Kontoor Brands Inc. has learned a thing or two about acquisitions from former parent VF Corp.
And Kontoor CEO Scott Baxter himself has talked about doing deals once the company established a “true multibrand platform” for its Wrangler and Lee jeans brands post-VF’s spinoff of its jeanswear group in May 2019. Kontoor’s Project Jeanius initiative has helped the company evolve operations from a legacy structure to ensure continuity post-spinoff to a model setting up the firm for its next stage of growth.
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During the company’s fourth-quarter earnings conference call in February 2024, Baxter said that Kontoor could make an acquisition if it wanted to, but that it would have to make sense from a financial standpoint, a brand standpoint and a culture standpoint. “And we also are very keenly aware we want to pay the right price for the right type of acquisition. So if that happens to come along, we’ll make sure we go ahead and do that,” he said at the time.
Norwegian outdoor and workwear brand Helly Hansen checked all of Kontoor’s boxes. The company said on Wednesday that it was acquiring the brand from Canadian retailer Canadian Tire Corp. for $900 million deal, comprised of $200 million from excess cash on hand and $700 million in new debt. Helly Hansen also owns Musto, a sailing apparel brand that it acquired in 2017 prior to its acquisition by Canadian Tire.
Helping to set the stage for Kontoor to operate from a position of strength has been organic growth driven by Project Jeanius. Kontoor is set to report fourth quarter and full year results on Feb. 25. On Wednesday, it said preliminary fourth quarter 2024 revenue rose 4 percent to $699 million from year-ago levels, with gross margin at 43.7 percent. Kontoor said GAAP earnings per share for the quarter is about $1.14 and that full year 2024 cash flow from operations was approximately $368 million.
“This acquisition will drive significant value for Kontoor, Helly Hansen and our shareholders,” Scott Baxter said during a company conference call on the transaction.
He said the categories at the top of the list for potential acquisitions were outdoor and workwear. Helly Hansen is a brand that was attractive because it has both categories. The brand also checked other boxes on Kontoor’s must-haves, which include authenticity of brand, structural tailwinds and a meaningful long term growth opportunity.