Kontoor Brands Inc., the US denim group, has reported a decrease in revenues for the third quarter. This decline can be attributed to inventory rebalancing efforts by US retailers and the impact of Covid-19 lockdowns in China. The total revenues for the quarter decreased by 7% to $607 million, with US revenue experiencing an 8% dip to $452 million. Both the Wrangler and Lee brands saw reductions in sales.

The decrease in US wholesale can be explained by lower shipments resulting from retailer inventory rebalancing, which were down 9% compared to the same quarter last year. International revenue also took a hit, decreasing by 3% to $154 million. This was largely due to the Covid-19 lockdowns in China, which led to a 24% reduction in local revenues. However, there was a sequential improvement from the 50% decrease seen in the second quarter of 2022.

In contrast, revenue in Europe increased by 7% due to digital sales and a shift in shipment timing associated with the implementation of an ERP system last year.

Breaking down the revenue by brand, Wrangler global revenue decreased by 4% to $406 million, while Lee sales plummeted by 13% to $198 million. Other global revenue also saw a decline, falling by 33% to $2 million compared to the same period last year.

Despite the challenging environment, Scott Baxter, President, Chief Executive Officer, and Chair of Kontoor Brands, expressed optimism. He highlighted the sell-through of their brands and continued point-of-sale (POS) share gains in the largest market. However, he acknowledged the adverse impact on sell-in and global revenue due to US retailer inventory rebalancing efforts and Covid-19 lockdowns in China. Baxter credited mix benefits, strategic pricing, and tight expense controls for helping offset inflationary pressures and deliver better-than-expected profits.

Looking ahead, Kontoor Brands has revised its 2022 outlook. The company now expects a 4% increase in yearly revenue, down from the previous guidance of approximately 6%. Despite these challenges, Kontoor Brands remains committed to navigating the evolving business landscape and driving growth for its brands.

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