Clothing company Kontoor Brands (NYSE: KTB) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 1.3% year on year to $622.9 million. On the other hand, the company’s full-year revenue guidance of $3.08 billion at the midpoint came in 16.7% above analysts’ estimates. Its non-GAAP profit of $1.20 per share was 3.1% above analysts’ consensus estimates.
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Kontoor Brands (KTB) Q1 CY2025 Highlights:
- Revenue: $622.9 million vs analyst estimates of $626.3 million (1.3% year-on-year decline, 0.5% miss)
- Adjusted EPS: $1.20 vs analyst estimates of $1.16 (3.1% beat)
- Adjusted EBITDA: $103.6 million vs analyst estimates of $100.3 million (16.6% margin, 3.3% beat)
- The company lifted its revenue guidance for the full year to $3.08 billion at the midpoint from $2.66 billion, a 15.6% increase
- Management raised its full-year Adjusted EPS guidance to $5.45 at the midpoint, a 3.8% increase
- Operating Margin: 11.8%, down from 13.4% in the same quarter last year
- Free Cash Flow Margin: 11.8%, up from 8.2% in the same quarter last year
- Constant Currency Revenue was flat year on year (-6% in the same quarter last year)
- Market Capitalization: $3.51 billion
“Our strong first quarter results reflect the operational agility that is a cornerstone of our business,” said Scott Baxter, President, Chief Executive Officer and Chairman of the Board of Directors.
Company Overview
Founded in 2019 after separating from VF Corporation, Kontoor Brands (NYSE: KTB) is a clothing company known for its high-quality denim products.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Kontoor Brands’s 1.6% annualized revenue growth over the last five years was weak. This fell short of our benchmarks and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Kontoor Brands’s recent performance shows its demand has slowed as its revenue was flat over the last two years. 
Kontoor Brands also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales were flat. Because this number aligns with its normal revenue growth, we can see that Kontoor Brands has properly hedged its foreign currency exposure. 
This quarter, Kontoor Brands missed Wall Street’s estimates and reported a rather uninspiring 1.3% year-on-year revenue decline, generating $622.9 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 2.1% over the next 12 months. While this projection indicates its newer products and services will fuel better top-line performance, it is still below the sector average.
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Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Kontoor Brands’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 12.4% over the last two years. This profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.
This quarter, Kontoor Brands generated an operating profit margin of 11.8%, down 1.6 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Kontoor Brands’s EPS grew at a decent 11.7% compounded annual growth rate over the last five years, higher than its 1.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
In Q1, Kontoor Brands reported EPS at $1.20, up from $1.16 in the same quarter last year. This print beat analysts’ estimates by 3.1%. Over the next 12 months, Wall Street expects Kontoor Brands’s full-year EPS of $4.93 to stay about the same.
Key Takeaways from Kontoor Brands’s Q1 Results
We were impressed by Kontoor Brands’s optimistic full-year revenue guidance, which blew past analysts’ expectations. We were also glad its full-year EPS guidance exceeded Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, it wasn't a perfect quarter but it was a decent one. The stock remained flat at $63.50 immediately after reporting.
Kontoor Brands may have had a good quarter, but does that mean you should invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
