4.0)% (Loss) profit related to other revenues $ (1.1) $ (0.6) 81.5% Operating margin (10.0) % (5.3) % 30 Kontoor Brands, Inc 2023 Form 10-K Table of Contents Reconciliation of Segment Profit to Income Before Income Taxes The costs below are necessary to reconcile total reportable segment profit to income before taxes.
Year Ended December (Dollars in millions) 2024 2023 Percent Change Other revenues $ 11.0 $ 10.8 1.3% Loss related to other revenues $ (1.6) $ (1.1) 51.5% Operating margin (14.9) % (10.0) % 30 Kontoor Brands, Inc 2024 Form 10-K Table of Contents Reconciliation of Segment Profit to Income Before Income Taxes The costs below are necessary to reconcile total reportable segment profit to income before taxes.
There were no outstanding borrowings under the Revolving Credit Facility as of December 2023.
There were no outstanding borrowings under the Revolving Credit Facility as of December 2024.
Kontoor Brands, Inc. 2023 Form 10-K 31 Table of Contents The following table presents outstanding borrowings and available borrowing capacity under the Revolving Credit Facility and our cash and cash equivalents balances as of December 2023: (In millions) December 2023 Outstanding borrowings under the Revolving Credit Facility $ — Available borrowing capacity under the Revolving Credit Facility (1) $ 493.3 Cash and cash equivalents $ 215.1 (1) Available borrowing capacity under the Revolving Credit Facility is net of $6.7 million of outstanding standby letters of credit issued on behalf of the Company under this facility.
Kontoor Brands, Inc. 2024 Form 10-K 31 Table of Contents The following table presents outstanding borrowings and available borrowing capacity under the Revolving Credit Facility and our cash and cash equivalents balances as of December 2024: (In millions) December 2024 Outstanding borrowings under the Revolving Credit Facility $ — Available borrowing capacity under the Revolving Credit Facility (1) $ 493.5 Cash and cash equivalents $ 334.1 (1) Available borrowing capacity under the Revolving Credit Facility is net of $6.5 million of outstanding standby letters of credit issued on behalf of the Company under this facility.
At December 2023 and December 2022, the Company had $24.1 million and $24.8 million, respectively, of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either the Company or the banks. There were no outstanding balances under these arrangements at December 2023, and $7.1 million of outstanding balances at December 2022.
At December 2024 and December 2023, the Company had $19.2 million and $24.1 million, respectively, of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either the Company or the banks. There were no outstanding balances under these arrangements at December 2024 and December 2023.
The Company has future payments related to "other liabilities" recorded in the balance sheets, which primarily represent long-term liabilities for deferred compensation and other employee-related benefits. Refer to Note 1 2 and Note 1 3 to the Company's financial statements in this Form 10-K for additional information. The Company is obligated under noncancelable operating leases.
The Company has future payments related to "other liabilities" recorded in the balance sheets, which primarily represent long-term liabilities for deferred compensation and other employee-related benefits. Refer to Note 12 and Note 13 to the Company's financial statements in this Form 10-K for additional information. The Company is committed under noncancelable operating leases.
Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the fiscal year ended December 31 , 2022, for discussion of the results of operations for the year ended December 31 , 2022, compared to the year ended January 1 , 202 2 .
Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the fiscal year ended December 3 0 , 202 3 , for discussion of the results of operations for the year ended December 3 0 , 202 3 , compared to the year ended December 3 1 , 2022.
Wholesale business, (ii) category extensions such as outdoor, workwear and t-shirts, (iii) geographic expansion of our Wrangler ® and Lee ® brands, most notably in the APAC region, and (iv) channel expansion focused on the digital platforms in our U.S. Wholesale and Direct-to-Consumer channels.
Wholesale business, (ii) category extensions such as outdoor, workwear and tops, (iii) geographic expansion of our Wrangler ® and Lee ® brands and (iv) channel expansion focused on the digital platforms in our U.S. Wholesale and Direct-to-Consumer channels.
Our effective income tax rate for foreign operations was 9.2% and 8.3% for the years ended December 2023 and December 2022, respectively. 28 Kontoor Brands, Inc 2023 Form 10-K Table of Contents Information by Business Segment The Company's two reportable segments are Wrangler ® and Lee ® . Refer to Note 3 to the Company's financial statements for additional information.
Our effective income tax rate for foreign operations was 8.2% and 9.2% for the years ended December 2024 and December 2023, respectively. 28 Kontoor Brands, Inc 2024 Form 10-K Table of Contents Information by Business Segment The Company's two reportable segments are Wrangler ® and Lee ® .
For presentation purposes herein, all references to periods ended December 2023, December 2022 and December 2021 correspond to the 52-week fiscal years ended December 30, 2023, December 31, 2022 and January 1, 2022, respectively.
For presentation purposes herein, all references to periods ended December 2024, December 2023 and December 2022 correspond to the 52-week fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively.
Realization of deferred tax assets related to income tax credit and operating loss carryforwards is dependent on future taxable income in specific jurisdictions, the amount and timing of which are uncertain, and on possible changes in tax laws.
Effect if Actual Results Differ From Assumptions Realization of deferred tax assets related to income tax credit and operating loss carryforwards is dependent on future taxable income in specific jurisdictions, the amount and timing of which are uncertain, and on possible changes in tax laws.
Future estimated interest payments under these agreements, based on interest rates in effect as of December 2023 and the remaining terms of the debt arrangements, are $43.9 million, $42.5 million, $38.3 million, $16.5 million, $16.5 million and $16.5 million for 2024 through 2029, respectively, with no remaining payments thereafter.
Future estimated interest payments under these agreements, based on interest rates in effect as of December 2024 and the remaining terms of the debt arrangements, are $37.3 million, $34.8 million, $16.5 million, $16.5 million and $16.5 million for 2025 through 2029, respectively, with no remaining payments thereafter.
The effective tax rate without discrete items for the year ended December 2023 was 19.1% compared to 19.7% for the year ended December 2022. The decrease was primarily due to changes in our jurisdictional mix of earnings.
The effective tax rate without discrete items for the year ended December 2024 was 20.0% compared to 19.1% for the year ended December 2023. The increase was primarily due to changes in our jurisdictional mix of earnings.
Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide readers of our financial statements with a narrative from management's perspective on our financial condition, results of operations and liquidity as well as certain other factors that may affect our future results.
The timing and amount of repurchases are determined by the Company's management based on its evaluation of market conditions, continued compliance with its debt covenants and other factors. All shares reacquired in connection with the Company's repurchase programs are treated as authorized and unissued shares upon repurchase.
As of December 2024, $215.0 million remained available for repurchase under the program. The timing and amount of repurchases are determined by the Company's management based on its evaluation of market conditions, continued compliance with its debt covenants and other factors. All shares reacquired in connection with the Company's repurchase programs are treated as authorized and unissued shares upon repurchase.
We currently expect capital expenditures to be approximately $40.0 million in 2024, primarily to support manufacturing, distribution, facility improvement, information technology and owned retail store investments. 32 Kontoor Brands, Inc 2023 Form 10-K Table of Contents The following table presents our cash flows during the periods: (In millions) Year Ended December Cash provided (used) by: 2023 2022 Operating activities $ 356.5 $ 83.6 Investing activities $ (39.1) $ (30.1) Financing activities $ (155.7) $ (170.9) Operating Activities During 2023, cash provided by operating activities increased $273.0 million as compared to 2022.
We currently expect capital expenditures to be approximately $35.0 million in 2025, primarily to support manufacturing, distribution, facility improvement, information technology and owned retail store investments. 32 Kontoor Brands, Inc 2024 Form 10-K Table of Contents The following table presents our cash flows during the periods: (In millions) Year Ended December Cash provided (used) by: 2024 2023 Operating activities $ 368.2 $ 356.5 Investing activities $ (22.3) $ (39.1) Financing activities $ (240.4) $ (155.7) Operating Activities During 2024, cash provided by operating activities was $368.2 million as compared to $356.5 million in the prior year period.
For goodwill impairment testing, we estimate the fair value of a reporting unit using both income-based and market-based valuation methods. The income-based approach is based on the reporting unit’s forecasted future cash flows that are discounted to present value using the reporting unit’s WACC as discussed above.
For goodwill impairment testing, we estimate the fair value of a reporting unit using both income-based and market-based valuation methods. The income-based approach is based on the reporting unit’s forecasted future cash flows that are discounted to present value using the reporting unit’s WACC that considers market participant assumptions, plus a spread that factors in the risk of the asset.
During 2023, the Company paid $108.6 million of dividends to its shareholders. On February 15, 2024, the Board of Directors declared a regular quarterly cash dividend of $0.50 per share of the Company's Common Stock. The cash dividend will be payable on March 18, 2024, to shareholders of record at the close of business on March 8, 2024.
During 2024, the Company paid $112.1 million of dividends to its shareholders. On February 13, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.52 per share of the Company's Common Stock. The cash dividend will be payable on March 20, 2025, to shareholders of record at the close of business on March 10, 2025.
Kontoor Brands, Inc. 2023 Form 10-K 27 Table of Contents ANALYSIS OF RESULTS OF OPERATIONS Consolidated Statements of Operations The following table presents components of the Company's statements of operations: (Dollars in thousands) 2023 2022 Net revenues $ 2,607,472 $ 2,631,444 Gross margin (net revenues less cost of goods sold) $ 1,087,837 $ 1,134,368 As a percentage of net revenues 41.7 % 43.1 % Selling, general and administrative expenses $ 768,568 $ 777,703 As a percentage of net revenues 29.5 % 29.6 % Operating income $ 319,269 $ 356,665 As a percentage of net revenues 12.2 % 13.6 % Additionally, the following table presents a summary of the changes in net revenues for the year ended December 2023 as compared to December 2022: (In millions) 2023 Compared to 2022 Net revenues — prior year $ 2,631.4 Operations (28.9) Impact of foreign currency 5.0 Net revenues — current year $ 2,607.5 2023 Compared to 2022 Net revenues decreased 1%, driven by a 1% decrease in U.S.
Kontoor Brands, Inc. 2024 Form 10-K 27 Table of Contents ANALYSIS OF RESULTS OF OPERATIONS Consolidated Statements of Operations The following table presents components of the Company's statements of operations: Year Ended December (Dollars in thousands) 2024 2023 Net revenues $ 2,607,578 $ 2,607,472 Gross margin (net revenues less cost of goods sold) $ 1,161,570 $ 1,087,837 As a percentage of net revenues 44.5 % 41.7 % Selling, general and administrative expenses $ 819,281 $ 768,568 As a percentage of net revenues 31.4 % 29.5 % Operating income $ 342,289 $ 319,269 As a percentage of net revenues 13.1 % 12.2 % Additionally, the following table presents a summary of the changes in net revenues for the year ended December 2024 as compared to December 2023: (In millions) Year Ended December Net revenues — 2023 $ 2,607.5 Operations 2.2 Impact of foreign currency (2.1) Net revenues — 2024 $ 2,607.6 2024 Compared to 2023 Net revenues were flat, with growth in the U.S.
In addition to continued organic investments in our brands and capabilities, the options in our capital allocation strategy are to (i) pay down debt, (ii) provide for a superior dividend payout, (iii) effectively manage our share repurchase authorization and (iv) act on strategic investment opportunities that may arise.
In addition, our capital allocation strategy allows us the option to (i) invest in our business, (ii) pay down debt, (iii) provide for a superior dividend payout, (iv) effectively manage our share repurchase authorization and (v) act on strategic acquisition opportunities that may arise.
If the undiscounted cash flows of the asset or asset group are less than its carrying value, the estimated fair value of the asset or asset group is calculated based on the discounted cash flows using the reporting unit’s weighted average cost of capital (“WACC”), and an impairment charge is recognized for the difference between the estimated fair value of the asset or asset group and its carrying value.
If the undiscounted cash flows of the asset or asset group are less than its carrying value, then the estimated fair value of the asset or asset group is calculated based on discounted cash flows using an applicable discount rate or weighted average cost of capital (“WACC”).
Wholesale revenues decreased 5% compared to the year ended December 2022, and represented 16% of total revenues in the current year. • Direct-to-Consumer revenues increased 8% compared to the year ended December 2022, and represented 12% of total revenues in the current year. • Gross margin decreased 140 basis points to 41.7% compared to the year ended December 2022. • Selling, general and administrative expenses as a percentage of revenues decreased to 29.5% compared to 29.6% for the year ended December 2022. • Net income decreased 6% to $231.0 million compared to the year ended December 2022. • Diluted earnings per share was $4.06 in 2023, compared to $4.31 in 2022.
Wholesale revenues decreased 7% compared to the year ended December 2023, and represented 15% of total revenues in the current year. • Direct-to-Consumer revenues increased 4% compared to the year ended December 2023, and represented 12% of total revenues in the current year. • Gross margin increased 280 basis points to 44.5% compared to the year ended December 2023. • Selling, general and administrative expenses as a percentage of revenues increased to 31.4% compared to 29.5% for the year ended December 2023. • Operating income increased 7% to $342.3 million compared to the year ended December 2023. • Net income increased 6% to $245.8 million compared to the year ended December 2023. • Diluted earnings per share was $4.36 in 2024, compared to $4.06 in 2023. • Cash provided by operating activities was $368.2 million as compared to $356.5 million in the prior year period.
Effect if Actual Results Differ From Assumptions Management makes its estimates based on information available as of the date of our assessment, using assumptions we believe market participants would use in performing an independent valuation of the business.
Effect if Actual Results Differ From Assumptions Management makes its estimates based on information available as of the date of our assessment, using assumptions we believe market participants would use in performing an independent valuation of the business. It is possible that our conclusions regarding impairment or recoverability of goodwill in any reporting unit could change in future periods.
The following tables present a summary of the changes in segment revenues and segment profit for the years ended December 2023 and December 2022: Segment Revenues: (In millions) Wrangler Lee Total Segment revenues — 2022 $ 1,745.8 $ 874.4 $ 2,620.2 Operations 5.2 (33.8) (28.5) Impact of foreign currency 3.1 1.9 5.0 Segment revenues — 2023 $ 1,754.1 $ 842.5 $ 2,596.7 Segment Profit: (In millions) Wrangler Lee Total Segment profit — 2022 $ 321.2 $ 121.1 $ 442.2 Operations (14.0) (21.5) (35.3) Impact of foreign currency 0.3 (1.5) (1.2) Segment profit — 2023 $ 307.5 $ 98.1 $ 405.7 The following sections discuss the changes in segment revenues and segment profit.
The following tables present a summary of the changes in segment revenues and segment profit for the years ended December 2024 and December 2023: Segment Revenues: Year Ended December (In millions) Wrangler Lee Total Segment revenues — 2023 $ 1,754.1 $ 842.5 $ 2,596.7 Operations 51.5 (49.4) 2.0 Impact of foreign currency 0.4 (2.5) (2.1) Segment revenues — 2024 $ 1,806.0 $ 790.6 $ 2,596.6 Segment Profit: Year Ended December (In millions) Wrangler Lee Total Segment profit — 2023 $ 307.5 $ 98.1 $ 405.7 Operations 58.4 (8.4) 49.9 Impact of foreign currency 0.4 — 0.4 Segment profit — 2024 $ 366.3 $ 89.7 $ 456.0 The following sections discuss the changes in segment revenues and segment profit.
In addition, short-term borrowings included other debt of $0.2 million at December 2022, with no balance remaining at December 2023. On August 5, 2021, the Company's Board of Directors approved a share repurchase program (the "2021 Repurchase Program") which authorized the repurchase of up to $200.0 million of the Company's outstanding Common Stock through open market or privately negotiated transactions.
On August 5, 2021, the Company's Board of Directors approved a share repurchase program (the "2021 Repurchase Program") which authorized the repurchase of up to $200.0 million of the Company's outstanding Common Stock through open market or privately negotiated transactions.
Americas wholesale revenues increased 8%, driven by higher sales in Canada. • Revenues in the APAC region decreased 1%, driven by a decrease in our wholesale business. • Revenues in the EMEA region decreased 4%, attributable to a decline in our digital wholesale business, partially offset by a 2% favorable impact from foreign currency and an increase in retail store sales.
Growth in our direct-to-consumer business was attributable to higher e-commerce and retail store sales. • Revenues in the EMEA region decreased 4%, due to a decline in our wholesale business, partially offset by growth in our direct-to-consumer business and a 2% favorable impact from foreign currency. • Revenues in the APAC region increased slightly.
Effect if Actual Results Differ From Assumptions We have not made any material changes in the methodology used to evaluate the impairment of property, plant and equipment and operating lease assets during 2023.
An impairment charge is recognized for the difference, if any, between the estimated fair value of the asset or asset group and its carrying value. Effect if Actual Results Differ From Assumptions We have not made any material changes in the methodology used to evaluate the impairment of property, plant and equipment and operating lease assets during 2024.
The increase was primarily due to favorable changes in inventory, partially offset by unfavorable changes in accounts receivable and income taxes compared to the prior year period.
The increase was primarily due to favorable changes in income tax and accounts payable and higher net income, partially offset by unfavorable changes in accounts receivable.
Recently Issued and Adopted Accounting Standards Refer to Note 1 to the Company's financial statements included elsewhere in this Annual Report on Form 10-K for discussion of recently issued and adopted accounting standards.
The Company does not currently anticipate any material impact on earnings from the ultimate resolution of these income tax estimates. Recently Issued and Adopted Accounting Standards Refer to Note 1 to the Company's financial statements included elsewhere in this Annual Report on Form 10-K for discussion of recently issued and adopted accounting standards.
The 2023 Repurchase Program replaced all remaining shares under the 2021 Repurchase Program and does not have an expiration date but may be suspended, modified or terminated at any time without prior notice.
The 2023 Repurchase Program replaced all remaining shares under the 2021 Repurchase Program and does not have an expiration date but may be suspended, modified or terminated at any time without prior notice. During the year ended December 2024, the Company repurchased 1.2 million shares of Common Stock for $85.0 million, including commissions, under the 2023 Repurchase Program.
The Company's most significant foreign currency translation exposure is typically driven by business conducted in euro-based countries, the Chinese yuan and the Mexican peso. However, the Company conducts business in other developed and emerging markets around the world with exposure to other foreign currencies. Amounts herein may not recalculate due to the use of unrounded numbers.
However, the Company conducts business in other developed and emerging markets around the world with exposure to other foreign currencies. Amounts herein may not recalculate due to the use of unrounded numbers.
During the years ended December 2023 and December 2022, the Company repurchased 0.6 million and 1.5 million shares of Common Stock, respectively, for $30.1 million and $62.5 million, respectively, including commissions, under the 2021 Repurchase Program. All of the $300.0 million authorized for repurchase under the 2023 Repurchase Program remained available for repurchase as of December 2023.
During the year ended December 2023, the Company repurchased 0.6 million shares of Common Stock for $30.0 million, including commissions, under the 2021 Repurchase Program.
If the estimated fair value of the trademark is less than its carrying value, an impairment charge would be recognized for the difference. Goodwill is quantitatively evaluated for possible impairment by comparing the estimated fair value of a reporting unit to its carrying value. Reporting units are businesses with discrete financial information that is available and reviewed by segment management.
Alternatively, the Company may elect to bypass a qualitative analysis and perform a quantitative analysis. Judgments and Uncertainties Goodwill is quantitatively evaluated for possible impairment by comparing the estimated fair value of a reporting unit to its carrying value. Reporting units are businesses with discrete financial information that is available and reviewed by segment management.
Kontoor Brands, Inc. 2023 Form 10-K 29 Table of Contents Lee Year Ended December (Dollars in millions) 2023 2022 Percent Change Segment revenues $ 842.5 $ 874.4 (3.6) % Segment profit $ 98.1 $ 121.1 (18.9) % Operating margin 11.6 % 13.8 % 2023 Compared to 2022 Global revenues for the Lee ® brand decreased 4%, due to declines in the U.S.
Kontoor Brands, Inc. 2024 Form 10-K 29 Table of Contents Lee Year Ended December (Dollars in millions) 2024 2023 Percent Change Segment revenues $ 790.6 $ 842.5 (6.2) % Segment profit $ 89.7 $ 98.1 (8.6) % Operating margin 11.3 % 11.6 % 2024 Compared to 2023 Global revenues for the Lee ® brand decreased 6%, due to declines in all regions and channels. • Revenues in the Americas region decreased 6%, driven by declines in our wholesale and direct-to-consumer businesses.
Wrangler Year Ended December (Dollars in millions) 2023 2022 Percent Change Segment revenues $ 1,754.1 $ 1,745.8 0.5 % Segment profit $ 307.5 $ 321.2 (4.3) % Operating margin 17.5 % 18.4 % 2023 Compared to 2022 Global revenues for the Wrangler ® brand were flat, with growth in the Direct-to-Consumer channel offset by declines in the U.S.
Wrangler Year Ended December (Dollars in millions) 2024 2023 Percent Change Segment revenues $ 1,806.0 $ 1,754.1 3.0 % Segment profit $ 366.3 $ 307.5 19.1 % Operating margin 20.3 % 17.5 % 2024 Compared to 2023 Global revenues for the Wrangler ® brand increased 3%, due to growth in the U.S.
Interest expense increased $5.5 million, primarily due to higher borrowing rates for long-term debt during 2023 compared to 2022. ANALYSIS OF FINANCIAL CONDITION Liquidity and Capital Resources The Company's ability to fund our operating needs is dependent upon our ability to generate positive long-term cash flow from operations and maintain our debt financing on acceptable terms.
In addition, the twelve months ended December 2023 included interest attributable to the out-of-period duty expense recorded in 2023. ANALYSIS OF FINANCIAL CONDITION Liquidity and Capital Resources The Company's ability to fund our operating needs is dependent upon our ability to generate positive long-term cash flows from operations and maintain our debt financing on acceptable terms.
Wholesale revenues decreased 1% compared to the year ended December 2022, and represented 72% of total revenues in the current year. • Non-U.S.
HIGHLIGHTS OF THE YEAR ENDED DECEMBER 2024 • Net revenues of $2.6 billion were flat compared to the year ended December 2023. • U.S. Wholesale revenues increased 1% compared to the year ended December 2023, and represented 73% of total revenues in the current year. • Non-U.S.
References to fiscal 2023 and 2022 foreign currency amounts herein reflect the impact of changes in foreign exchange rates from fiscal 2022 and 2021, respectively, and the corresponding impact on translating foreign currencies into U.S. dollars and on foreign currency-denominated transactions.
References to fiscal 2024 foreign currency amounts herein reflect the impact of changes in foreign exchange rates from fiscal 2023 and the corresponding impact on translating foreign currencies into U.S. dollars and on foreign currency-denominated transactions. The Company's most significant foreign currency translation exposure is typically driven by business conducted in euro-based countries, the Chinese yuan and the Mexican peso.
Refer to N ote 1 1 to the Company's financial statements in this Form 10-K for additional information. These debt agreements also require periodic interest payments on floating and fixed rate terms.
Contractual commitments on the Company's balance sheets include obligations to make principal payments on $745.0 million of long-term debt based on the defined terms of our debt agreements. Refer to Note 11 to the Company's financial statements in this Form 10-K for additional information. These debt agreements also require periodic interest payments on floating and fixed rate terms.
As of December 2023, the effect of a hypothetical 10% change in the aforementioned key assumptions would not have a material effect on reported results. 34 Kontoor Brands, Inc 2023 Form 10-K Table of Contents Indefinite-Lived Intangible Assets and Goodwill Description Our policy is to evaluate indefinite-lived intangible assets and goodwill for possible impairment as of the beginning of the fourth quarter of each year, or whenever events or changes in circumstances indicate that the fair value of such assets may be below their carrying amount.
However, if actual results are not consistent with our estimates and assumptions used to calculate estimated future cash flows, we may be exposed to potentially material impairments. 34 Kontoor Brands, Inc 2024 Form 10-K Table of Contents Goodwill Description Our policy is to evaluate goodwill for possible impairment as of the beginning of the fourth quarter of each year, or whenever events or changes in circumstances indicate that the fair value of goodwill may be below its carrying amount.
Accordingly, the Company recorded $14.5 million in adjustments in 2023 within "cost of goods sold" to accrue for underpayment of duty expense related to prior years. Refer to Note 1 to the Company's financial statements for additional information related to this out-of-period adjustment.
Accordingly, the Company recorded an out-of-period adjustment in 2023 to accrue for the underpayment of duty expense related to the 2022 and 2021 periods. The $14.5 million out-of-period expense, recorded within "cost of goods sold" in 2023, results in a lack of comparability between periods in the statements of operations.
A tax position is recognized if it meets this standard and is measured at the largest amount of benefit that has a greater than 50% likelihood of being realized. Effect if Actual Results Differ From Assumptions Such judgments and estimates may change based on audit settlements, court cases, proposed tax regulations and interpretation of tax laws and regulations.
A tax benefit is recognized if it meets this standard and is measured at the largest amount of benefit that has a greater than 50% likelihood of being realized.
The U.S. direct-to-consumer business decreased 1%, resulting from a decline in retail store sales, partially offset by growth in e-commerce sales. • Revenues in the APAC region decreased 6%, driven by declines in wholesale revenues due to lower wholesale shipments resulting from retailer actions to manage elevated inventory levels, and a 4% unfavorable impact from foreign currency, partially offset by growth in retail store sales. • Revenues in the EMEA region decreased 1%, driven by a decline in our digital wholesale business, partially offset by an increase in retail store sales and a 2% favorable impact from foreign currency.
The decline in our direct-to-consumer business was due to lower retail store sales, partially offset by higher e-commerce sales. • Revenues in the APAC region decreased 6%, primarily resulting from declines in wholesale revenue and retail store sales in China, partially offset by higher e-commerce sales. • Revenues in the EMEA region decreased 6%, attributable to a decline in our wholesale business, partially offset by higher e-commerce sales.
Year Ended December (Dollars in millions) 2023 2022 Percent Change Total reportable segment profit $ 405.7 $ 442.2 (8.3) % Corporate and other expenses (96.1) (88.9) 8.0 % Interest expense (40.4) (34.9) 15.7 % Interest income 3.8 1.4 180.4 % Loss related to other revenues (1.1) (0.6) 81.5 % Income before income taxes $ 271.9 $ 319.1 (14.8) % 2023 Compared to 2022 Corporate and other expenses increased $7.1 million, primarily attributable to an increase in compensation-related expense as well as investments in information technology, including amortization related to prior year investments, partially offset by lower restructuring charges and reductions in discretionary expenses in response to macroeconomic conditions.
Year Ended December (Dollars in millions) 2024 2023 Percent Change Total reportable segment profit $ 456.0 $ 405.7 12.4 % Corporate and other expenses (123.2) (96.1) 28.3 % Interest expense (40.8) (40.4) 1.0 % Interest income 11.1 3.8 194.1 % Loss related to other revenues (1.6) (1.1) 51.5 % Income before income taxes $ 301.4 $ 271.9 10.9 % 2024 Compared to 2023 Corporate and other expenses increased $27.2 million, primarily due to increases in incentive compensation expense and higher restructuring and transformation charges compared to the prior period.
We are focused on driving brand growth and delivering long-term value to our stakeholders including our consumers, customers, shareholders, suppliers and communities around the world. We incurred costs in 2023 to drive efficiencies in our operations, which included reducing our global workforce, streamlining and transferring select production within our internal manufacturing network and optimizing and globalizing our operating model.
We are focused on driving brand growth and delivering long-term value to our stakeholders including our consumers, customers, shareholders, suppliers and communities around the world.
Additional details on changes in net revenues for the year ended December 2023 as compared to December 2022 are provided in the section titled “Information by Business Segment.” Gross margin decreased 140 basis points, attributable to 370 basis points from higher inventory costs, driven by the impact of inflationary pressures on product and input costs, especially in earlier quarters of the year, and proactive inventory management actions.
Additional details on changes in net revenues for the year ended December 2024 as compared to December 2023 are provided in the section titled “Information by Business Segment.” Gross margin increased 280 basis points, primarily related to 360 basis points of favorability from product costs, channel mix and product mix and 60 basis points due to the out-of-period duty expense recorded in 2023.
Refer to Note 1 1 to the Company's financial statements in this Form 10-K for additional information regarding the Company's Notes and Credit Facilities, including covenants and interest rates thereunder, and borrowing limits and availability as of December 2023.
Refer to Note 1 1 to the Company's financial statements in this Form 10-K for additional information regarding the Company's debt obligations, and refer to Note 15 to the Company's financial statements in this Form 10-K for additional information regarding the Company's interest rate swap agreements.
These decreases in operating margin were partially offset by benefits from pricing adjustments and reduced use of air freight. Other In addition, we report an "Other" category to reconcile segment revenues and segment profit to the Company's operating results, but the Other category does not meet the criteria to be considered a reportable segment.
Other In addition, we report an "Other" category to reconcile segment revenues and segment profit to the Company's operating results, but the Other category does not meet the criteria to be considered a reportable segment. Other includes sales and licensing of Chic ® , Rock & Republic ® , other company-owned brands and private label apparel, and the associated costs.
These decreases were partially offset by an $11.4 million increase related to our continued investments in our direct-to-consumer business and information technology. The effective income tax rate for the year ended December 2023 was 15.0% compared to 23.1% for the year ended December 2022.
These increases were partially offset by a $4.2 million reduction in distribution and freight costs. The effective income tax rate for the year ended December 2024 was 18.5% compared to 15.0% for the year ended December 2023.
Wholesale and Non-U.S. Wholesale channels. We experienced product category expansion in outdoor, non-denim long bottoms and female. • Revenues in the Americas region increased 1%, primarily due to a 10% increase in our U.S. direct-to-consumer business resulting from growth in e-commerce and retail store sales. Despite an increase in our digital wholesale business, the U.S.
Wholesale and Direct-to-Consumer channels, partially offset by a decline in the Non-U.S. Wholesale channel. • Revenues in the Americas region increased 3%, primarily due to growth in our wholesale and direct-to-consumer businesses. Growth in wholesale was driven by an increase in our U.S. digital wholesale business and category growth.
The Company's estimated contractual obligations and other commercial commitments at December 2023 and the future periods in which such obligations are expected to be settled in cash are described below. Contractual commitments on the Company's balance sheets include obligations to make principal payments on $790.0 million of long-term debt based on the defined terms of our debt agreements.
Contractual Obligations The Company believes it has sufficient liquidity to fund its operations and meet its short-term and long-term obligations. The Company's estimated contractual obligations and other commercial commitments at December 2024 and the future periods in which such obligations are expected to be settled in cash are described below.
The Company has $69.2 million of gross deferred income tax assets related to income tax credit carryforwards and $30.5 million of gross deferred income tax assets related to operating loss carryforwards, offset by valuation allowances of $65.7 million and $17.8 million, respectively.
The Company has $65.5 million of gross deferred income tax assets related to income tax credit carryforwards and $33.3 million of gross deferred income tax assets related to operating loss carryforwards. We periodically assess the realizability of deferred tax assets, which often requires significant judgment.
We continue to closely monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand. Business Overview We continue to execute on our Horizon 2 multi-year strategic vision, "Catalyzing Growth," which outlines four growth catalysts: (i) expansion of our core U.S.
We continue to closely monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand.
Wholesale revenues due to lower wholesale shipments resulting from retailer actions to tightly manage inventory levels, predominantly in the fourth quarter, partially offset by growth in our U.S. digital wholesale business. Non-U.S. Wholesale revenues decreased 5%, driven by a decline in our digital wholesale business in EMEA and reduced wholesale shipments in APAC. The decreases in U.S Wholesale and Non-U.S.
Wholesale and Direct-to-Consumer channels offset by a decline in the Non-U.S. Wholesale channel. U.S. Wholesale revenues increased 1% primarily attributable to growth in our digital wholesale business and strength in our Outdoor and Western businesses, partially offset by retailer actions to conservatively manage inventory levels and a decrease in revenue from seasonal product.
These macroeconomic factors contributed to uncertain consumer spending patterns leading to retailer actions to tightly manage inventory levels, which impacted our results during 2023.
The macroeconomic factors discussed above, primarily interest rates and inflation, contributed to ongoing retailer actions to conservatively manage inventory levels, which impacted our results during 2024.
Macroeconomic Environment and Other Recent Developments Macroeconomic conditions, including inflation, elevated interest rates, recessionary concerns and fluctuating foreign currency exchange rates, as well as continuing global supply chain issues and uneven post-pandemic economic recovery in China, continue to adversely impact global economic conditions, as well as the Company's operations.
Macroeconomic Environment and Other Recent Developments Global macroeconomic conditions that continued to impact the Company during 2024 included ongoing elevated interest rates, moderating inflation, fluctuating foreign currency exchange rates, supply chain issues and inconsistent consumer demand. These factors continued to contribute to uncertain global economic conditions and consumer spending patterns, which impacted retailers' and the Company's operations.
The year ended December 2022 included a net discrete tax expense primarily related to changes in deferred tax valuation allowances. The net discrete tax expense for the year ended December 2022 increased the effective income tax rate by 3.4%.
The 2024 effective income tax rate included a net discrete tax benefit primarily related to a decrease in unrecognized tax benefits and interest as well as benefits from stock-based compensation. The net discrete tax benefit for the year ended December 2024 decreased the effective income tax rate by 1.5%.
Wholesale were partially offset by an 8% increase in Direct-to-Consumer revenues, driven by growth in retail store and e-commerce sales. We experienced product category expansion in non-denim long bottoms and outdoor.
Direct-to-Consumer revenues increased 4% with growth in e-commerce sales partially offset by declines in retail store sales. The increases in U.S. Wholesale and Direct-to-Consumer were offset by a 7% decrease in Non-U.S. Wholesale revenues, driven by reduced wholesale shipments in all regions.
Income Taxes Description As a global company, Kontoor is subject to income taxes and files income tax returns in over 50 U.S. and foreign jurisdictions each year. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.
A future impairment charge for goodwill could have a material effect on our financial position and results of operations. Kontoor Brands, Inc. 2024 Form 10-K 35 Table of Contents Income Taxes Description As a global company, Kontoor is subject to taxation and files income tax returns in over 50 U.S. and foreign jurisdictions each year.
Term Loan A requires quarterly repayments which commenced in March 2023, and the remaining principal is due at maturity. Additionally, the Company has outstanding $400.0 million of unsecured 4.125% senior notes due 2029. These debt obligations could restrict our future business strategies and could adversely impact our future results of operations, financial conditions or cash flows.
These debt obligations could restrict our future business strategies and could adversely impact our future results of operations, financial conditions or cash flows.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInsured Risks The Company is self-insured for a significant portion of its employee medical, workers’ compensation, property and general liability exposures, and purchases from highly-rated commercial carriers to cover other risks, including property, casualty and umbrella, and to establish stop-loss limits on self-insurance arrangements. 36 Kontoor Brands, Inc 2023 Form 10-K Table of Contents Cash and Cash Equivalents Risks We had $215.1 million of cash and cash equivalents at the end of 2023.
Biggest changeInsured Risks The Company is self-insured for a significant portion of its employee medical, workers’ compensation, property and general liability exposures, and purchases from highly-rated commercial carriers to cover other risks, including property, casualty and umbrella, and to establish stop-loss limits on self-insurance arrangements.
Based on balances of outstanding debt, sold trade accounts receivable and cash equivalents as of December 2023, the effect of a hypothetical 1% increase in interest rates would be a decrease in reported net income of approximately $0.9 million. Foreign Currency Exchange Rate Risks We are a global enterprise subject to the risk of foreign currency fluctuations.
Based on balances of outstanding debt, sold trade accounts receivable and cash equivalents as of December 2024, the effect of a hypothetical 1% increase in interest rates would be a decrease in reported net income of approximately $2.6 million. Foreign Currency Exchange Rate Risks We are a global enterprise subject to the risk of foreign currency fluctuations.
Approximately 21% of our net revenues in 2023 were generated in international markets. Most of our foreign businesses operate in functional currencies other than the U.S. dollar.
Approximately 20% of our net revenues in 2024 were generated in international markets. Most of our foreign businesses operate in functional currencies other than the U.S. dollar.
For cash flow hedging contracts outstanding at December 2023, if there were a hypothetical 10% change in foreign currency exchange rates compared to rates at the end of 2023, it would result in a change in fair value of those contracts of approximately $22.7 million.
For cash flow hedging contracts outstanding at December 2024, if there were a hypothetical 10% change in foreign currency exchange rates compared to rates at the end of 2024, it would result in a change in fair value of those contracts of approximately $20.8 million.
Management continually monitors the credit ratings of the financial institutions with whom we conduct business. Similarly, management monitors the credit quality of cash equivalents. Deferred Compensation and Related Investment Security Risks The Company sponsors a nonqualified retirement savings plan for employees whose contributions to a 401(k) plan would be limited by provisions of the Internal Revenue Code.
Similarly, management monitors the credit quality of cash equivalents. 36 Kontoor Brands, Inc 2024 Form 10-K Table of Contents Deferred Compensation and Related Investment Security Risks The Company sponsors a nonqualified retirement savings plan for employees whose contributions to a 401(k) plan would be limited by provisions of the Internal Revenue Code.
To manage risks of commodity price changes, management negotiates prices in advance when possible. We have not historically managed commodity price exposures by using derivative instruments. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See “Item 15. Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K for information required by this Item 8.
To manage risks of commodity price changes, management negotiates prices in advance when possible. We have not historically managed commodity price exposures by using derivative instruments.
Removed
Kontoor Brands, Inc. 2023 Form 10-K 37 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable.
Added
Cash and Cash Equivalents Risks We had $334.1 million of cash and cash equivalents at the end of 2024. Management continually monitors the credit ratings of the financial institutions with whom we conduct business.

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