Kontoor Brands, Inc. Stock

All right. Good afternoon to all of those who are joining us here in Oslo. And to those that are on the webcast, good morning and good evening. Welcome to Helly Hansen's 2026 Investor Day. We are so glad that you are here. My name is Erinn Murphy, and I lead Finance and Operations for Helly and Corporate Investor Relations.

I joined Kontoor a few months ago, and some of you have already asked, what were the things that made you join? And the answer has been very simple. It is 3 things. It's been about the team, which I know you spent time with this morning. It's the culture and it's the opportunity. And my hope is that today, you come away with a deeper understanding of all 3 of those things.

But before we get going and as a matter of formality, I need to remind everyone that the following presentation includes forward-looking statements that are based on the information available to Kontoor and subject to risks and uncertainties that could cause actual results to differ materially from the information presented today. In addition, the presentation will reference certain non-GAAP financial measures. Please see Kontoor's investor website for a full reconciliation of GAAP to non-GAAP financial measures.

And unless otherwise stated, the numbers you will see in the presentation today are for the Helly Hansen brand on a stand-alone basis and exclude Musto. So with that out of the way, we've got a full agenda this afternoon. In the first hour, you are going to hear the clear purpose that Helly Hansen fits within the broader Kontoor Brands portfolio. Our leaders will then share more about the Helly Hansen brand, our DNA and our heritage, our product and innovation engine as well as our consumer.

Following a brief break, we will discuss the commercial drivers of both the sport as well as the workwear business. And we will wrap our prepared remarks with the levers that underpin our 2030 financial plan. We will then conclude by inviting all of our speakers to the stage for a Q&A session. As important as the plan is the team here behind the plan. I know you've had an opportunity to meet everyone in the last couple of days, but I am particularly proud to introduce the Helly Hansen leadership team, Borre, Tor and Patrik, who collectively have been here for 60 years.

And so for those in the room, before we get going, just a reminder to silence your cell phones and no applause in between sections. And so at this time, I would like to welcome to the stage, Joe Alkire, Kontoor's President and Chief Financial Officer. Joe?

Well, thank you, Erinn, for that warm introduction. Good afternoon, everybody. Welcome to Norway and what a beautiful day for an Investor Day. Good morning to those of you joining us on the webcast from the U.S., and good evening to our audience in Asia Pacific. Today is a very exciting day for Kontoor Brands and for Helly Hansen. This is a day we've been looking forward to for some time.

We're thrilled to be here and to have the opportunity to share with you our long-term strategy and growth plan for the Helly Hansen business over the next 5 years. And what an honor to be able to do so from Oslo, the heartbeat and soul of the Helly brand and its people, a place our Helly colleagues call Paradise. And the more time that we've spent here as a Kontoor management team, the more we're beginning to appreciate why.

We've got a great agenda for today. And over the next few hours, I believe you'll have a better appreciation for why we have so much confidence in this team here at Helly, the business we're building together and the tremendous growth and value creation opportunity that we have right in front of us. But before we dive into Helly Hansen, I want to spend a few minutes on Kontoor, the enterprise, what's been accomplished over the past several years and the way we see the evolution of our strategy shaping our business moving forward.

Kontoor has delivered exceptional outcomes since the spin-off in 2019. We've delivered an annualized total shareholder return of 15%. And over the past 3 years, our total returns have been even stronger at over 20%. We've generated over $1.8 billion of cumulative free cash flow, and we've returned over $1 billion to shareholders through a combination of share repurchases and dividends. And with our planned [ ASR ] in the fourth quarter, our capital returns will approximate $1.5 billion.

We've significantly improved the profitability of the business. We've delivered 600 basis points of gross margin improvement, 300 basis points of operating margin improvement. And we further improved our return on invested capital to close to 30%, which remains among the highest in our sector. These numbers reflect the operational discipline, the execution excellence and the disciplined capital stewardship that have become hallmarks of Kontoor Brands. And our performance is something that we're incredibly proud of.

In addition to our financial performance, we've evolved the Kontoor portfolio, and we continue to strengthen the business. Over the past several years, we've sold noncore and other underutilized assets, such as the Rock & Republic brand, a portion of our manufacturing operations in Mexico. We announced the acquisition of Helly Hansen and the divestiture of Lee, significantly improving our financial profile and the growth outlook of a more focused portfolio anchored by Wrangler and Helly Hansen.

We executed the first iteration of our Project Jeanius transformation program, delivering more than $100 million of gross annualized savings. We greatly simplified our organizational structure and our operating model to enable faster, more streamlined decision-making. And we've significantly increased the level of investment behind our business. While much has been accomplished, our work is not done. In fact, we think we're at the beginning of a step change in our growth and TSR algorithm.

And with the unveiling of our growth plan for Helly Hansen today, you're going to see a significant piece of our go-forward Mosaic. So where do we go from here? The moves we've made over the past several years have been very deliberate steps to position Kontoor for more accelerated growth and investment and stronger returns moving forward. Our strategy has evolved, and we're building from a position of strength. We're building from the bedrock foundation that's been established. And the acquisition of Helly Hansen was a key pillar on our journey and a significant piece of our go-forward value creation potential.

All right. The guiding principles that fuel our success, I'd like to spend a few minutes on this because it's important context for the approach we took to the strategy and provide some insight into the core tenets we hold true as a management team and how they influence the way in which we run the company. The first is our culture. Our culture is a competitive advantage. It's part of our magic. We will go to great lengths to protect it and to preserve it. What we have at Kontoor, what we have at Helly Hansen is not easy to create, and we believe it's something that differentiates us.

The importance of the TAM and in category leadership, we believe strongly in the addressable markets in which we operate. We've anchored our portfolio around 3 foundational categories: denim, outdoor and workwear. These markets are large, have attractive growth characteristics. And our brands are well positioned to continue to capitalize on growth opportunities within these markets. We believe in the power of a multi-brand portfolio and in the importance of brand strength. This is a model when managed with focus and resource allocation discipline that can deliver superior long-term shareholder returns. And acquisitions in our core categories will play an important role in our long-term strategy.

We have an unwavering commitment to becoming a more growth-oriented organization and to our transformation. Our growth and transformation strategy is bold. It will require us to move out of our comfort zone and push the boundaries of what's possible, while at the same time, respecting the foundation that's been built and acknowledging that what got us here won't get us to where we want to go. Disciplined capital stewardship. The strength of our balance sheet and our cash flow are competitive advantages. We've put ourselves in an enviable position to play offense when the majority of our industry is on its heels.

The cash flow component of our TSR delivery model and the healthy balance between earnings growth and cash flow -- capital returns is a differentiator. Talent is a big part of our strategy. Our people are our #1 asset. We're committed to elevating our talent, developing our talent and empowering our talent. Our people will drive and enable the success of our strategy. And lastly, operating with transparency. This is part of our culture. We operate with a high degree of transparency and integrity. That's both within our organization as well as the institutions we partner with outside of our organization, including our investors. We've earned credibility for consistent execution and maintaining a high say-do ratio, which in turn leads to a high degree of trust in our leadership team.

As part of our growth acceleration and transformation, we've defined a new North Star for Kontoor Brands. Our iconic brands are woven together by a deep authority in the denim, outdoor and workwear categories. We empower consumers to pursue their passions with confidence and authenticity through innovative design, exceptional products and compelling performance. These words were chosen very carefully. And by 2030, we aspire to be recognized not only for our financial performance and our operational excellence, but for category leadership with inspiring products, compelling consumer experiences and world-class capabilities.

We have sharpened our portfolio focus around 3 core categories: denim, outdoor and workwear. Each is large, growing and supported by tailwinds such as casualization, Western outdoor lifestyle and cultural relevancy driving denim, increased skilled trade participation and safety requirements driving workwear and the continued shift to more active lifestyles and wellness driving outdoor. We are planting our flag in categories where our brands are authentic, have deep authority and have earned the credibility and a differentiated right to win.

We're also being more prescriptive about the role each of our brands play within our portfolio, and each of our brands have a distinct role to play in the future of Kontoor. Helly Hansen is our growth engine. The mandate is clear: expand aggressively in the U.S. and the Alps, grow in technical outdoor and workwear, 2 categories where we have massive opportunity relative to where we are today. Double-digit revenue growth, significant gross margin and operating margin expansion, supported by increased investment.

Wrangler is our balanced grower. The mandate is also clear: protect and build upon the core business and accelerate growth in women's, DTC and adjacent non-denim categories. Mid-single-digit revenue growth, gross margin expansion, increased brand investment and strong and durable cash generation. A focused multi-brand portfolio managed with resource allocation discipline can deliver superior long-term shareholder value. When we're clear about what each brand stands for, invest where we have a differentiated right to win and build shared enterprise capabilities that make brands better by being part of the same company.

Kontoor brings deep expertise and platform capabilities as a more synergistic brand owner of Helly Hansen. Kontoor's deep expertise and capability set at scale are key enablers of a more efficient growth model for Helly Hansen moving forward. This is one of the reasons this acquisition was so compelling. Kontoor's capability set, and we've highlighted a representative set here. These capabilities were immediate unlocks for the Helly business. And these capabilities not only benefit Helly Hansen, but position Kontoor as a more advantaged acquirer of additional assets in the future.

All right. The growth strategy you're going to see from the Helly team today is focused, and it's anchored on 3 key pillars: Supercharge the U.S., a large and highly attractive market with significant headroom for growth, expand in technical outdoor, including trail running, hiking, backpacking and climbing and power the workwear category globally. Technical outdoor and workwear are 2 key aspects of our business where we have massive opportunity, have earned credibility and a differentiated right to win.

These 3 initiatives account for the overwhelming majority of the growth in our 5-year plan. We expect our plan to deliver strong financial results. We expect revenue to grow to over $1.1 billion over the next 5 years, reflecting a 10% CAGR with even stronger growth in 2028 and beyond as the benefits of our early investments begin to scale. We will drive operating profit to approximately $165 million, reflecting a mid-teen operating margin driven by significant gross margin expansion, operational discipline and increased brand investment.

We also expect Helly Hansen to contribute over $500 million of cumulative cash from operations, supporting our balanced TSR delivery and capital allocation optionality. Our plan is not only financially attractive, but we believe it's one of the most exciting growth stories in all of consumer. So with that overview, it is now my pleasure to introduce the Global Head of Helly Hansen, Borre Hegbom.

Borre is a former Norwegian professional skier and athlete. He's been with the brand for more than 20 years and has been a critical part of the brand's growth and success during that time period. He's also the first Norwegian leader of the brand in decades. Borre's leadership through the acquisition of Helly has been exceptional. He's been a strong partner to me and the broader Kontoor organization, and this is something that was evident since the first day we met him. Borre's tenacity, his passion and his commitment are unmatched. We have an incredible amount of confidence in Borre's leadership, and there is no better person to honor the legacy of Helly and be a steward of the brand into the future.

Borre?

Thank you, Joe. Thank you a lot. That was a nice introduction. Wasn't it? It's going to trigger some salary discussions, I can tell you. Okay. Yes, like Joe said, I'm Borre. I've been in the company for 22 years. Before that, I was 8 years in Nike. So I guess you can call me a veteran. I probably look like that, too. I had the pleasure of leading Scandinavia first, and then I did Europe. And the last 10 years, I've done sport globally, both wholesale and DTC.

What I'm going to do now, I'm going to introduce you to the brand, a little bit where we are today and where we're going forward. And I'm coming back another time later today. So let's jump into it. Helly Hansen is a Norwegian brand born and raised here in Norway, founded by a sea captain who was tired of being wet. What he did was that he made his own waterproof jacket that he started to sell. That's how it all started.

Next year, we're celebrating 150 years. We are one of the very few brands that has more than 100 years. We're one of the oldest brands in this industry today. And we've been here now for 150 years. Our mission is very simple. We make professional grade gear to help people stay and feel alive. You're going to hear professionals during the whole day today. We have 150 years of innovation. The reason why Helly Hansen has been so successful over the years is 3 things: product, innovation and Scandinavian design. That is something to remember, Scandinavian design.

And that will remain core to who we are going forward too. We will not drop the ball on product. The company has a long history of innovation, as I said. We were the first brand launching the synthetic midlayer and we -- in the '60s, and we came with the first synthetic base layer in the '70s. Tor, my colleague, is going to come back and talk more about the innovation and product later.

What's unique with Helly Hansen and separates us from the competition is where we play. Most outdoor brands have been on the South Pole, North Pole and Mount Everest, so have we. But we are one of the very few brands operating on the toughest conditions in the world, the ocean. It's a completely different ball game. It's not rain and snow that is the problem. It's waves of saltwater coming over you. So we make one of the most advanced products in this industry today. My point is, if we can keep these guys protected and dry, we can keep the end consumer dry anywhere.

We are trusted by professionals. We work with athletes, fishermen, search and rescue companies, mountain guides, yes, you name them. We have a long-standing partnership as an example, with a lot of ski resorts around the world. The products they have, you can't find in a store or online. They are customized for their needs. The jacket, the blue jacket that you see over there, that's for the Norwegian Alpine ski team this year. That jacket specifically is designed and developed together with the athletes of the team. That's how we work with the professionals.

Culture. There is a reason why I've been in this company for 22 years. It's a good place to be. We have a very unique culture in Helly. We're very passionate. We're open, we're honest, result-oriented. We are winning, and we're having a lot of fun. I think it's very important when you go to work, it has to be fun to go to work. I've had the pleasure of working with colleagues in this company that has built this -- the revenue 10x since we started, more than 10x. Today, there's around 250 people in the company that has been here more than 10 years. I think that is something that we are proud of and is very unique.

So where did we end in '25? We ended at $675 million. We doubled the business since 2016. 25% of the total business is DTC. We have 1,300 employees around the world. We operate in 50 countries, and we have 115 brand stores around the world. That is very important to note, ex-China, which I'm going to come back to. We have scaled the Helly Hansen brand over multiple owners. The majority of the owners that I have worked under has been private equity companies, owners with a limited approach to investments.

Despite that, we have managed to grow this business high single digits over the last 17 years. And this is an important slide that you need to remember. What is different on Kontoor? They understand this business. We speak the same language. They can really help us in the U.S. marketplace. They are U.S. experts. We will have access to Kontoor's multi-brand platform. That is a big upside for us, and they understand that we need to invest to accelerate growth. This is truly -- and this is honest, I've been here for 22 years. This is truly a game changer for Helly Hansen and the people in this company. It's a new world for us.

So one of the first things that we're doing under Kontoor. We are separating Workwear and Sport into 2 distinct organizations. Today, sport represents 75% of the revenue. Workwear represents 25% of the revenue. We have separated Workwear and Sport in Scandinavia more than 10 years ago. The revenue is equally the same. It shows the potential of workwear. So pay attention to workwear here. We're going to go from a specialist European brand in ski, sail and workwear over to a leading premium technical brand globally.

Three things to remember after today, we're going to go more into details on these. But 1, we're going to supercharge U.S., 60% of the growth will come from the U.S. 2, we will be in outdoor. Keep in mind also, we have a very strong position today in ski and sailing. And with the separation of sport and workwear, we will power workwear and power -- give workwear the resources they need to grow the business. With that, I'm handing over to a guy who has just been for 21 years, been managing product for a long time, done a great job, and here is Tor Jenssen. Welcome. Thank you very much.

Thank you, Borre.

There you go.

Hello, everybody. Like Borre said, my name is Tor Jenssen. I'm heading up product and merchandising at Helly Hansen. I've also only been here for 21 years. And who knows what they did that first year, but I can tell you the last 21 years have been quite a journey. When I started, I started as a category manager for sailing. The business back then was about $6 million. I quickly took it down to around $3 million. But since then, we've grown that business more than 30x, like 30x. So like I said, quite a journey.

Today, I'd like to talk a little bit more about our long history of innovation, how we have a professional-driven innovation engine and also how we have a playbook for entering technical categories. But first, allow me to just take a step back and anchor this on our long history and also our brand platform. Our purpose is to connect people and the power of nature. The outdoors is really our canvas. That's where we work, that's where we play, that's where we spend our time, and that's where we charge our batteries.

We get up every morning with a mission to create professional grade gear to help people stay alive in harsh conditions and -- help people stay alive in harsh conditions and feel alive and safe in the outdoors. In this work, we are guided by our values. And of course, quality is one of the most important values we have. Meeting consumer expectations with quality product is really the foundation for our company. Another important value for us is responsibility. Being a Scandinavian brand coming from Scandinavia, being responsible is reflected in everything we do, also in our product.

And as you have probably already noticed, we are passionate. We are very passionate about this brand, our product, our teams being part of Kontoor and also passionate about our future opportunities. I think you've already seen this both in the team, also from Kontoor management, and I hope you will see this in the rest of our discussions. Another thing we are very, very passionate about is innovation. This is the most important value for this company and this brand, and it's also one of the most important things for our future success.

This brand has a long legacy of innovation and being at the forefront in our industry. If you go back to 1878, that's the first year of this company, this company won an award for product excellence at the World Trade Fair in Paris. So since then, innovation has been in our blood and propelling us forward. Ever since launching the first waterproof jacket in 1877, later launching more waterproof technologies, and then we launched the world's first synthetic midlayer, the pile fleece. Some years later, we launched the first synthetic base layer, the Lifa base layer.

We actually started the technical base layer category by launching these products. Some year later, we launched the waterproof breathable technology, Helly Tech. That was the basis for introducing the 3-layer system, meaning you dress with a base layer next to skin for moisture management, you have a synthetic mid-layer as insulation and you have a protective waterproof breathable layer on the outside. This system has later been copied by most brands, but we did it first.

Another aspect, not to be underestimated is how we use visually distinct and differentiated designs. Our design language is really rooted deeply in our Scandinavian heritage. The bold color stories, the bright colors is what you can find in the Scandinavian outdoors. This is also a very important safety feature because you have to be visible when the weather suddenly turns bad. And the weather in this part of the world can turn bad really quickly, I can tell you. We also take inspiration from workwear, from professionals and add more visible elements like high-vis hoods, shoulders, detailing, just to make sure you are as visible as possible when you are in the outdoors.

For these reasons, we are continuously being recognized for innovation in our sport -- in our industry. We have an amazing group of talented people working in this company. And every year, every team, every category is bringing out new products with new technologies, new constructions or new materials, and these products go on to win awards. Here are some examples of the awards we've been winning lately. Lately, we've also seen Workwear receiving the same kind of recognition for their work on innovation and products. This is not luck. This is something we do repeatedly and successfully.

And why can I say this with such confidence? Well, we have 3 big sources for our innovation. The first and the most obvious one, of course, is consumer insights. We've always been a consumer-centric company. You will hear later from Erinn, my colleague, on just how well we know our markets and our consumer. Another very important innovation source for us is our long-standing relationships we have with suppliers and manufacturers. Combining our consumer insights with manufacturing capabilities and new materials has allowed us to design, develop and launch a lot of world firsts to the market together with them.

But the one thing that really sets Helly apart on innovation is how we work with professionals. If we look at sport, we play in a lot of different technical categories. If you look at workwear, you will see the same. We work in highly technical categories. When you put this together, you can see that we are an expert in sport. We're an expert in workwear, and we play in both of these categories. And in the middle is what we call professionals. At the intersection of sport and workwear, we have professionals.

These are the people that don't get to choose their day. They have to go out there, whatever the weather, whatever the situation. These are the pros. Like mentioned, they are search and rescue. They are skiers, they're ski patrol, they're Coast Guard, sometimes they're athletes. And we work very closely with this group of people. We have a separate team that is only dedicated to servicing these professionals with unique products dedicated designed to their needs. On a global basis, we have more than 55,000 professionals that go to work every year in our uniforms, and this is not including workwear.

This, we believe, is a strategic and defendable advantage to Helly Hansen. The professionals are our most valued source of innovation of testing and validating our products and concepts before we launch to consumers. Let me give you some quick examples. Like Borre mentioned, we work very closely with the Norwegian ski team. When they race, they use a race suit, but everything they do in between, they need warmth, comfort and protection. So we sat down with them and developed a jacket and a pant, and that's outfit in the light blue, you can see next to the screen over there.

They needed specific details, a lot of extra features, and you would also be surprised at how important good looks are to them. We sat down with them, worked for a long time and the end result is this outfit. It ended up winning a lot of awards and also turn into a commercial winner. Another example is how we work with ski resorts. We work very closely with ski patrol and what we found out is that their needs is very similar to the needs of free ride skiers. So on ski patrol, you would be surprised. This is a small thing, but to them, it's really important.

You'd be surprised at how many pockets they need for a full day on the mountain. They need pockets for their own gloves, maybe a radio, some food for someone else's gloves, maybe some more food. These learnings are something we have put into our in-line collections. And that is partly one of the reasons we've been successful. In sailing, we work with a lot of the best ocean racers in the world. Like Borre said, that's the harshest conditions you can have, like there are tons of water coming over the boat. We are building products, technical products for them that are unique to their needs.

They need double cuffs for extra protection against water. They need a higher collar. They need a face visor. They need a more advanced hood. They need fully waterproof pockets for safe storage, and they also need a high visibility hood and reflective elements for safety if they fall in the water. These bombproof designs are very different from a ski or a mountain jacket. And even from other sailing products, like for America's Cup, they will need something that is highly breathable, flexible and aerodynamic, just as an example to how different the needs of these professionals can be.

Over the last decade, we've started working with mountain guides and search and rescue. Here, we are taking the exact same approach as we have done in ski and sailing. We're building technical products to the specifications of professionals, and then we're doing testing, testing and testing, making sure the products concepts are trusted by professionals before we launch it to consumers. So why are we trusted by professionals? Well, we are very proud to say that we're trusted by professionals, and there's a lot of different reasons why.

One of the most important reasons is that we have proven technologies that gives us a competitive edge. We also have quite a few unique to Helly Hansen technologies. One of those technologies is Helly Tech. This is our waterproof, breathable and windproof technology. This technology has been developed over the last 40 years and refined and refined and refined. It is a system that enables us to design and construct really waterproof products for ocean racing, highly breathable products for the mountains or highly flexible products for athletes.

With Helly Tech, we can basically design to the use case. And this is one of the key learnings from working with professionals. There is no one technology to solve all problems. Another key technology to Helly Hansen is Lifa. Lifa is the warmest, driest and lightest fiber you can find out there, but it's also very, very hard to work with because of its low melting point. This is something Helly Hansen has mastered over the last 50 years. It's also a very good example of how we scale technologies to more use cases.

What really started as a next to skin base layer has later been developed to be found in a wide range of product types and different use occasions. Our latest Lifa innovations include introducing Lifa into insulation, making it warmer and lighter than anything else we have in the collection. We've also been putting it into membranes and outdoor fabric using the unique properties of the fiber for watershedding and creating waterproof breathable membranes without the use of chemical treatments. You can expect to see more innovation coming in this area.

Today, we play in multiple categories. And this is an important point for me to make. We are not a cross-category generalist. We are a multi-category specialist. So what does this mean? Well, in all of these technical categories, as you know, we go up against other specialist brands.

Still, we are the #1 technical sailing brand in the world. We are a leader in winter sport and ski in North America. We're a leader in workwear in Europe, and we're trusted by professionals all around the world. With our existing playbook from ski and sailing, working with professionals, creating consumer-centric collections, aligning our resources with our strategic priorities, storytelling through the lens of professionals and continuous innovation, we are very, very confident that we will win in technical Outdoor and in workwear.

Our success has been anchored in careful category management, first building for professionals, then extending in a good, better, best approach, ending up with a full range of commercial products. This is exactly what we did in sailing. First, we designed and developed the Aegir collection with input from professionals. From the same professionals, we got a lot of input for a midlayer jacket. This jacket later turned into our best-selling franchise, the crew jacket. It meets and exceeds the needs of ordinary sailors, and it still brings a lot of the same technical aspects and technology you find in the Aegir collection.

This is the exact same model we are currently running in outdoor. At the pinnacle end, you have the Odin concept for mountain guides and search and rescue. Beneath it sits Verglas. This is targeting the nonprofessional hikers, and this is the assortment we expect to grow and expand our presence in the hiking business. This is the model. We always built first for professionals, extend that credibility to reach more consumers and meet more needs. In the near term, our growth will be driven by scaling what works, building awareness and distribution for the categories that are already strongest.

For the first part of the plan, that's where we expect to see the growth. This is commercial work, putting more excellent products in front of more consumers in new markets. At the same time, we are investing in Technical Outdoor to broaden the assortment and extend our technical credibility. These products have longer development cycles. So this opportunity will build over time as we launch more and more products. In our plan, we expect Technical Outdoor to be the biggest growth driver in the last half of the plan.

So let me finish where I started. We have a long history of innovation, and we're being recognized for that. We have a professional-driven innovation engine that I believe is truly unique. We have a proven playbook of how to enter these technical categories and expanding the business. If you add the operating platform from Kontoor, we can remove the typical hurdles to quick acceleration. And if you add significant investments in brand, product, people and marketing at levels we at Helly Hansen have never seen before, we are very, very confident that we will win in Technical Outdoor and Workwear. And with that, I want to say thank you for listening, and I want to hand it over to my colleague, Erinn, who's going to teach you more about our consumers and our products -- sorry, about our consumers and our markets.

Great. Thank you, Tor. And for those just tuning in online, I'm Erinn Murphy, and I'd love to spend the next 10 minutes grounding us in 3 key areas. First, where we play today across both sides of our business; second, what we have learned about our consumer that gives us the right to win; and finally, how we have used these consumer insights in the foundation of our plan. So as Joe mentioned, we play across 2 large addressable markets. The outdoor market is over $300 billion, but we are myopically and specifically focused on the premium segment that sits just north of $60 billion.

And within workwear, the $85 billion global market, we are focusing on disrupting the North American business and scaling the European segment. So stepping into the technical outdoor market, there are several structural tailwinds that are fueling this market. First, this is a category that is steeped with innovation, has premium pricing, and we expect premium margins over time. Second, it's an activity-based market. You are seeing the rising tide of participation in several outdoor activities, whether it's hiking or rock climbing or trail running, these activities are becoming a global movement and ultimately create a sticky and recurring consumer base.

Third, this is the fastest-growing part of the market and is projected to grow at a compounded annual growth rate of 6% each and every year through 2030. And finally, this is a segment that allows us to extend the wearing occasions year-round and create deeper relationships with our consumers. Our team has done extensive consumer research here in Europe as well as in the United States. And I'd like to share a little bit more about who our consumer is. We have recruited a highly engaged active consumer. 20% of Helly Hansen's core consumer have discovered our brand through a professional.

And as you just heard from Tor, we work with 55,000 professionals year in and year out. We also have a performance-driven consumer. In fact, the top purchasing criteria for our consumer is technical performance. Not surprisingly, our consumer is an enthusiast. They ski an average of 16-plus days a year. And finally, they are already active year round. 75% of our core consumer participate in at least 3 technical outdoor activities. What you are going to hear throughout the day is that we are supercharging the U.S. And so I wanted to share a little bit more about who our consumer is within the United States.

Our consumer leans male, but we have amassed a healthy portion of females as well. 73% of our consumer sits under the age of 43, and they are high category spenders. On average, they spend $1,500 in the winter sport category on a 2-year basis. But beyond who they are, we wanted to better understand what drives their purchase decisions. And we surveyed U.S. winter sport consumers who had purchased in the category over the last 24 months. And what we learned and what you will see here is that there are 4 top attributes that these consumers care most about when purchasing in the category. It's technical performance, being a trusted brand, warmth and weather protection.

And what you're going to see on the next series of slides illustrates how consumers of these leading outdoor brands, which we denote as A through D along the bottom, how they rate individual brand performance across each of these 4 attributes. So this is how consumers of brand A rate brand A against these purchase criteria. This is how consumers of brand B rate brand B against the same criteria. This is how consumers of brand C rate brand C. And this is how consumers of brand D rate brand D. We also asked Helly Hansen consumers to rate us against these same criteria.

Our consumers rate us the highest across technical performance as a trusted brand and in the warmth category. And so the bottom line to us is clear. While our brand is smaller than many of these multibillion-dollar brands, our consumers already give us disproportionate credit in the most important purchase drivers in the category, and this is our right to win. So that brings us to what we believe is one of the most compelling parts of the opportunity ahead. We have an opportunity to drive deeper brand awareness and bring more consumers into the top of the funnel.

Today, our aided awareness sits at roughly 30% in the U.S., which is well below that of leading global peers in the same category. And in fact, when you look at unaided awareness, we sit at just 3%. So how are we going to scale? In the first part of our 5-year plan, we will accelerate growth by reaching new consumers within our core category. This is where we have a stronghold today and deep consumer credibility, and yet we are just scratching the surface. We will also grow through expanding share of wallet for our existing consumers as we play deeper within technical outdoor.

As I mentioned, our core consumer is already active and participate in several outdoor activities. 75% of our core consumer are already hikers and over 50% are trail runners. Our consumer is telling us we have permission to extend into these categories and create that deeper long-term relationship with them. And what you will see on this slide is the opportunity gets so much larger as we expand. There are 2.5x more hikers in the U.S. than there are winter sport participants. So I'd like to shift gears and talk a little bit more about the workwear market.

I know everyone here got to see the workwear showroom today, which was very exciting. But the category, as I mentioned, is an $85 billion category, and we are focused on the North American and the European parts of that and is projected to grow at 6% over the next 5 years. We have already built credit in the harshest climate in the world, which is here in the Nordics. And equally as exciting as the tailwinds powering outdoor are the tailwinds powering the workwear market. We all read the same headlines, but this is an industry, particularly in the U.S. that is being reimagined each and every day.

The cost of higher education is driving more and more consumers to choose an alternate path away from university. As a result, you're seeing multiyear waitlists at trade and vocational programs, and the construction sector is booming. So our opportunity is to lean into these tailwinds and further disrupt the market, particularly in the U.S. And when you look at the U.S. consumer base for workwear, it sits at 35 million consumers, and we are but a spec of that base. So before we take a brief break, I'd like to close my section on how we plan to get after this opportunity.

Our 5-year plan intends to double the marketing spend through 2030. But as important as the dollars that we are putting behind this plan are how we plan to deploy those dollars. So we are moving from what has been more of a performance-led marketing approach to a brand-led marketing approach. Prior to Kontoor's ownership of Helly, on average, we spent about 70% of our marketing dollars on performance, and we are flipping that paradigm. We're also moving more from a fragmented approach across multiple categories and multiple products towards a category-specific storytelling approach.

And finally, we're moving from what has been a centralized marketing team to distinct sport and workwear marketing teams. So to wrap up, we have a passionate base of consumers. They're active. They're big spenders in the category, and they're outdoor enthusiasts. The Helly brand has already created deep credibility and consumer trust. We also expect to grow from recruiting new consumers in our core category and extending the wallet share of existing consumers as we go deeper into technical outdoor. And we intend to build brand awareness as we double marketing and more tactfully deploy those marketing dollars. And so I'd like to thank you all for your attention. We are going to take a brief break. But for those on the webcast, please be back in about 10 minutes. Thank you.

[Break]

Hello again. I'm back. I need to do it twice. It's hard to remember all these slides, but I'm trying to do my best. In this section, I will talk more about the sport business and a little bit of a deeper into the U.S. After me, Patrik is going to come and talk about workwear. He's going to go a little bit deeper into the details that I'm doing here right now. So for you to understand the Workwear business a little bit better. So let's start with sport. Today, sport is 75% of the company's revenue, Helly's revenue.

Back in 2015, we did a reset of the strategy. We focused. We focused on 2 categories, ski and sailing. We focused in 5 countries: U.S., Canada, U.K., Norway and Sweden. Since then, we have more than doubled the sport business. The strategy worked. Keep also in mind that in 2022, we exited Russia. At the time, when we exited Russia, we had 49 brand stores in Russia and a solid wholesale business. The revenue was approximately $40 million and very profitable. So it was a big one for us. This gives you a flavor of our global footprint in sport.

30% of the revenue today is the U.S. Rest of the world represents 70%. Majority of the 70% is in Europe. We operate, like I said, in 50 countries today. 22, we do operate directly. The rest are distributors, mainly in Asia and South Africa, Australia, et cetera. The plan is to grow U.S. the fastest. I've been overseeing the U.S. business over the last 10 years from this building. Now we're hiring a dedicated GM that knows this market inside out in the U.S. marketplace. That's a big difference for us. His name -- he is here today, C.J. King, welcome to the family. You will love it here.

So a little bit more about the U.S. The U.S. business today is $150 million. It's already our largest and fastest-growing country. Keep also in mind, and this is important that you pay attention to. We are already one of the most successful European outdoor brands in the U.S. marketplace. That said, we are relatively small versus the big guys in the U.S. That is something that we now are going after. We have a very healthy balanced channel mix in the U.S. 55% of the business today is wholesale and 45% is DTC. Very important to note again, we're not planning to change that balance. We expect both wholesale and DTC to continue to grow.

Over the last 10 years, since we did our reset, we focused on growing the specialty business in the U.S. We will continue to build and protect that business, but we need to start accelerating the key account business, too. Like Erinn mentioned, to be successful with the key accounts in the U.S., we need to increase brand awareness. That is something that we're starting already this fall. We are already in many of the key accounts in the U.S. today, but in limited number of doors. The plan is to increase the number of doors going forward to 25% to 35% penetration.

The intention is not to be in all doors, but to be in the right doors. We're planning to build the e-commerce business. We plan to double the business by 2030. We will elevate hellyhansen.com as a premium full-price destination. That job, we started with -- already end of '25. We will build a seamless omnichannel experience, and we're deepening capabilities to drive retention, loyalty and customer lifetime value. E-commerce is very important for us in the U.S. marketplace and is already our biggest region in terms of e-commerce. Like I said, e-commerce is already driving stronger quality of sales.

We established, we basically protected our core franchises like the Crew Series that you guys have seen here and the [indiscernible] and Alpha series. Less discounts on them. And so we have seen an increase in AUR by 12% year-to-date. Retail, we will -- we have today 12 retail stores in the U.S. marketplace, mainly located in ski and sailing location. The plan is not to roll out a ton of stores in the U.S., but to roll out a handful amount of stores in the right locations. So to sum it up in the U.S., we expect 45% to 50% of the growth to come from wholesale and 50% to 55% to come from DTC.

But there is a world outside the U.S., too. That's important to remember. What I said, 70% of the business today is outside the U.S. and then mainly Europe. We see big opportunities in Europe, too, and especially in the Alps since we are so strong, especially in the ski category. So why are we focusing on the Alps? It's Europe's largest auto market with a 4-season opportunity. It fits us perfectly well. It's already the largest ski market in Europe, and we have a very strong position in ski. Germany, as an example, is today our biggest country in terms of e-commerce.

And to confirm that we just started these investments, we just opened up a flagship store in Munich a month ago. So that work has already started. Then China. China is an interesting one. I'm always getting impressed when I'm down there, learning a lot. It goes fast. We, the business in China is already very impressive. We have a premium position down there, sorry, this was wrong. We entered the market through a 50-50 JV with a strong local partner called Youngor. They have a strong expertise in the China marketplace. We entered the market actually via the sailing category.

Now we're starting up with outdoor, and we're launching footwear summer '27. We have a premium position in China. It's priced 30% to 40% higher than here in Europe, mainly because they use more expensive fabrics. The business started to take off in '23. In 2025, we ended at close to 90 doors and a revenue of around $100 million. First half, we have delivered 80% growth this year. The plan is to open up another 40 stores this year, and we are on track doing that. It goes fast down there. So to sum it up on sport before I hand it over to Patrik. We already have a very strong position today and especially in ski and sailing. Now it's time to bring it to the next level.

There is still a significant growth potential, both in Europe and U.S. in ski and sailing and also to accelerate the outdoor business. The growth, like I said, will be driven by wholesale and DTC, and we expect all markets and regions to continue to grow, but we expect U.S. and the Alps to grow faster. With that, I'm going to hand it over to a legend in the workwear industry. He has built this business -- workwear business from $25 million to $175 million. So it's impressive what he has done with his team for sure, bring on Patrik, and welcome to the stage.

Thanks, Borre. Thanks for the nice introduction.

Yes. Good luck.

You too. Thank you.

So I'm Patrik Falkenby, and I'm heading up the great, great Helly Hansen Workwear division and have done so the latest 17 years. I actually signed up for 5 years, and now it's 17, so you can all understand that it has been a great and enjoyable journey. Part of the joy has obviously been to [ 7 ] double turnover since then. So the last 17 years with Helly, but actually this year, I have been in the workwear business for 40 years, believe it or not, 40 years since 1986. And I can already now tell you, workwear is a fantastic business to be in.

The development of workwear since I started is almost like going from a T Ford to a Formula 1 car. I think maybe some of you in the showroom before saw some of the Formula 1 cars. Since I started, it has been this great development. And I always say to my colleagues and to my friends, workwear might not be as sexy in lack of a better word as sport or fashion, but it is a financially very sexy business, and we all like that. So you heard what Borre said before, everything started with workwear back in 1877, and this gives us this great heritage that almost no other brand can claim.

That heritage creates authenticity, authenticity, all brands want authenticity. We already have it. And again, authenticity builds credibility and that credibility gives us the undisputable right to participate in all the categories we are present in and then most obviously, workwear. So we are participating in this large growing workwear market globally. And as Erinn mentioned, the addressable market is $85 billion. Only looking at North America and Europe, it's $40 billion. So it's a huge market where we today have a tiny market share. So we have just scratched the surface.

There is a massive headroom for us to grow. And the worker market, as Erinn also mentioned, is predicted to have a 6% CAGR through 2030. The good thing here is that there is a growing demand for high-performance workwear, and we are sitting in the premium sector of this market. The premium sector is growing faster than the entry part of the market. So it is the right place to be. We could actually have grown a lot faster if we wanted to tap into that entry part of the market, but we have been unwilling to compromise the premium brand positioning.

So as I mentioned, as I've been in this business for a long time, and I realize that a lot of you people here and people in general don't walk around thinking about workwear every day, I guess, but I have done that every day, the latest 40 years. So I would like to share with you some of my experience, some of my insights and some of my accumulated conclusions in the Workwear business. So first of all, it is a very, very consistent business. I mean we won't wake up one day and workwear is out of style. Nobody wants workwear. That won't happen.

It's up to us to develop what the end users and companies needs at all times. So in that sense, we control our own destiny. It is a recurring high -- recurring business with high order volumes. That means that we can get in an order from any country in Europe today for GBP 1,000, GBP 3,000 or GBP 5,000, and they expect us to deliver that within one week. So it is a high demand on quick deliveries at this and [indiscernible] business. The worker market, as I said, is very consistent, and we are here in control of our own destiny and customer doesn't want to wait if they need the products, they need it now.

I mean, how often do you see a worker at work without pants? That doesn't happen that often, right? And if you see a worker without pants, they are probably in a very special industry. I'm thinking about swimming teachers and life guards and et cetera. We have very long product life cycles. They are between 5 to 10 years, sometimes even longer. And that gives the stability in the assortment. And we also have a very stable color palette, which is an advantage. And we will most likely never have that the color of the season in workwear is purple.

We introduced between 5% and 10% novelty per year, which means that plus 90% are carryovers. And actually, our customers doesn't want us to change too often. If it works, it works, and they will keep it for a long time. Lastly, we have a year-round demand with limited seasonality. It's almost 50-50 across the year, first half, second half. We also have some structurally great category dynamics. In workwear, there is a very, very high brand loyalty, both as an end user, but also as a company or employer, if you like.

If the end user is satisfied with our product and service, they can actually be brand loyal for all of their working life. I guess that is kind of a man thing, but still, it's the truth. And if the company is satisfied with our products, they doesn't want to change either because switching brand in a company creates -- often creates a lot of noise, and they don't want to have that noise. They want to be able to focus on their core business. So if you can win them, you will keep them for a long time. There is also an increasing safety focus in the world, as we all know.

If you go in and look at big companies' websites, you can clearly see zero accident policies. They state that safety goes before even productivity and zero fatality programs and more. Safety is in focus. And the industry is getting more and more regulated towards different standards, which allows us to sell more premium regulated certified products at higher price points. Safety is priceless. And I guess that is one of the reasons why we, since plus 10 years back, do a significant business with the mining industry in Chile. For them, they want to maximize the safety for the workers and they buy the best workwear and most safe workwear as an insurance if something happens.

In workwear, there is also for obvious reasons, a high wear and tear rate on both workwear and safety footwear due to heavy usage, of course. This gives us a very high purchasing value per end user per year. And they also will need to repurchase frequently. And that is a big advantage for us as well compared with many other businesses. I would like to spend a couple of words about some different types of customers that we have. We have employers, individual buyers and wholesale customers. So let's start with employers. In Europe, it's very common that the employer is the buyer.

And that is a big advantage because the purchase decision for that company is most often taken by one person or a small group. And if you manage to convince that one person that Helly Hansen Workwear is value for money, then that person can buy for 100, 1,000 or even plus 10,000 users. So you get that lever. In my former company, I did contracts like this with companies with plus 30,000 users. So that is a great advantage. As you know, in many other consumer businesses, there is one person taking the purchasing decision for themselves, buying 1 or 2 units. We have that as well, of course.

We have those individual buyers going into a physical store or to an e-com site, buying for themselves. And by the way, the e-com channel will be a very, very important channel for us going forward. And of course, even more so in the U.S., where there is a lot of contracting, and it's not that common that the employer is the buyer. That might change over time. And from consumer research, we can see that 87% of our existing Helly Hansen Worker users have a repeat purchase intent, which means that they are satisfied with our products.

The third type is not consumers, but dealers. These are our wholesale customers, and we sell and distribute through their stores. For them, it's, of course, really important that we provide them with attractive products that they can sell through. And it's also very important that we have a very structured and simple to understand product offering, and I will come back to that. Lastly, we have tenders going back to employers again. That is a business within the business. Very large companies with plus 10,000 users, you often get through tenders.

And we have just started to build up in-house tender department within Helly Hansen Workwear, and I have big expectations on what they can achieve. This will, of course, then allow us to participate in tenders directly with big end users, but also via our existing key accounts with our facilitation. Just to give you a picture of the potential in tenders. A couple of years ago, we participated in a tender called the Nordic Combat Uniform. The total value of that tender was $2.8 billion. One tender, $2.8 billion. So that shows a little bit the potential of tenders and building up an in-house tender department.

So we have this great opportunity to capitalize on this growing and maturing market and being in this industry for so long time, I have been traveling around in almost all countries. And I've noticed that the maturity level in the different countries and regions are very, very different. The Nordics is the most mature market, followed by Europe and then, and Canada, of course, almost a little bit the same as Europe. Then Eastern Europe, U.S. and rest of the world. All regions are maturing. But I have not still been in one country where the development is going in the opposite direction that they are requesting lower quality, less functionality.

They don't care about comfort and fit. It's no regulation. That has not happened. So all the regions and markets are maturing in the same direction, but in different speed. So just to be clear here, what is then the definition of a maturing market? It is that the end users and the companies are requesting better quality, increased functionality, more technical materials, increased focus on comfort and fit and increased demands, of course, on products being developed towards local regulations and safety standards. That all again leads to an increased acceptance for higher price points.

Safety is priceless, remember. For the younger generations, actually design also plays an important role. They still want to look good even if they are at work. So as you all know, we have the headquarters in the most mature region -- workwear region in the world, and we have had great success here. So we have proven that our playbook actually works, and we are effectively sitting on the answer to what less mature markets or regions will request going forward over time. And that is, of course, a great advantage as well. So how are we doing in this market?

Pretty well, I would say myself, we more than doubled the business since 2016, and we intend to double the business again until 2030. And we have done so with very, very, very limited investment. We've had between 2% marketing spend per year, actually on an average between 1.8% and -- 1.7% and 1.8% the last 10 years. That is going to change now with KTB as an owner, understanding brand, first of all, but also understanding the huge, huge opportunity within workwear and they are willing to invest behind it. That never happened before.

During my 17 years here and with the 3 former owners, as Borre alluded to, Workwear has always gone under the radar. Now we are on the radar and now we will utilize the full power of Workwear and go full potential. So it feels a little bit like Christmas Eve for me here. And it has already started. With the approval from KTB, we already this year started to invest heavily in the sales organization. We are also, as I said before, separating the front end of our business between sport and workwear, which will be great. And we have started the search also for a General Manager, Workwear North America.

And again, establishing this in-house tender department will obviously will be great for us. These are actually things we have been talking about the latest plus 10 years, and now it's finally happening. So what is our foundation for success? It is a great brand, it's great products and it's great people with the culture we have been talking about before. This is the very strong foundation we build everything on, both sport and workwear. I believe a lot in focus. So we have been focusing on 3 core categories. That is trades, high-vis and footwear.

To explain trades a little bit more, that's everything from residential and commercial construction, like carpenters, plumbers, electricians to HVAC and more. High visibility speaks for itself, of course, safety, road workers, railways, et cetera. But also here in the Nordics, as you might have seen walking around here, a lot of people within trades actually need to use high visibility for safety reasons. And then footwear, of course, which is used across all jobs. We have focused on these 3 categories, and we have done that with a great success. And why did we focus on these 3 categories?

Because it is within these 3 categories, you build credibility as a workwear brand. When I joined Helly Hansen back in 2009, we did not have that credibility. Now we have built that. And if you can succeed within these 3 categories, you can succeed anywhere within workwear. So that has been really important for us. And how are we doing? We set the bar that 70% of sales should be consisting of these 3 core categories. We have succeeded really well in the Nordics, in the rest of the world, but we are not really there yet in the U.S. And there is a very simple reason for that.

Helly Hansen footwear used to be licensed out through another company. So we first launched Helly Hansen Workwear footwear in the U.S. fall/winter '25. So I expect us to catch up to the 70% pretty quickly in the U.S. We believe that footwear in the U.S. as well is a fantastic opportunity for us. And then you might wonder what other means here in this chart. That is our other strong supporting categories. And here, you can see just a few examples like base layer, like midlayer, like rainwear.

And the good thing is if you win end users within trades, as an example, they will, over time, also need base layer or midlayer when it gets cold, for instance, they will need rainwear when it rains. So they start to buy within their category and then they tap into the supporting categories. I would like to spend some words about concept. For those of you who was in our showroom before, we were talking a little bit about concepts. And within each category, we build concepts or families, if you like, where all the products belongs together.

When I joined Helly, we had an extremely fragmented product offering. It was a lot of freestanding style with no connection whatsoever. Now we build and develop everything in concepts. And the idea is, obviously, that you get attracted by one of the concepts and you buy within that concept. So instead of buying 1 unit, you might buy 2 or 3 within that concept. And here, you can see a couple of examples. Magni is our Pinnacle trades concept. ICU is our volume driver within high-vis or cash cow, if you like. And then we have a newly developed Magni TRX within footwear.

And building our product line with this concept thinking has actually been a big part of our success. So we look into concepts within trades as an example. We try to make a very simple to understand product offering. So again, we start with concept trades. Within trades, we build concept. Within this concept, we structure them in a very, very simple to understand ladder. As you can see on the Y-axis, technical performance and on the x-axis, price. So it's a good, better, best offering. So it's very easy to understand both as an end user and as a company, of course.

This structure is what makes it easy for us or possible to sell into regions with different maturity level. And you can see below the maturity levels I was talking about before for the different regions. So if you are in the Nordics, you probably are more to the right. If you are in the less mature market, you probably look into the concepts more to the left. This makes it also possible for us to sell into both smaller companies and bigger companies with different readiness to spend. If you are 20, 30, 40 people, you might have readiness to spend on our Pinnacle concept, Magni.

But if you are a company with 5,000 users and every cent matters, you probably look more to the left of this structure. And of course, when we get our customers in one of the lower levels here, we always, over time, try to sell up to a more premium concept. And talking about maturity levels again, what we consider as our good offering here in the Nordics is probably considered as best in the U.S. as an example. And it looks the same throughout all categories, category concept and placed in this letter with good, better, best offering. And again, this makes it very easy to understand for end users, for purchasers and companies and for our dealers.

So I would just like to spend a few words about our pinnacle concept within trades Magni. Some years ago, we decided to disrupt the worker market, and we wanted to develop something that had never existed before in the worker market. So we developed this Magni concept. Normally, in our product development process, we have a very, very strict RRP price that we target on each style. That gives us a very, very strict target FOB price. With Magni, we decided to do the total opposite. We said, we don't care about the FOB or the RRP. We just want to develop the best product ever existed in the market.

And we did that, and we'll charge the price it costs. The main purpose of this concept was to push price points north, and to prepare the way for other concepts that we were going to launch shortly after to make them appear more affordable and of course, also to build brand image. The pants were priced at almost $300, never seen before, never ever. And as always, sales did their suggested 12 months forecast, and they came up with 3,000 pieces for the pant specifically. I thought we could do a little bit more, so I put 5,000 pants in for the coming 12-year period.

We were sold out after 2 to 3 months. After 15 months, we've sold 23,000 units of that pant. So what did we learn? We totally, including myself, with 40 years in business, we totally underestimated the end users' willingness to pay for highly technical, comfortable, high performance and well-designed workwear. And I always say, we should send an invoice to all of our competitors because we raised the price bar for all the other brands as well. They were following along over time. So we set a new level for the most expensive pant. I haven't still sent that invoice, but we might do.

And just a few words about pants because pants are very, very important for us and alone stand for 40% of revenue in our core categories. Everybody wears pants in all seasons or most people, as I alluded to before. So it is an all year-round business that very well contributes to our limited seasonality. I also want to mention that consumer insights and innovation is really important and has been really important for Helly Hansen Worker as well. As we are testing most of the products we develop with our professionals.

Here, you can see some of our developers out in the field, getting feedback from our professionals to be able to maximize the functionality and the performance of our products before launch. This gives us this plus 2-year development calendar to actually have time to do these types of testing because they test on time, the developers goes back and improves the product back again and test the product, and that takes time. That gives us a plus 2-year development calendar, as I said. So now our developer has finalized fall/winter '28 and have started to work on spring/summer '29. So they are well ahead.

I also want to show, as you saw in the showroom, one of our innovations launched a couple of years ago called HH Connect System. In short, it's a specialized detachable, interchangeable pocket system that gives you the possibility to build your own pant, customized towards your needs. Different pockets for different types of works, which makes you more efficient during your workday. Talking about innovation, this is just a few examples. We have a lot going on in the coming 5 years. We have a 5-year product road map and everything is laid out. Recently, this year, we launched a concept called Nord.

That is developed for extreme weather protection for coastal workers. And you might have seen it down in the hallway. One of the professional groups that participated in the development of this concept was workers within the fish farming industry, working in wet environment all around the clock, all year round. Very well received, by the way. In 2027, we will launch our PROVIS H2O cooling garment concept, reducing heat stress. That is developed, obviously, for warmer regions, but also taking into consideration the climate change. And of course, it's also UV protection.

Then maybe the most exciting of all new developments from a financial perspective is that with 2028 we'll tap into a completely new category for Helly Hansen Workwear. It's called industry service in workwear language. What is that then? That is products developed for manufacturing, logistics, facility management, repair and installers, operators, et cetera, huge target group. And that is based on a very comfortable 4-way fabric approved for industrial wash. And that might not sound important for people who are not in the business, but that is a must if we are going to tap into that business.

It has to be approved for industrial wash. So it's going to be really interesting to see what we can do within that category industry service. U.S. With KTB, we have now, for the first time, set a very, very clear strategy with a significant and dedicated investment behind for how to win in the U.S. market. U.S. will play a very important role in our future growth. People. We will invest in building a dedicated U.S. organization across sales, e-commerce and marketing. Product, we will scale our existing assortment in the U.S. and also invest in a tailored product development concept, especially developed for the U.S.

Distribution, we will accelerate e-commerce. As I said, it's going to be really important for us in a B2C-led market and grow at the same time, strategic wholesale key accounts to reach more individual users in that B2C-led market. And behind all of this, of course, we're going to significantly increase brand and performance-led marketing, and you will get more concrete figures from Mike in a while. And as icing on the cake, I'd like to say, we have those current tailwinds that Erinn was talking about, like Gen Z is becoming the tool belt generation or more young people are considering a career within trades, right? So it seems to be the right timing for us.

I just want to show you that we actually have the product to scale in the U.S. market today. This is an already -- this is just an example of a few styles within a concept in the U.S. that is very well received called Oxford. So we are not starting from scratch. We already have an existing well-working assortment, but we will continue to invest additionally in the product offering in the U.S. So key takeaways. We are participating in this large, fast-growing workwear market. It's a highly consistent business with deep consumer loyalty.

We have a focused product strategy anchored by differentiated technologies applied in a wide range of products. We have built a scaled workwear business with very, very limited investment to date. We will scale our existing European credibility through a tailored U.S. strategy with significant investments behind. And remember all the great category dynamics I was talking about before. And I couldn't be more excited about the opportunity ahead when we now finally will utilize the full potential of Workwear and go full potential. And with that, I'll hand over to Mike Karapetian, Global Brand and Operations Finance and actually our Norway ambassador. He will talk more about our massive headroom for future growth and the strategy for how to exploit this in the best possible way. Thank you. Mike?

Thank you, Patrik. That was excellent. And thank you all for joining us today. This has been a day I've been looking forward to for 2 years. For much of that time, I've had the privilege of living here in Norway with my family, and I can say firsthand, it has been the experience of a lifetime to live and work with this incredible group. For the rest of our time together, I'm going to cover 4 topics. First, Helly Hansen's business complexion and why we consider it to be among the most compelling assets in the space.

Second, I will discuss how we intend to leverage our shared platform to unlock investment capacity and fuel margin expansion. Third, I'll discuss what sits behind the plan and the focused investments that support our growth ambitions. And lastly, I will discuss how the strategy you heard today drives accelerating growth and profitability and ultimately stronger value creation for our shareholders. So let's start with the business. As you've seen today, we operate 2 distinct business segments. Our sport business is approximately 75% of global revenue.

Our success in apparel is a direct reflection of the focused strategy we initiated 10 years ago, driving 2 categories, ski and sailing in our top markets around the world. The balance of our business is accessories and footwear, which represents a meaningful opportunity as part of our win premium outdoor strategy. Workwear is approximately 25% of our global revenue. We lead with apparel with our focus on the trades and high visibility setting the strong foundation. Footwear is 20% of our revenue and primarily reflects safety footwear, protective toe cap, puncture-resistant sole and a variety of proprietary and branded technologies.

The workwear business is wholesale led today with significant room to grow our direct-to-consumer business as we expand in the U.S. market. Despite their differences, in one area, they are the same, significant white space in the largest markets in the world. This is incredibly rare for a brand with nearly 150 years of heritage and a rich history of product innovation and firsts. In the U.S., we have only 1% share of the premium outdoor market, and we are just getting started in the $15 billion workwear market.

Within sport, our innovation platforms and unique design language brings newness to a market that is already benefiting from increased consumer demand for outdoor-based activities. And within workwear, shortages of skilled trade workers, rising cost of higher education and increasing safety standards are all contributing to increasing enrollment in the trades. This does not mean we do not expect growth outside of these areas. The Alps region in Europe, South America and new markets in Asia are all opportunities. But we believe strongly in focus and focus on what has the potential to generate the greatest returns.

For these reasons, hopefully, you now see the strong rationale to acquire Helly Hansen. As we've discussed, M&A has a high bar. It needs to be immediately accretive, leverage our strengths and operating model and play in structurally attractive addressable markets. And some things are must-haves. And at the top of that list is strong cultural fit. But as you've seen today, Helly Hansen checks all of the boxes and will be the growth engine for Kontoor for the many years to come. Now let's walk through the how, how we are creating the investment capacity to fuel growth and drive margin expansion.

There are 3 drivers, and let's start with our multi-brand platform, which creates several streams of value. First, Helly Hansen directly benefits from our supply chain and sourcing capabilities to add scale efficiencies. Second, we expect expense synergies as the business plugs into our support pillars in areas such as finance and operations. And we also expect system and process improvements to drive greater working capital efficiency. This has been the earliest contributor to the margin improvement we have delivered to date.

Next, accretive mix. We expect product mix benefits as we scale outdoor, driven by the higher-margin base layer business and better unit costs as we scale volumes with our vendor base. We also expect channel mix benefits. Sport will be more modest as we will be balanced across both wholesale and direct-to-consumer growth. Workwear will more meaningfully contribute as we accelerate our global e-commerce business. Further, we expect the combination of revenue growth and disciplined expense management to drive scale leverage. And finally, we expect benefits at the enterprise level as we plug Helly Hansen into our advantaged tax platform.

So how we deploy this capacity for our growth ambitions? There are 4 strategic pools of reinvestment. Number one, as you've heard today, we are establishing dedicated sport and workwear organizations to create a step function increase in focus and accountability. We're also investing in product development and innovation, leveraging our flywheel of professionals, consumer insights and material science to create the next generation of product franchises. These first 2 create the foundation and where we have biased our investments over the last 12 months.

We are now ready to move to the right, starting with brand marketing. Within sport, we will redress the balance between performance and brand marketing as we lean into upper funnel investments to drive increased brand awareness. And within Workwear, we will increase marketing from just 2% of revenue to 7% of revenue by 2030. Within commercial expansion, we are making leapfrog investments to elevate our e-commerce and retail platforms. And we're also investing to expand wholesale distribution within key accounts as well as growing our specialty business.

Let's review how the strategy is working thus far. Relative to our plan, performance has exceeded our expectations by every measure. Revenue is tracking ahead with upside in every quarter as part of Kontoor. And gross and operating margin upside is being driven by the factors we have just discussed. Finally, we've generated more than $100 million in cash from operations, driven by stronger profitability and inventory management. This is essential to our investment philosophy, create the oxygen in the P&L over the first 12 months and now deploy that capacity to accelerate growth.

Finally, a few words on our China JV. As you heard earlier, our partnership is strong and the business is performing at a high level. Our acquisition thesis was fortified by multiple pathways to create value, and we believe our unique China JV structure provides a compelling source of additional upside over the balance of our plan. Now let's discuss how the strategy you heard drives accelerating growth. There are numerous vectors available to Helly Hansen to drive growth. But again, we believe strongly in focus, and our strategy prioritizes the investments in the big ideas that can generate the biggest returns.

The cornerstone of this strategy is supercharging the U.S., both sport and workwear laser-focused on the largest market in the world. We expect to build our U.S. business to at least $500 million with strong contributions from both premium outdoor and workwear. Let's start with outdoor. As I mentioned, 10 years ago, we focused our sport business on 2 categories: winter sports and sailing. The strategy worked. Today, we have 1% and 4% share, respectively, and are a category leader of each. We are now ready to build the third leg of the stool.

We are using our proven strategy, win with the professionals to win the consumer. The compelling factor here is the relative size of the technical outdoor market. At roughly 3x the size of the winter sports market, relatively small share gains here result in relatively large revenue gains. In fact, just adding 1% of incremental market share in the technical outdoor category would equate to more than $400 million of incremental revenue or almost the entirety of our global plan. So let's review this opportunity against our investment framework.

It starts with talent. And as Borre mentioned earlier, we are thrilled to welcome C.J., as the newest member of our team to lead our North American business as General Manager. We are also investing in the organization more broadly to expand capabilities. We're also investing in product to create the next generation of franchises to serve both our professional and consumer communities. We're also investing in marketing. Over the near term, we will flex marketing spend higher as we drive brand awareness before settling back to more normalized levels in the back half of our plan window.

And we will also thoughtfully expand both wholesale and direct-to-consumer, including modest door growth and digital investment. The sequencing here is critical. Talent and product leads marketing, which in turn leads distribution. Let's move to workwear. By now, hopefully, you see why we are so bullish on our workwear opportunity. And our success in the Nordics offers a compelling blueprint. Where we have dedicated focus, we have increased penetration. In fact, in the Nordics, both our sport and workwear businesses are largely the same size.

We will replicate this structure globally, starting in the U.S., where relatively small share gains can result in large revenue gains. Similar to sport, it starts with talent. We are establishing a dedicated workwear organization. We are also investing behind a U.S. tailored product line to augment our global concepts. We're scaling our marketing investment, and we're expanding our digital platform. Taken together, we expect to grow the U.S. business to at least $500 million by 2030 or more than 20% annual growth, with the rest of the world contributing mid-single-digit growth.

Within sport, our core categories of winter sports and sailing drive the majority of the near-term growth with technical outdoor accelerating as we scale new product franchises. And within workwear, we expect measured growth over the next few years as we scale organizations and execute against our innovation road map. So for the balance of our time together, let's review how this strategy creates a stronger Kontoor. And let's begin with the overall shape of the plan. There is an intentional sequencing that underpins our strategy, create the investment capacity first, invest in the foundation and then drive accelerating growth.

Over the front half of the plan, value creation will be biased towards increasing profitability. This work is already underway, and we are ahead of our planned profit improvement driven by better-than-expected gross and operating margin expansion. As we transition to the back half of the plan window, revenue growth accelerates as we realize the benefits from our investments. Moving to gross margin. We're off to a strong start with gross margin expansion driven by the benefits of our multi-brand platform, synergies as well as improved sales quality as a result of better channel and inventory management.

Moving forward, we expect channel and product mix, ongoing benefits from our shared platform and synergies to drive gross margin expansion to the mid- to high 50s. Extending this to operating margin, again, we are off to a strong start. And moving forward, we expect to achieve mid-teens operating margin, driven by the gross margin drivers I just discussed, our multi-brand platform, scale and leverage. This will more than offset the investments in both sport and workwear. This is our playbook in action.

Putting this together, by 2030, we expect more than $1.1 billion of revenue, mid- to high 50s gross margin, mid-teens operating margin and a significant increase in our cash generation. In fact, cash generation from Helly will be driven by scale, profitability and working capital discipline, more than doubling what it replaces from the Lee divestiture. And finally, our financial plan is supported by multiple pathways to create value, including new markets and expanding distribution. We also expect only a modest incremental benefit from our China JV with room for upside as the business scales.

Before moving to Q&A, let me close with a few comments. Earlier, you heard what makes Helly's culture unique. From my point of view, let me add 2 more, authenticity and curiosity. Curiosity drives our innovation. Authenticity keeps us true to our roots. This combination has contributed to the incredible pipeline of product that has been a driving force for the last 150 years. This also means the organization knows its strengths and has been open to learn about Kontoor's strengths. Both organizations are helping each other and a big reason why the integration has been so successful.

And finally, let me close with how I started. It is incredibly rare for 1 business with 2 distinct segments to have white space in the largest market in the world and significant runway to increase profitability. This combination of growth and margin expansion is powerful and why we are so confident our best days are ahead. I want to thank you all again for joining us today. We're going to take a very short pause, and then we're going to bring all of our speakers on stage for your questions. Thank you.

All right. We'll go ahead and we can take questions from the audience, and I've got some questions from our webcast as well. Any takers in the room? Adrienne.

Adrienne Yih from Barclays. So thank you very much for doing this. It was really enlightening and great to be here on the ground. I guess at the high level, we rarely -- to everything that you said, we rarely see white space in 2 parts of the market, premium in the sportswear, but also in the workwear. They seem to be at opposite ends perhaps of the perceptual kind of premiumization and price point. So can you talk about how your approach will be to making sure that those stay at polar opposites in terms of the mindset of the consumer as you go into the market? And then for Mike, for you, if you can talk about the 9.3% to the 15%, a lot of different drivers in there. If you can help us with prioritization, you have to give us the basis points but in rank order, which are the drivers or maybe Joe, whichever one that falls into.

Why don't we start with the gang down here on the first question from a premium standpoint. You guys go ahead, and then we'll chime in and then Mike, you and Joe get the second part.

Yes, sure. From a worker perspective, obviously, as I said, U.S. is a less mature market. And we are, as I also said, developing a product offering specifically for the U.S. We already have an existing one that we're going to scale. That is developed for the maturity level of the current maturity level of the market, but we expect the maturity level to increase. So over time, we will be able to sell in, as I also said, up in the higher scale of the ladder. But of course, we are not going to compromise again our premium brand positioning.

We still believe that there is a pretty big niche and the development is going in the right direction for us to be able to price our products more premium because we then have arguments like double durability is half the price, superior functionality, increased safety levels and many other arguments for why our products might be a little bit more expensive. But we cannot be too far away because the step cannot be too big, right? So that's why we have that ladder, the offering going from good to best. So you can buy where you want within that ladder.

But also, what we've seen is that, that marketplace right now has become very popular for young folks to get into, right, the trades. They're seeing less college graduates, less people entering college and more people getting into the trades. And we find that, that group that's entering wants to look better and feel better about the product that they're wearing versus what the folks before them were. And they didn't have much of an opportunity to folks before them. We're going to give them that opportunity, make it a step change and so they can work their way into it. But we really think that, that's really going to be the win relative to who's entering that market in a significant way right now with all of the investment that's going into the trade schools and the trades in the United States right now. It's pretty significant.

Yes. Yes, I'll start. So if you think about those various buckets, let's start with the multi-brand platform and synergies. That's the largest driver of the 3, and that's where you've seen a lot of the benefits that we've driven over the last 15 months. In fact, through the first half of '26, we've seen operating margins expand by about 600 basis points. And a lot of that has been driven by the platform as well as synergies. We also expect channel and product mix. That's about 50 basis points of benefit per year. That will scale as we move through the balance of the plan window, particularly as Technical Outdoor grows as well as the Workwear e-commerce business. And then the balance of that will be fixed cost leverage. And those combined will more than offset the investments, as I mentioned, in both the growth in both the Sport and Workwear businesses.

Brooke from Goldman Sachs. I was hoping that we could dive a little bit deeper into the brand awareness opportunity that you see in the U.S., particularly for Helly Hansen Sport. That seems to be one of the big underpinnings of the opportunity at both DTC and wholesale. Can you talk a little bit more about what we should expect to see where you think those opportunities are for brand awareness? And then how that's going to play in with distribution expansion beyond the initial test that you have at one key partner this fall? And then maybe just one follow-up for Joe. You talked a lot about the power of the portfolio at the beginning of the discussion. Could you tell us a little bit more about the key milestones or markers that we should be on the lookout for to understand at what point you might be interested in expanding the portfolio further? And any key guardrails that we should keep in mind?

Yes. Regarding the brand awareness part, we are aware that there is an upside on building the brand awareness. We are starting that already now fall/winter '26 with a bigger brand campaign this fall and upper funnel brand marketing. We will also open up stores, like I mentioned, that will also help to build the brand awareness. And maybe Erinn can add.

Yes. The only thing I would add is that when we think about how consumers are learning about our brand, we talked about, first, it's professionals. But if you look at the second and third, it's through word of mouth as well as social. So as we think about kind of these more brand-specific campaigns, again, we're leaning in the fall of this year. We have further opportunities in '27 as we go after a 150-year anniversary, there's very specific channel ways of kind of further reaching that consumer. But I think the important piece is we already have credibility where it matters the most. It's in the product. It's in the technical performance. It's already as a brand that's being trusted. We just need more consumers to learn about us.

And Brooke, I would tell you that it's been so dry. I mean we have just not had a voice there at all, and we haven't invested in that and the previous company didn't invest in it. It just wasn't important to them. But if you look at what we did at Kontoor relative to, we took 2 brands that were dry, no investment, no voice really at all, and we created that through a period of time, and it took building blocks to do that. We're looking at this opportunity the exact same way. And we've got a real nice playbook relative to how we went through that before, how we're going to go through it again.

And I think we're in a really good place, and we're making the investments initially now. It's happening throughout the organization. They're really working well together. We're bringing our expertise to the North American market to this team and helping them. And then, of course, the addition of C.J., who's here today. So all of those things embedded together with the knowledge that we have in the marketplace is really, really important for how this is going to evolve over time. And Joe, you want to talk about?

Yes. So I'd say, look, strategically, we do see M&A as playing a role in the long-term strategy. And I would underscore long term, as we think about the plan that we've laid out today, the opportunity set is pretty significant, right? And you're going to see Wrangler's version of that over the next handful of months. So frankly, our balance sheet will be ready by the end of this year as we get the Lee transaction closed and turn the corner into '27. But the bar is pretty high. I mean the return profile on the plan that we just presented for us to bring something else in from an execution risk standpoint those returns need to be quite meaningfully higher than what we're staring at organically. So that's how we think about it in terms of just our framework.

But I would say, too, that it took 7 years for us to make that first acquisition. And we looked at a lot of things. And we weren't getting the calls inbound before, but now we get every call that's coming inbound to us. And one of the things that I think is really important for our organization that we're hearing that we've never heard before was they really want to talk to you from the investment bankers. They really want to make sure that you're in the process. They really want you to take a look at this because they know we can do it, they know we have the expertise.

But we're also hearing that culture word too, that they've heard about the culture that you have there, and they'd like to be part of it. So I think we're going to have choices that we can make. I think we can be extremely selective. We're not worried about the financial aspect because of our strong balance sheet. So we're in a really good position. But I think Joe was perfect in saying we've got a couple of things that we need to do. As you know, we're finishing up right now our integration. We just have IT really that's left with the Helly integration, which, by the way, has gone really, really smooth.

And then the second piece of that is that we've got our divestiture that we haven't really talked about, but we're finishing that up, too. The partner that we chose to do that with has worked with us exceptionally well. It's been a really good process from both partners. Joe has been leading that for us. It's gone better than I even thought it would go. And we'll finish that up before the end of the year also. So then we can kind of focus on what we need to do as far as the most important thing is really growing Helly in North America and doing everything that we said today that we would do and then continuing that really strong focus and lens with Wrangler, which now Wrangler is going to get a lot more attention than they got before because remember, we're down to one Jeanswear group right now, and that's Wrangler. So it will be a lot of fun for us in the next couple of years relative to the 2 big brands that we have.

Great presentation. So I wanted to see if, first of all, you could share any more color on the relative profitability of workwear versus sport. And then I know you guys mentioned a pretty large investment in marketing and workwear. I don't know if you could provide any kind of similar detail in sport or maybe even across the regions as well, just that marketing investment. And then do you want to take that? Yes, we can start there.

Yes. So today, they're relatively similarly profitable, slight differences between gross margin and operating margin, but relatively similar. So going forward, it's really the drivers that I previously articulated around the, whether it's accretive mix, the shared platform, synergies, scale leverage, that's really going to be the largest driver versus the mix between sport and workwear.

And then within the U.S. sport, can you talk about the opportunity within winter, ski, outdoor and lifestyle, especially like how do you see the difference in those opportunities throughout the U.S. over the next few years?

So since, what I said is that since 2005, when we did the reset, we really focused on building the specialty business. There is still massive opportunity to build the ski business -- continue to build the ski business, too. And the outdoor market, I mean, is the biggest category in the industry, right? We already do significant business there today, but we strongly believe that, that can grow a lot faster going forward.

Think about the ski business and think about how many mountains are we on in North America? I don't know exactly, but it is, it's significant.

Mostly on everyone, I think.

Mostly on everyone, if you think about all of that and all the advertisement we're getting from that, right, and all the people and all the users, we need to take that down the mountain now and make sure that the people that are skiing there are using our product and take full advantage of that. Those are the programs that we can bring to life that just haven't gotten the light of day before in the past. And we understand how to do that, and it should be a lot of fun doing it.

And I would also say that since the reset, we've really been successful. We've really been happy. Keep in mind, we're a European brand being successful in the U.S. marketplace, right? We're one of the few ones. And the focus that we did back in 2015, that has really worked. It really paid off. So we're really happy with the results that we have already today, but there are still massive opportunity to grow, like I mentioned.

Okay. We're going to go ahead and we've got some questions from the line. We are starting with Jon Komp from Baird. Can you provide more context on the main growth accelerators in 2028 and beyond and help to bridge the gap of the, for the key performance indicators you expect to deliver in 2027? Second part, can you better shape the high-level growth expectations across phases?

Yes, I can start. So just remember, these product categories, they've got lead time, right? So some of the investments we're making in an area like technical outdoor, that's going to take a bit of time before that flywheel starts to turn a little faster and that growth opportunity starts to become a little more meaningful. That's starting now. But remember, what Mike said during his presentation, talent and product, lead marketing, lead distribution, and that's the way I would think about the sequencing of some of these growth opportunities that will accelerate more meaningfully in the back half of the window.

And then in terms of the overall shape of the plan, so I think it's helpful to actually split this apart between both sport and workwear. So within sport, it's actually relatively balanced between the front half of the plan and the back half of the plan. Back half is a bit stronger, but it's fairly similar between the 2 hemispheres. In the front half of the plan, you have the majority of the growth being driven from our core categories, so think winter sports and sailing. As we move to the back half of the plan, that's when you have Technical Outdoor take the growth baton and drive more of the incremental growth. Within Workwear, I would think about it as just a measured growth acceleration over the plan window as we scale growth, particularly in the U.S. market.

Perfect. All right. We're going to go to Ike at Wells Fargo. Regarding the $1.1 billion revenue goal by [ 2023, ] assuming this does not include any contribution from the China JV, how big do you expect revenue in China to be at the time? And how should we think about the potential for that JV to be brought in-house by 2030?

Why don't I start? So there's, the revenue from the China JV is not included in the $1.1 billion. So that's just where we're directly, where we directly operate the brand. Our China business is incredibly strong. We've got a great partner in Youngor. We've got a very strong management team on the ground. This business has scaled very fast and is really profitable. We have not, we've been very prudent with the assumptions embedded in the plan we just presented. Our aspirations with Youngor and the management team pretty materially higher than that. So that could be a meaningful source of upside to this plan. Youngor is a publicly traded company in China. And so we stay very coordinated with the level of disclosure that we put out there around the China JV. So you can appreciate, there's a limit to how much we can share in terms of our specific assumptions around the JV. Anything you can...

No, like I said in my presentation, it goes really fast on there. I mean learning every time it goes, but the competition is picking up, too. But I'm really impressed by the team, what they're doing there. The quality of the product, the distribution, how the stores look like is very high end. I'm really impressed.

All right. Going to go to Mauricio Serna at UBS. Based on the last commentary, is it fair to assume Helly Hansen sales growth will be more along high single digits in FY '27 and then accelerate to low double digits in the latter part of the 5-year algorithm?

Yes. We're not going to give '27 guidance today. We have said more accelerated growth in '27, '28 stronger than '27. I think we gave you a pretty good visual of the shape of the plan, both revenue growth and pace of operating margin expansion. So that's probably where we'll leave it with regard to specific expectations for 2027.

I've got a few more from -- anyone else in the room?

Go ahead with a couple more, Julia.

Okay. This is from [ Spencer ] at [ Pennbberg Capital ]. Can you discuss the wholesale door expansion strategy? You guys mentioned entering Dick's House of Sport. So what comes next? And how does that evolve?

Yes, we think that was, like I said, we have dialogue today our partnership with most of the key accounts in the U.S. today. We're starting up slowly now with House of Sport. And then the plan is to accelerate some of the key accounts that we're already in. Keep also in mind, I'm just going to mention, we're doing a little bit of the same in Europe. In Europe today, we can actually go into some of the real big key accounts. They want us to go in. We are holding off a little bit because it's not the right timing to do it. So we think a lot about the strategy and where we are positioned.

I've got one more here. So from a KTB perspective, what has surprised you? What have you learned in the last 15 months since acquisition? And then for the Helly team, I'd love to hear a little more about what's been different under Kontoor Brands' ownership.

I'll go ahead and start from KTB. I think for me, it's been 2 things specifically. The first thing is culture. We've done a lot of acquisitions. We've done some divestitures. Joe and I have worked together for a very long time. And the one thing that you find out from all of these is that no matter how great the brands are and how great you think the business and the culture is, if the cultures don't work together, it never works out. It doesn't because you can't get past the friction points and you can't get past the infighting to get the real work done. What we found here is we had real for the first time we came here.

And I've never said this publicly, but I do believe it stems from the fact that, we came from a situation, Kontoor Brands, where we got no investment, and we were not treated well, and it was just we were an aside thought and all the other brands were. You came from the same situation where you were part of a much bigger entity in another country and you were the different piece of that entity. You were the only manufacturing piece in a retail environment. So we had that kind of chip on our shoulder. We both it throughout that entire process. And I think we kind of melded together because of that. And I think it's made a really good partnership and a team.

And I think after that, the one thing that stands out for me, and I know you heard it today, but there is a significant opportunity in North America. I think you folks know that I ran the North Face for years, and Joe was a partner with me there. And so we understand the marketplace and the size of the prize in the business. And we really think that it's pretty substantial going forward. And so all I mean by that is I think there's years of growth in the North American market going forward. And we're going to take that in a measured way to make sure we capture it the right way because I've seen in my past how to do it the right way, and I've seen how to do it the wrong way. And we're going to do it the right way going forward. So those are probably the 2 for me. Joe, would you add anything?

Yes, I'd add just one. I mean, the deeper we've gotten into the business with this team, just a better appreciation for just how investment constrained this business has been across both sport and workwear. I think over a number of years, there's been a bit of a debt that's accrued, whether that's talent, whether that's product and innovation, whether that's marketing. And so I think as we've started to work more closely with these guys, we have a different investment posture that's more offensive in terms of attacking the growth opportunity that we see in front of us. But...

So like I said in my presentation, majority of the owners that we have worked under has been coming from private equity, a limited approach to investments. So we heard about Kontoor coming in here, we're really glad because it is a different ball game when you sit with people that really understands the business. And also the way they have approached us has been very humble. One of the things, first things Joe said when he came in that, do no harm. So, and that has basically happened. So they had a very humble approach. They come in, what do you guys need to accelerate the growth. The plan that you see today is basically coming from us with the help from them. This is something that we wanted to do for many, many years, accelerate outdoor, accelerate the U.S. and grow workwear. I mean you, for the first time in 15 years, you've been getting some focus on investments.

It's amazing. I just want to mention, first of all, the culture, and we speak the same language. Feels great, of course. And then the very professional integration that has been happening in the latest 15 months, we never even been close to that before. And from a workwear perspective, obviously, it's a total, total game changer. Workwear during my last 3, 4 owners has always been something on the side. No focus whatsoever. No investments, just do what you do. Focus has been elsewhere. Now it's the total opposite. We have somebody as an owner that actually understands workwear and the potential in workwear and as I said, are willing to invest behind it. And that's just fantastic because then we will show when we give the power to Workwear and go full potential, what will happen, wait and see.

I will say one thing in addition. And if you've got something, please do. But this acquisition has brought a shot of energy to our company, too. It's been a lot of fun for our folks to get to work on a different business, an outdoor business that they've known and been around in their past lives. And it's just been a lot of fun for everybody in the entire organization.

Will? Okay. Well, listen, a huge thank you to all of you that traveled here. That was a real, real big deal to come that far. And you've got one more question. So you go ahead. You came this far, you can ask.

Okay. So a couple more questions here. What is the brand awareness for Helly Hansen Sport in the United States? And the reason I ask this is because we're at this sort of moment of outdoor performance acceleration, but the younger brands, the nascent brands, all are very low on awareness. So it's almost, and you have the highest kind of installed base, right? So I feel like you are kind of primed a little bit ahead in terms of the users, but, and I'm talking about Arc'teryx, et cetera, Stio, et cetera, we're having a discussion over lunch. And so you're in this very rare moment where you've just been underinvested in, but you actually have some really good competitive advantage with the user base.

So I guess a long way of saying, is there an opportunity or what would the upside be? What would you need to see to kind of accelerate and put more fuel behind that engine to sort of get ahead in this already kind of positioning head start? And then for Patrik, for you, with regard to workwear, I'm really interested to see what is, to understand what is the purchase criteria. So what, you had said that loyalty is huge. So to kind of move out an incumbent, it kind of takes some effort. And then once you're there, how do you stay there? So what exactly is that criteria that you'll go after to sort of like bump somebody aside or to get them into the Helly Hansen workwear fold? And back to store. So globally, we always find brand awareness. You see that 10-year investment, and it's working for you, 24/7, 365 to build that. What is the store strategy in the U.S. and then globally? And then how many stores and how quickly can you open those?

All right. So I got the brand marketing one. So I think as you astutely noted, we're about 30% aided awareness in the U.S. So we, if you looked at that chart that we showed, we're significantly below our peers that are anywhere from 40% to almost 90% awareness. So what gives us the confidence that now is the right time to be investing is we already have proven that we have what it takes in the most important purchase criteria. So whether it's being a trusted brand, we already have that. We are far to the right of some of our, of those peers that we showed, whether it's the technical performance.

So we have that credibility where it matters most. And now it's about kind of leaning in from an investment perspective. So you will see, as Mike said, kind of a sequencing of the investment, but it's building out some more of those capabilities from a talent perspective as well as kind of pivoting how we're deploying those dollars. So more towards upper brand or upper funnel as well as being much more prescriptive with how we storytell against key products versus kind of approaching things from more of a peanut butter approach.

We started to invest more really now, the second half of '26. Next year is the 150th anniversary of the brand. Fair to assume that we're going to have a much louder, consistent voice throughout the year around that moment in particular. But Patrik, go ahead.

Yes. From a Workwear perspective, I would like to mention something that we haven't mentioned, but this is actually pretty important for workwear. The positioning of, we will do significant investments, marketing investments in the U.S. for both sport and workwear. The positioning for Helly Hansen Workwear as a workwear brand will be and are in Europe, totally different than the pure workwear brand because we are not only a workwear brand. We have the ski, we have the sailing, we have the outdoor. So in that case, it's more attractive as a brand. That's a good start.

When we look at the product offering today in the U.S., we can see that we most often have superior quality, superior functionality, more technical features and many arguments, durability as well, right? And then on top of it, comfort and fit that's actually better than what's existing today, not for all the brands, but for most of the existing workwear brands today. So we believe and our U.S. organization believes that we have a big potential to move very quickly in the U.S. market. And first of all, we need to get the basics right.

We have -- to be honest, we have been milking U.S. the latest 15 years. We have done no investments whatsoever. So to get the foundation right, what I said, we need to start to invest in the organization, more feet on the street. We are today very, very few people in the U.S. organization, not to mention any numbers, but very, very few people. And then again, getting the GM on board, coming from the business, knowing distribution, have relations, those products will also help, of course, and then build out that organization in a structured way over time will mean a lot for us. But we are confident that our product is very competitive in the U.S. market.

And retail? So historically, where we have been successful with retail is where there's been mono-brand markets. So Russia was an example of it. It's a typical monobrand market, right, but we're out of there. Also, Eastern Europe in general, is more monobrand and China is a good example of it. At the same time, we have, you saw the store here in Oslo yesterday. We will do open up stores around the Alps area, probably also up in ski areas where we're known for ski. And also in the U.S., continue to open up in ski and sailing destinations and where it's relevant to open up stores in the bigger cities to build the brand awareness and showcase the brand. But we're not going to roll out a ton of stores tomorrow. We're going to be careful. Do it in the right way.

I think that's going to wrap today. And again, I want to say thanks to everyone that traveled here. It was a significant expense and a significant amount of your time. So, thank you very much. And all that you joined us on video today, thank you very much. And a big thank you to the staff and team and everybody. There's a lot of preparation goes into this, as you folks know. So Julia and the rest of the team here and everybody that we hired and brought in to help us from a professional standpoint, thank you very much. But just a big shout out to the whole group here, and then we took over this office here for a week and probably disrupted business a little. So thanks to all the [ HH ] employees here this week that have put up with us. But thank you to everyone. We really appreciate it. I hope you enjoyed this. I know we certainly did. Telling our story is an easy thing for us to do. And we look forward to seeing you on the upcoming call here. We've got fairly quickly. So thanks, everybody. Take care.

Greetings. Welcome to the Kontoor Brands Second Quarter 2026 Earnings Conference Call. [Operator Instructions]. Please note, this conference is being recorded.

At this time, I'll now turn the conference over to Erinn Murphy, Vice President, Global Head of Finance and Operations, Helly Hansen and Corporate Investor Relations. Thank you. You may begin.

Thank you, operator, and welcome to Kontoor Brands Second Quarter 2026 Earnings Conference Call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to materially differ. These uncertainties are detailed in documents filed with the SEC. We urge you to read our risk factors, cautionary language and other disclosures contained in these reports. Amounts referred to on today's call will be on an adjusted dollar basis, which we clearly define in the news release that was issued earlier this morning and is available on our website at kontoorbrands.com.

Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in today's news release. These tables identify and quantify excluded items and provide management's view of why this information is useful to investors. Unless otherwise noted, revenue growth rates referred to on this call will be in constant currency, which exclude the translation impact of changes in foreign currency exchange rates and reported results and our outlook are stated on a continuing operations basis, unless otherwise noted.

Joining me on today's call are Kontoor Brands' Chief Executive Officer and Chairman, Scott Baxter; and President and Chief Financial Officer, Joe Alkire. Following our prepared remarks, we will open the call for your questions.

Scott?

Thanks, Erinn, and thank you all for joining us. I am pleased to share our second quarter results and the progress we have made advancing our strategic priorities. Through the first half of the year, we've elevated the portfolio, positioned the company to accelerate revenue and profit growth and increased our capital allocation optionality. Simply said, we've reached an inflection point in our value creation journey driven by our primary initiatives: build Wrangler momentum from a position of strength and sharper focus following the lead divestiture, integrate and accelerate Helly Hansen and finish Project Genius strong.

To accelerate our ambitions, I am pleased to share that Joe has been appointed to an expanded role of President and CFO. He knows our business and has been instrumental in driving our transformation.

Let's begin with Helly Hansen. In June, we celebrated our one year anniversary together. When we announced the transaction, the goal was clear: drive greater value for our shareholders and structurally increase our TSR potential. To ensure we deliver on our commitment, we established a value creation framework built on four pillars: accelerate revenue growth, achieve mid-teens operating margin, increase capital allocation optionality and establish Kontoor as an employer of choice. So how are we doing?

First, revenue is tracking ahead of our acquisition plan with results exceeding our expectations in every quarter under our ownership. This has continued into the first half of '26 with pro forma reported revenue growing at a low double-digit rate compared to our high single-digit outlook. We've had opportunities to grow faster, but we are committed to doing this the right way by creating a healthy foundation that supports years of sustainable growth.

We're making investments in talent and separating the sport and workwear commercial organization under Board's leadership. These are distinct businesses with their own set of opportunities. In North America, we are creating two GMs to drive increased focus. We will replicate this globally over time. This is something the Helly Hansen team has discussed for years, and under Kontoor, we are making it happen.

Second, expand operating margin. Through the first half of '26, operating margin expanded approximately 600 basis points to 7%, driven by gross margin expansion and expense synergies. This is our multi-brand platform in action. We are leveraging our supply chain and technology platforms to provide greater scale advantages for both organizations while driving greater back-end efficiency.

At the same time, better inventory management is increasing the mix of full price selling on our digital platform, resulting in higher AURs and reduced promotional activity. This is an area where we have great expertise and has been a meaningful contributor to improved profitability. We remain committed to expanding operating margin while increasing investment capacity. Over the last 12 months, we have done just that. As we move to the second half of the year, we will deploy these resources to drive accelerating growth.

Third, increased capital allocation optionality. Last year, Helly Hansen generated $100 million in cash from operations, driven by improved profitability and net working capital. We are ahead of our planned deleverage path, allowing for greater optionality even earlier than expected. Year-to-date, we have returned more than $130 million to shareholders, including $75 million of share repurchases. And finally, establish Kontoor as the employer of choice in the industry. Attracting and retaining top talent will ensure long-term success. We continue to be impressed by the Helly Hansen organization. There is depth at all levels. At the same time, we are investing in both existing and new parts of the organization to support accelerating growth.

We are very encouraged by the talent pipeline and recently hired a GM of North America to lead our sport business. We look forward to introducing him at our Investor Day next month in Norway. By every measure, our first year together exceeded our expectations. We are on track to complete the majority of integration activities by year-end, apart from the systems migration, but we know the most exciting days are still ahead of us.

Turning to Wrangler. For the first half of '26, global revenue increased approximately 3% on a reported basis, in line with our expectations. It starts with building on the momentum we've created in our core bottoms business. We have incredible opportunities in female, direct-to-consumer and non-denim categories, but we will not lose sight of Wrangler's identity. In the second quarter, as measured by Circana, we drove over 100 basis points of share gains in our core bottoms business. With female, our success continues. First half revenue grew 20% with trends accelerating in the second quarter.

Our investments in talent, product development, design and demand creation are working. Bespoke is the number one female style at select specialty retailers and new collaborations and brand activations are elevating the brand in the marketplace. And within Western, first half revenue grew low double digits. Western sits at the heart of Wrangler's DNA, and we have never been stronger. To support this momentum, we will continue to invest behind our product innovation and demand creation platforms to solidify our position as the authority in the category.

Turning to Lee. The divestiture is progressing well. We have cleared a number of important milestones and are on track to complete the transaction in the fourth quarter. Our teams are working well together, and the process with AVG has been smooth and efficient. I want to thank the Lee organization and AVG for their professionalism and dedication to supporting the brand during this important transition. We intend to use the majority of net proceeds from the divestiture to fund a new $400 million ASR with the remainder to voluntarily pay down debt and further strengthen our balance sheet. This is a hallmark of our operating model and will further support strong returns for our shareholders.

Finally, let me provide an update on Project Genius. While we could not have predicted the challenges the industry would face over the last few years, we push ourselves to take initiative from our front foot. We launched Project Genius to create investment capacity to accelerate growth while expanding profitability. We are in the final stretch and are firmly on track to exceed $100 million in gross savings. Genius has been essential to the operational agility we have demonstrated over the last few years. Importantly, it has solidified a continuous improvement mindset within our culture that will yield benefits for years to come.

Before turning it over to Joe, let me underscore the confidence I have in this team and our ability to achieve our 2026 plan. We are entering the second half of the year focused on our largest priorities, build Wrangler momentum from a position of strength and sharper focus following the Lee divestiture, integrate and accelerate Helly Hansen and finish Project Genius strong. These are the initiatives that will generate results going forward and deliver strong returns for our shareholders. As we move beyond 2026, we have adopted an always-on cost excellence mindset that will enable us to continue to fund our growth initiatives as we continue to transform our business. We are off to a strong start in 2026, and I would like to thank our global teams for their continued dedication and steady execution.

Joe?

Thanks, Scott, and thank you all for joining us today. Before I begin, let me say how honored I am to step into this expanded leadership role as the President and CFO of Kontoor. I am energized by the opportunity ahead and deeply grateful to the talented people across the organization whose commitment to excellence has positioned Kontoor to compete and win. I look forward to continuing to partner closely with Scott and the executive leadership team as we build on our strong foundation and pursue the next horizon of growth.

Since late last year, our leadership team has been developing a comprehensive strategy centered around Kontoor's next chapter, one focused on accelerated, highly profitable growth, strong cash generation and an enhanced TSR algorithm. Our growth and transformation agenda is bold and builds on our strong foundation of operational discipline, execution excellence, financial rigor and capital stewardship. Our strategy will be enabled by a more robust set of enterprise capabilities, including consumer insights, DTC excellence, product innovation, demand creation and technology, which along with our talented team and winning culture will be key ingredients to drive the success of our growth ambitions. We plan to unveil more details about our strategy in a series of upcoming events, starting with the Helly Hansen Investor Day, September 2 in Norway.

Building from the strong foundation that has been established since becoming a public company, we are increasing our investment on our largest growth opportunities and driving more clarity around the roles we expect each brand to play in our portfolio moving forward. Wrangler is our balanced grower. The mandate is clear: protect and build on the core business while accelerating growth in female, DTC and adjacent non-denim categories. To support accelerated growth, we are leaning into brand building and other growth-enhancing investments while maintaining strong profitability and durable cash generation. It is imperative we continue to protect and drive our core male bottoms business, which is foundational to the brand and our economic engine.

Last month, we launched TufLite, our newest material innovation for our iconic Cowboy Cut jean. Wrangler TufLite jeans are up to 20% lighter without sacrificing performance and are positioned at a premium price point. Within female, our business stands at approximately 10% of total revenue today despite female comprising over 50% of the U.S. denim market. The growth opportunity in female is massive and seizing our share of the market requires new capabilities, investment and an evolved operating model.

Going forward, we are choosing to operate the female business separately from men's to intentionally drive the focus, investment and growth opportunity we see in this aspect of our business. And we recently appointed a dedicated GM for the female business and are investing in and elevating our talent in the areas of product development, design, merchandising and marketing.

Building on the success of our full-price store in the Stockyards of Fort Worth, Texas, we are beginning to develop a focused retail fleet in the heartland of Wrangler Country. During the quarter, we secured two additional locations in Texas, both slated to open in early 2027. We will test, learn and scale our full-price DTC opportunity as we establish a true omnichannel brand experience for the Wrangler consumer while also investing to supercharge our digital business through improved capabilities in AI, site experience and an expanded loyalty program.

Turning to Helly Hansen. Helly is our growth engine, and we are accelerating growth in both the U.S. and the Alps region in Europe, while expanding into a four season brand by winning in outdoor and disrupting the workwear market, two categories with significant white space relative to where we are today. Within sport, we intend to accelerate investment in geographic, category and channel expansion. Under the highly capable Helly leadership team, we are bolstering the organization with more meaningful investments in the commercial and product teams. As Scott mentioned, we recently hired a GM for North America, a critical leadership role the Helly business has lacked for years.

In the second half of 2026, we have also identified incremental opportunities to invest behind demand creation as we scale brand awareness, particularly in the U.S., where our aided awareness is around 30% and well below our peers. Winning in the outdoor category is about extending our authority beyond ski and sailing and competing year-round. Consumers already give Helly Hansen credit for high-performance gear and protection, and we believe we can extend this proposition into the technical outdoor category. We are building the product and innovation road map, thoughtfully expanding distribution and investing in storytelling to claim that territory.

Workwear is one of the most compelling growth opportunities in the entire Helly Hansen portfolio. We have built a large and profitable European business, and there is significant runway to grow in the U.S. Structural tailwinds in workwear are fueled by higher participation in skilled trades, the rising cost of higher education and stricter workplace safety standards. As Scott mentioned, we are choosing to separate sport and workwear into distinct organizations to drive more focus and better align resources against this global opportunity.

From a profitability perspective, we are committed to improving Helly's operating margin into the mid-teens through a combination of gross margin expansion, operating expense leverage and synergies. We are leveraging our multi-brand platform as well as Project Genius and seeing better-than-expected profitability as a result. In the second quarter, Helly's seasonally smallest quarter, we saw notable profit improvement and delivered positive operating profit, well ahead of both our expectations and what the brand has been able to deliver historically.

As an enterprise, to fund our commitment to drive brand building and growth-enabling investments across our portfolio, we have established an always-on cost excellence program to create the capacity for these investment dollars in our P&L. This program builds on the success of Project Genius and provides another layer of investment capacity and earnings power moving forward. Simply stated, our strategy will deliver accelerated revenue growth, fund the investments required while expanding profitability and continuing to drive strong cash generation.

Moving on to where we are in the Lee divestiture process. We are on track to close the transaction in the fourth quarter. All work streams are progressing well, and we have clear line of sight to offset the approximate $40 million of stranded costs over a 12-month to 18-month period. Upon the closing of the transaction, we expect to enter into a $400 million accelerated share repurchase agreement and expect to use the remainder of our proceeds for voluntary debt payments as we work to exit 2026 with a net leverage ratio below 1.5 times.

These strong capital deployment tools will bolster our earnings power in 2027 and beyond and will help offset near-term dilution from the lost earnings contribution of Lee. Over a 12-month to 18-month period, we continue to expect the divestiture of Lee to be immaterial to earnings per share. We look forward to delivering what we believe is a great outcome for ABG, the Lee business and Kontoor.

Before I review the specifics of our second quarter results, I want to take a moment to reflect on our performance for the first half of the year. Revenue of $1.2 billion was at the high end of our previously communicated first half outlook, reflecting an increase of 31% compared to prior year. Adjusted gross margin of 52.2% was well above the high end of our previously communicated outlook of 50.5%, reflecting an increase of 590 basis points compared to prior year. Adjusted EPS of $2.12 increased 36% compared to prior year. We delivered these results while also investing more into our brands and strategic priorities relative to what was initially contemplated in our plan. The divestiture of Lee is on track. The fundamentals of our business are strong, and we are raising our full-year outlook based on the strength we have seen in our business year-to-date and our confidence and visibility as we enter the second half of the year.

Now let's review our second quarter results in more detail. Starting with Wrangler, Global revenue increased 1%, driven by 12% growth in DTC. In the U.S., revenue increased 1%, driven by 9% growth in DTC as wholesale was relatively flat. Growth was broad-based, driven by double-digit growth in female and Western. As measured by Circana, we gained market share in our men's and women's bottoms business, our 17th consecutive quarter of share gains. Notably, our bottoms business has remained resilient with POS up 3% year-to-date through July despite ongoing macro volatility and conservative inventory management among our largest retail partners. Our overall POS trend remains consistent with what we've seen over the past 12 months to 24 months.

Wrangler International revenue increased 8%, driven by 27% growth in DTC and 4% growth in wholesale. Wrangler is well positioned to deliver another year of broad-based growth in 2026, including mid-single-digit growth in the second half of the year, adjusted for the 53rd week impact in 2025.

Turning to Helly Hansen. Global revenue of $114 million increased 6% compared to prior year on a pro forma basis, exceeding our expectations. Through the first half, global revenue increased 12% on a reported pro forma basis with underlying constant currency growth in the mid-single-digit range. Sport was $70 million and growth was strongest in the U.S., the Nordics and the Alps region in Europe. Growth was led by healthy order book conversion, solid at-once demand and e-commerce. Workwear was $37 million with growth across the U.S. and the Alps region in Europe. While small today, our Workwear e-commerce business was particularly robust in the second quarter.

Moving to China. As a reminder, Helly Hansen's revenue results exclude the direct contribution of the China joint venture with our partner, Youngor, as the results are not consolidated under the equity method of accounting. Second quarter results were strong with revenue increasing close to 70%, along with further improvement in profitability. Including the revenue of the China JV, Helly Hansen global revenue increased at a mid-teen rate on a pro forma basis.

While still early, the acquisition of Helly is off to a great start. We're driving strong benefits as a more synergistic brand owner and expect the business to be a significant contributor to revenue and earnings growth in the years ahead. But more on that at our Investor Day in early September.

Moving to the remainder of the P&L. Adjusted gross margin increased 710 basis points to 53.8% compared to prior year, driven by the benefits from Project Genius, a stronger gross margin contribution from Helly Hansen and the favorable impact of channel mix, product mix and pricing. SG&A expenses were $221 million or 37.8% of revenue. The increase in SG&A expenses was driven by the impact of a full quarter of Helly Hansen expenses compared to prior year, increased investment in direct-to-consumer demand creation and technology, partially offset by the benefits from Project Genius. And adjusted EPS was $1.06, an increase of 13% compared to prior year. This includes a $0.06 loss per share from Helly Hansen, well ahead of our expectations.

Turning to the balance sheet. Inventory at the end of the second quarter was $526 million, down 3% compared to prior year, driven primarily by inventory reductions in Helly Hansen. We remain pleased with the quality and composition of our inventory. We finished the quarter with net debt of $1.1 billion and $58 million of cash on hand. Our $500 million revolver remains undrawn.

During the quarter, we repurchased $50 million of common stock. Year-to-date, we repurchased $75 million of common stock at an average price of $75 per share. We ended the quarter with $700 million remaining under our existing share repurchase authorization. And as previously announced, our Board declared a regular quarterly cash dividend of $0.53 per share.

Moving to tariffs. The global trade environment remains dynamic. Following the U.S. Supreme Court's ruling that the International Emergency Economic Powers Act does not authorize tariffs, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to refund IEPA duties previously paid. As a reminder, during the first quarter of 2026, we recognized a net receivable of $54 million for IEPA tariffs previously paid. In July of 2026, we started to receive IEPA refunds and thus far have received cash of approximately $23 million in the third quarter. We expect to receive the remaining IEPA refunds by the end of fiscal 2026.

In May 2026, the U.S. Court of International Trade ruled that Section 122 tariffs were also invalid and these tariffs expired in July of 2026. Year-to-date, our financial results include the previously paid and expensed tariffs under Section 122. We have not recorded a receivable related to Section 122 tariffs and continue to monitor ongoing litigation related to the potential recovery of these tariffs.

Effective July 2026, the Office of the U.S. Trade Representative implemented new Section 301 tariff rates of between 10% and 12.5% on products imported from the majority of our current trading partners. The majority of the countries we source goods from remain at the 10% level with the exception of China and Vietnam, which are now at 12.5%. As a reminder, our imports from Mexico to the U.S. remain exempt under USMCA based on currently available information.

Our 2026 outlook continues to assume a 15% reciprocal tariff rate for the second half of 2026. On an adjusted basis, the company has excluded any impacts of the 2025 related IEPA tariffs in its 2026 outlook.

Now let's review our updated outlook. Revenue is expected to be in the range of $2.66 billion to $2.71 billion, consistent with our prior outlook. For the second half of 2026, we expect revenue to be in the range of $1.46 billion to $1.51 billion, reflecting mid-single-digit growth for both Wrangler and Helly Hansen, excluding the impact of the 53rd week in 2025. As a reminder, the 53rd week in 2025 impacted Wrangler's revenue growth by 8 percentage points in the fourth quarter.

Full-year adjusted gross margin is expected to be in the range of 49.8% to 50%, representing an increase of 330 to 350 basis points compared to prior year. This compares to the prior outlook range of 48.3% to 48.5%. Our updated gross margin outlook reflects stronger-than-expected year-to-date results and a stronger contribution from Helly Hansen.

Full-year adjusted SG&A expenses are expected to increase approximately 23% compared to prior year. This includes the impact of a full-year of Helly Hansen expenses. Our updated outlook also includes approximately $25 million of incremental brand building and other growth-enabling investments as compared to our prior outlook. Adjusted operating income is now expected to be in the range of $413 million to $420 million, including $25 million of incremental investment, representing an increase of 15% to 17% compared to prior year. This compares to our prior outlook range of $411 million to $418 million.

Full-year adjusted EPS is now expected to be in the range of $5.25 to $5.35, reflecting growth of between 27% and 29% compared to prior year. Our updated outlook includes approximately $0.36 of incremental investments as compared to our prior outlook of $5.15 to $5.25. As a reminder, our outlook includes the impact of approximately $0.55 of unmitigated expenses that were previously allocated to the Lee business.

For the full-year, we anticipate an effective tax rate of approximately 20%, reflecting tax synergy benefits as we integrate Helly Hansen into our global tax platform. We expect our diluted average share count to be approximately 55.5 million. Our outlook does not include the impact of any future share repurchases, including those from the expected proceeds of the planned divestiture of Lee. Finally, we continue to expect another year of strong cash generation. Total cash from operations is expected to approximate $450 million, including the expected contribution from the Lee business now reported in discontinued operations.

Our outlook assumes voluntary term loan payments of $225 million, excluding additional voluntary debt payments with a portion of the expected proceeds from the planned divestiture of Lee. We're tracking ahead of our original deleverage plan and anticipate returning to less than 1.5 times net leverage by the end of 2026. For the full-year, including the use of proceeds from the divestiture of Lee, we expect to return more than $900 million of capital through a combination of share repurchases, dividends and voluntary debt payments.

Before opening it up for questions, a few closing comments. As we look ahead, we are sharpening our portfolio focus and investment on our largest growth opportunities. The increase in our 2026 outlook reflects the strength we have delivered in our business year-to-date and our visibility as we enter the second half of the year. As we move beyond 2026, I am confident we are on a path to unlock the full potential of Kontoor Brands and create significant value for our shareholders in the years to come.

This concludes our prepared remarks, and I will now turn the call back to the operator.

[Operator Instructions]. First question is from the line of Matthew Boss with JPMorgan.

Congrats on a nice quarter. Scott, Wrangler accelerated this quarter on a two year basis and the inflection to mid-single-digit growth in the back half of the year, as you cited. Helly exceeded expectations in the first half of the year. I think lead times you've cited point to second half opportunity for you to control or greater control of that brand. Could you just elaborate on the brand-building investments and the opportunity you see to accelerate the total portfolio top and bottom line growth into the back half of this year and multiyear?

No problem. First, though, I would like to acknowledge Joe's promotion and congratulations to Joe. It's wonderful for our company, wonderful for our shareholders and so well deserved. And congratulations, Joe. Outstanding.

Thank you, Scott. Thank you.

So Matt, we're really pleased with the progress we're making on both brands, and we did accelerate. Thanks for the comments. A lot of the confidence from a back half standpoint, I'm going to share with you. I also want to point out that we have a lot of confidence in '27 in our long-range plan. We've got a lot of actions that we've taken. And some of the things that are happening, for instance, in the back half and into next year are for Wrangler, they have got strong new customers, one of those being Lowe's Home Improvement. So really excited about that.

Helly Hansen will be showing up this year at Dick's Sporting Goods in the House of Sport for the first time. And as you know, Dick's is a significant outdoor retailer. So really great for the Helly brand here in North America because as everyone remembers, that was one of the reasons why we bought the brand to expand in North America. So a great start there. But I'm really pleased with our continued progress in Western with TufLite as a new example of some innovation in Western. The business is strong there. We continue to have great relationships and continue to lead in both men's and women's in Western. So very exciting. D2C is doing well.

And then our women's business has been growing very significantly, and we've got a great product -- new product introduction with Bespoke that's been around for a little while now, but continues to accelerate. Great product innovation from the team. And then with Helly, we've got Crew and Life of Marino, two big platforms that we're reinvigorating going into next year. But Matt, I will tell you, the single most important thing for me, which I think is going to be incremental to our business, and I am really excited about this is that we, in Q4 are going to be focused on denim brand only.

So after the spin-off of Lee, we are going to turn all of our attention. We have an excellent team that's going to be focused on growing, investing and making sure that Wrangler continues to grow to its full potential. I think that's incredibly exciting, and that is right around the corner, and we're investing in that right now to make sure that really accelerates going forward.

Joe, anything to add?

No, I think you covered it, Scott.

That's great color. Then, Joe, so first, I'll add my congrats on your promotion. Then second, just as we think about visibility, what's your visibility today to mid-single-digit back half revenues at Helly based on order books and real-time sell-throughs? What have you embedded in the back half relative to the front half, if any improvement? Then can you just walk through drivers of further profit improvement in the back half of the year at Helly Hansen?

Yes, sure. Thanks, Matt, and I appreciate the comments. Look, based on the confidence and the visibility we have into the second half of the year really for both brands, we raised the outlook, right? We raised the outlook on the back of stronger gross margin just as we continue to execute really well on that front. And we took the opportunity to invest at least a portion of that upside back into both brands to accelerate growth into '27 and beyond as we continue to build momentum in both brands, as Scott mentioned.

In terms of where those dollars are going, again, in both brands, and it's into the areas that you would expect, data and analytics, consumer insights, demand creation and talent. talent on the product side in Wrangler, for example, in the female area, we said we hired a GM of North America for Helly. And these key hires will begin to have an impact as we move into '27.

In terms of the profitability improvement, our visibility is pretty high. We're now bought from an inventory standpoint into the back half of the year. We've got good visibility into the forecast for both brands and our investment dollars are committed. So from here, it's really about execution. We have not embedded an improvement in the overall environment in the back half. So the growth that we have planned is really where we have good visibility into, for example, expanded distribution at Wrangler and what we can see on the Helly side in terms of order book and the distribution expansion.

The next question is from the line of Irwin Boruchow with Wells Fargo.

Congrats to Joe. Congrats to everyone on the quarter. I guess two for me. First, I wanted to dive into Helly a little bit more -- in a more detailed way for the second quarter. Maybe this is for Joe. The profit of $2 million, it seems pretty impressive given the seasonality of the business. Can you just give more context how notable that is to you? Basically, what was that on a pro forma basis, maybe the last time the brand made a profit in the second quarter? Just curious because it seems like a notable change from a seasonality perspective.

Yes. Thanks, Ike. And again, thanks for the comment. Look, while small, it's a pretty big deal. We -- I don't know when the last time, if ever, the Helly business generated positive operating profit in its seasonally smallest quarter. Certainly, a combination of factors drove that, most notably on the gross margin side, the business is really beginning to benefit from our platform, sourcing, logistics, planning, procurement. We've got a lot more operational discipline in the business right now in terms of inventory quality and composition. That's greatly improved. We're selling through more full price. We're being less promotional. There's been a lot of work done in that area as well as pricing. And then you've got synergies. So a lot of the work that we've done with the team over the past year. The synergies are starting to manifest in the P&L, which is also giving us the opportunity to invest more back in the business.

The profitability improvement is meaningful. It was meaningful for the first half. It will be meaningful for the second half. So the mid-teen operating margin target that we put out there, fair to say we've got more confidence in that, and you'll see the specifics of how we see that evolving over the next few years in a few weeks at the Investor Day.

Then a bigger picture question. A lot of moving parts have occurred this year, while the core business is clearly outperforming. That said, I kind of want to address the go-forward plans because I think there's some confusion with the investor base. I think several months ago when the lease sale was announced, you guys said there really wasn't any reason why 2027 Street EPS needed to change. At the time, the Street was a little above $7. Today, they're a little below $6.50. I honestly just want to ask you to address the discrepancy and how you're viewing 2027 EPS power at a high level, given all the changes in the model taking place?

Sure. Thanks, Ike. Look, we're not updating the long-term algorithm today or providing specific '27 guidance, but I appreciate the significance of the moving parts to the story, and let me try to give you a high-level framework as to how to think about '27 and into '28.

You've got baseline continuing operations EPS that now is in the range of $5.25 to $5.35 for 2026. That's burdened by about $0.55 of expenses that were previously allocated to the Lee business. We've said we expect to offset those costs over a 12-month to 18-month period. The planning for those actions is already well underway. That started before we even announced transaction. So that takes you to about $580 million to $590 million. From there, through strong capital deployment, we believe we can offset the $0.90 of operating earnings that Lee is contributing today. The $400 million ASR will be a part of that. That will start immediately upon closing, and then we talked about the debt repayment. So that bridges you back to $670 million to $680 million pro forma kind of run rate EPS. Then from there, we can drive more accelerated growth in the Wrangler and the Helly brands. So all that to say, this is why we keep highlighting we expect the divestiture of Lee to be immaterial to EPS on a 12-month to 18-month basis.

The next question is from the line of Jonathan Komp with Baird.

I want to follow up on gross margin. Could you maybe highlight some of the areas you're seeing success driving stronger gross margin inflection year-over-year and contributing to the raised guidance? Then just on the full-year guidance range, it looks like second half consolidated is implied quite a bit below the first half. That's maybe a little bit different than the historical seasonality. Could you maybe just share some of the factors you're embedding in the second half implied gross margin?

Sure. I'll take that, John. For 2026, we now have a gross margin outlook of over 300 basis points in the 49.8% to 50% range. That's about 150 basis points above our prior outlook. Relative to the prior outlook, the stronger gross margin is really driven by Helly. That's probably the single largest driver of the increase, along with increased visibility into the second half of the year.

From a year-over-year perspective, on a full-year basis, there's some pretty meaningful puts and takes within our gross margin evolution. We expect Helly to be accretive by more than 100 basis points. We've got Project Genius and the benefits of mix, both channel mix, product mix to drive more than 200 basis points of expansion combined.

From a product cost standpoint, we expect the product cost environment to be fairly muted. The impact of tariffs, some of the inflation we've seen more recently is largely offset by some of the pricing actions that we've taken along with other mitigating actions. As you look to the back half, we now have about 140 basis points of gross margin expansion embedded in the outlook. That's really driven by accretion from Helly and mix. The moderation relative to the first half is really driven by the fact that we're now starting to lap the full benefits of Project Genius and the impact of tariffs. But longer term, the overall gross margin algorithm is unchanged. So structural mix, Helly, cost excellence initiatives, which we alluded to, that will drive the expansion while we neutralize any other inflationary impacts through price and other efficiency initiatives.

Joe, just a quick comment in there. Jonathan, I would be remiss if I didn't call out our product and design teams at both Helly and Wrangler. The product that they're making, what they're doing, how they're listening to the consumer, the consumer team, it's just outstanding. So congratulations to that group because it doesn't work without great product, and we are producing great product.

That's great. Then I'm sure we'll hear a lot more in a few weeks. But just from a conceptual standpoint, as we think about Helly Hansen and growth beyond 2026, do you think there's still a meaningful period that's needed to drive acceleration on the top line? Should we expect to see those drivers start to line up in 2027? Just any kind of directional color to help shape our expectations. Thanks again.

Yes. I think we haven't really pivoted from the reasons why we bought the company where we saw opportunity from the categories that we can enter and of course, the geographic areas that we can enter. But what we do see is that we're going to manage the business appropriately. And there was a comment in our -- I guess, our release today, we talked about the fact that we could have driven more business, but we've been really smart about where and how we're driving that business. I think that's really important because we've learned a lot of lessons from the past.

What I would tell you is that we've got this set up for a long-term growth algorithm going forward, and we continue to see opportunities in all those markets that we enter in all those categories that we enter going forward and also much stronger distribution with key winners in those categories. We really like how this looks going forward, not just on an end of '26, '27, but on a nice five year algorithm going forward.

Yes. John, look, we're confident we're in the early innings of a multiyear growth acceleration for this brand as it continues on its path to becoming the next $1 billion-plus brand. You're going to see the specifics of how we see that evolving in the next couple of weeks, growth will accelerate in 2027. We're starting to see the order book come together for the first half of '27 and the indications are pretty solid. It's important to remember that when we bought the business, given the lead time, 2026 was largely set. So the growth that you're seeing now is really what the team has been able to drive on their own. With the benefit of a year plus of working with that team, we now have the ability to impact more of the future trajectory of the brand, and you'll start to get a better sense for what that means.

Our next question is from the line of Adrienne Yih with Barclays.

Congratulations, Joe, on the promotion or the additional responsibilities well deserved. Staying on the topic of Helly Hansen, I'm wondering if you can give us kind of a little sneak peek or a little bit of kind of what we're going to see in a couple of weeks. exceeded expectations again, you're talking about sort of more legacy innovation that's driving that. It's doing it across sport, workwear in all geographies. So can you sort of unpack the biggest upside drivers of kind of how you see category geo and also more detail on the timing of wholesale, how many doors? What's the opportunity on the kind of three year horizon for that?

We're really excited about that. It's going to be an outstanding meeting. I think the thing that I'm most excited about is you're going to meet the team. You're going to see the people that are really making this happen. That's a team that's been around for a really long time together, and they work really well together. Then within that, we've embedded some talent from our organization and from the outside to give it a little breath of fresh air going forward.

You're going to meet a team that's highly energized with great investment going in. You're going to see incredible product, and you're going to see the future of what we think product is going to look like. Then you're going to hear about our channel diversification. You're going to hear about how we're thinking about geographies and categories and the growth rates we're thinking about. I think the day is set up to be outstanding. Also here, we're going to take you into D2C, one of our stores in Oslo, so you can see how we make it all work there. So really, really a good day. We're looking forward to having you out there. But I think you'll come away very impressed with the talent that you see, the team that you meet, the product that you see. And then we'll go ahead during that time and give you a little bit more specificity around some of the metrics.

Can you give a little bit more details on the pre-existing back half? What's the timing of entering into Dick's, how many doors? Have you already had the upfront buy? Is that forward front loaded into the current quarter? Any timing on that?

We'll give you an idea. The product is on its way. It actually gets set and it will be in stores in October. You'll see it in the House of Sports in 18 doors in the House of Sports then, our first time. So that will give you an idea. Really, that -- I hope that answers your question.

Yes. Joe, just following up on sort of inventory. Inventory was down 3% year-on-year despite the strength. Is that -- we're hearing from a lot of kind of brands that there's a little bit of conservatism by the retail channel partners. So is that sufficient to drive -- to allow for upside? Are you planning on doing a lot of replenishment? It sounds like not necessarily. So just if you can kind of qualify that between DTC and wholesale and perhaps by brand. Thank you very much.

Hi, Adrian, again, thanks for the comment. Yes, look, our inventory was down 3% year-over-year despite 19% revenue growth. The majority of that increase, really all of that increase was driven by continued improvement in the Helly brand. You'll recall that the net working capital opportunity for Helly was one of our big value drivers, and we've, in fact, gotten after that pretty quickly.

On the Wrangler side, our own inventory is relatively flat. I mean, our inventory is in really good shape. We're very pleased with the quality. We're very pleased with the composition. The brands are a little different. Helly is more order book driven, and we buy to the order book that we see. We don't speculate. Wrangler is a little more replenishment driven and our manufacturing helps us in that regard, just given the short lead times.

I agree with the sentiment, though, that from an environment standpoint, retailers remain incredibly cautious with how they're approaching their inventory and their forward inventory commitments, and we make our buys accordingly.

Next question is from the line of Mauricio Serna with UBS.

Congrats, Joe, on the expanded role. Yes, I just was wondering, first to start with Wrangler. Could you talk about what you're seeing quarter-to-date on that business? I know you talked about POS. I was just wondering also just high level what you're seeing on the wholesale environment, just given for the last quarter, the growth was relatively flattish on U.S. wholesale for that brand. How are you thinking about the opportunity maybe for like the DTC growth of that brand to -- sorry, the wholesale growth of that brand to catch up to the very good DTC trends that you're seeing -- you've seen in the last couple of quarters? Thank you.

Joe, why don't you go ahead and start the DC.

I can start. Yes, Mauricio, on the wholesale side of the business, POS for Wrangler in our bottoms business increased at a low to mid-single-digit rate in the second quarter. That's consistent with the performance we saw in the first quarter and really the trends that we've seen over the past 12 months to 24 months. So really no change on the POS front. That said, we do continue to see volatility week-to-week and month-to-month. We've been fighting through that for a couple of years now. But the overall trend line has been pretty consistent. Wrangler continues to gain share and perform very well at retail.

Despite the solid POS performance and continued share gains and the consistency of POS, retailers just remain very cautious with respect to inventory management and their forward inventory commitments, as I said, which does impact our sell-in quarter-to-quarter. Inventory levels at retail, for example, were down high single, if not low double digits in certain parts of the market. We would continue to characterize inventory at retail as suboptimal. We have not assumed in our forward growth plans that POS improves or inventory at retail improves from current levels. That's an approach that we've consistently taken to our outlook, and I think has served us really well.

Mauricio, from a DTC standpoint, we have a store in Austin -- excuse me, a store in Fort Worth, Texas, and we have delivered a formula that really works for the Wrangler brand in that store, and we feel really confident as far as rolling out that formula. We've signed two more leases in Texas, the opening in the first quarter of '27, and we'll continue that rollout going forward, one, maybe two stores a quarter until we get it built out to where we're comfortable.

As we look at the landscape, we've got years of growth there, and we've got a formula that really works. Wrangler has got great momentum, as you can imagine. We are being really thoughtful about where we're starting that rollout in one of our biggest markets, if not our biggest market in Texas. We see a really good horizon relative to how we grow, how many stores we grow and a healthy investment behind it, and we really have a formula right now that really works for us.

Just a quick follow-up. Is that like the reason why you expect the Wrangler business to accelerate to like mid-single digits in the back half because of DTC? Or what's driving that acceleration?

Yes. The majority of the growth in the back half is really driven by the new distribution that we can see, right? We already have that inventory committed. Scott mentioned Lowe's. There's a few other places where we've got good visibility at this point in the year. We do expect growth in female to continue, growth in DTC to continue. The Western business continues to perform really, really well. That's really the -- those are really the drivers of the mid-single-digit growth. Like I said, from a POS inventory perspective, we've not assumed any meaningful improvement.

One last quick one on Helly Hansen. Maybe could you talk a little bit more details on the growth rate that you saw by channel in the quarter on a pro forma basis? Just thinking about the back half, I think you're guiding for mid-single-digit growth. I think previously, the idea was going to be high single digits. Just trying to understand like anything that's changed on that front. Thank you.

No change to the outlook for Helly for the full-year. We said high single-digit growth on a reported basis, we've got low double-digit growth, I think, about 12% in the first half, which implies mid-single-digit growth in the second half. That's really driven by currency in terms of the reported deceleration in the growth rate from a constant currency standpoint, the growth rates are pretty similar first half to second half in that mid-single-digit range.

The growth rates by channel, if you have any details on that?

We've not talked about that level of specificity, but I will say growth has been fairly broad-based for the brand globally, whether that's geographically, product category, channel, sport workwear. Growth is pretty balanced for the brand.

Next question comes from the line of Robert Drbul with BTIG.

This is actually Jake Petsikas on for Bob. Wrangler and International had a nice quarter. Just curious if you could unpack which markets are kind of outperforming your expectations? And where do you believe Wrangler has the greatest white space opportunity over the next several years? Thank you.

Thanks, Jake, for the question. Right now, it's really kind of a North American story. Canada and Mexico, the product is doing really well. The business is really strong. Also our Western business is really strong in both of those markets, too, which is very helpful and really good for the brand, as you can imagine.

Europe was flattish to down right now, and we expect that to turn relative to the year coming in because we're going to have a focus on that brand versus having two brands going forward, but more of a North American story.

The next question is from the line of Brooke Roach with Goldman Sachs.

Joe, I was hoping you could provide some guardrails on how you're thinking about the pacing and the drivers of mitigating that cost overhang from the Lee business within the 12-month to 18-month period. What are the biggest opportunities? How quickly can you achieve them? How should we think about your ability to improve the underlying business margin profile in addition to this cost mitigation? Thank you.

Brooke, I can start. We've got about $0.55 of expenses that were previously allocated to Lee that have now been reclassified to continuing operations. Just to there does appear to be some confusions on what those expenses are. These are overhead and other direct costs that were historically allocated to the Lee business, the majority of which ABG or their operating partners will have to build and support on their own or we may provide support via a TSA type of arrangement for some period of time. These are expenses necessary to operate the business.

We expect to mitigate these costs moving forward through a combination of restructuring and other mitigating cost actions. As I mentioned earlier, the planning for that has been well underway. That will start really upon close. We've got plans in place to begin to attack those costs, and we'll get out of those over a 12-month to 18-month period. We need a little bit of time to solidify our plans just as we continue to work with ABG on the separation and how much support they're going to need, we're committed to making sure that this transition goes as smoothly as possible. But we're very confident in our ability to get out of these stranded costs.

Brooke, I would just add that we are world-class at this. We've got an incredible amount of experience on our team in M&A. I will tell you, in this process, there's nothing more important than experience, and we are really good at this part of this. We've just had a lot of times at the plate relative to how many times we've done it, and we understand what to do. So I have a high level of confidence in the team.

At this time, we've reached the end of our question-and-answer session. I'll turn the floor back to Scott for closing remarks.

I just want to say thank you to everybody for participating in the call today. Really appreciate your interest in our company. Again, congratulations to Joe, and we will look forward to catching up with you again next quarter. Take care, everyone, and thanks again.

This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.

Greetings, and welcome to the Kontoor Brands Q1 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Karapetian, Vice President, Corporate Development, Enterprise Strategy and Investor Relations Corporate Management. Thank you. You may begin.

Thank you, operator, and welcome to Kontoor Brands First Quarter 2026 Earnings Conference Call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to materially differ. These uncertainties are detailed in documents filed with the SEC. We urge you to read our risk factors, cautionary language and other disclosures contained in those reports. Amounts referred to on today's call will often be on an adjusted dollar basis, which we clearly defined in the news release that was issued earlier this morning and is available on our website at kontoorbrands.com.

Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in today's news release. These tables identify and quantify excluded items and provide management's view of why this information is useful to investors. Unless otherwise noted, revenue growth rates referred to on this call will be in constant currency, which exclude the translation impact of changes in foreign currency exchange rates and reported results and our outlook are stated on a continuing operations basis, unless otherwise noted.

Joining me on today's call are Kontoor Brands President, Chief Executive Officer and Chairman, Scott Baxter; and Chief Financial Officer and Global Head of Operations, Joe Alkire. We anticipate this call will last 1 hour. Following our prepared remarks, we will open the call for questions. Scott?

Thanks, Mike, and thank you all for joining us. Today marks an important day for Kontoor. This morning, we announced we have made the decision to divest the Lee brand as part of our strong commitment to maximize value. This decision will allow us to sharpen our focus on the opportunities with the greatest potential to generate returns for our shareholders. We believe this will be a great outcome for Kontoor and the Lee business. Our discussion today will focus on 3 topics: First, our rationale to divest Lee and why now is the right time to do so. Next, we will discuss where we are in the competitive sale process and why we are confident this result will accelerate value creation. And finally, we will discuss highlights of our first quarter results and provide an update to our stronger 2026 outlook.

Since becoming a public company, we have been laser-focused on maximizing shareholder value and have executed a purposeful playbook to drive consistent revenue and profit growth. We established a multi-brand operating platform, executed Project Genius to create investment capacity to fund growth, optimized our supply chain and transformed the portfolio through the acquisition of Helly Hansen. These initiatives have resulted in improving fundamentals, accelerating capital allocation optionality and strong shareholder returns. As a result, we have delivered over 100% combined TSR since becoming a public company.

Two years ago, we recognized the need to capitalize on the opportunity to improve Lee's fundamentals. When we set out to turn the business around, we established a clear road map to do so. We focused on harmonizing talent, product, marketing and distribution to create better alignment with the brand's position as an authority in classic lifestyle denim. While it has not been linear, we are where we expected to be when we started this initiative as seen in Lee's improving fundamentals in 2025.

So why choose to divest Lee now? Our decision to initiate a sales process of the Lee business reflects the significant opportunities we see in both Wrangler and Helly Hansen. Focus is a critical element of our management approach. By dedicating the entirety of Kontoor's resources and capital towards growth-oriented brands, we are confident we can meaningfully accelerate long-term growth and profitability while unlocking significant capital allocation optionality. As we stated last year, when we announced the acquisition of Helly Hansen, our portfolio is built around strategically attractive categories. Outdoor, workwear and denim are large, growing addressable markets with structural tailwinds that afford a meaningful long-term growth opportunity. Importantly, our portfolio is built around function. We believe function and activity-based brands offer more durable, dependable and sustainable growth characteristics with greater differentiation in the marketplace.

As part of the Lee turnaround, we conducted an extensive consumer study. Our learnings confirmed the Lee brand sits outside of our strategic bull's eye. While Kontoor has the organizational muscle and discipline to continue to turn the brand around, we are confident our go-forward resources are better utilized in our remaining brands that are better aligned with our long-term focus.

Let's discuss how we will better deploy our resources, starting with Wrangler. Wrangler has grown at a low single-digit rate for over the last 3 years, and 2025 marked the strongest year for the brand. We expanded market share in our core bottoms business and drove double-digit gains in female, Western and D2C. Our investments in talent, product and demand creation have resulted in remarkable consistency. This quarter is the 16th consecutive quarter of market share gains in men's and women's bottoms as measured by Circana. Wrangler has a unique position in the market. It is the authority in Western lifestyle and offers an attractive value proposition for our core consumer. And its distribution footprint is healthy with significant white space opportunities in specialty, female and direct-to-consumer. With our team entirely focused on Wrangler, I am confident the brand's best years are ahead.

Turning to Helly Hansen. The global opportunity for the brand is significant, and we expect the business to be a substantial contributor to our growth and profit engine. It starts in the U.S., which is the largest outdoor and workwear market in the world. While it is already among Helly's fastest-growing markets, the brand remains significantly underpenetrated relative to its peers. Within sport, aided brand awareness is less than 30%. And within workwear, we are just getting started. Across both sport and workwear, we will accelerate investments in talent, direct-to-consumer and wholesale expansion and demand creation. Through improved focus and increased investment capacity, we see a clear path to double-digit growth in our home market. We also see opportunities to accelerate investments in new category growth, including technical outdoor apparel and footwear and increased investments in the ALPS region, which like the U.S., remains underpenetrated.

We expect to fund these investments through the benefits of our multi-brand platform and remain committed to increasing Helly Hansen's operating margin to mid-teens over time through a combination of gross margin expansion and expense leverage. As a result, we expect a meaningful increase in Helly's fundamental growth and margin profile. We plan to share more details at the Investor Day in September and look forward to seeing many of you there.

Before turning it over to Joe, I want to reiterate the confidence I have in our future. Our decision to divest Lee will enable sharper focus on Wrangler and Helly Hansen and supports greater shareholder returns as we align Kontoor to a higher growth profile. I want to reinforce our commitment to support the Lee brand through the sale process and personally thank the Lee team for getting us to where we are today. As I look ahead, I have never been more confident in our future as we work to deliver the next chapter of Kontoor's value creation journey. Joe?

Thanks, Scott, and thank you all for joining us. Disciplined capital stewardship is a hallmark of our operating model and deeply embedded in the Kontoor way. The optimization of our portfolio by pursuing the divestiture of Lee will allow for greater focus on our largest growth assets that we expect to drive the most value for Kontoor and our shareholders in the years to come. This is a defining moment for Kontoor, and our ongoing transformational actions will result in several important changes within our business moving forward.

First, our streamlined brand portfolio architecture will result in sharper focus on Wrangler and Helly Hansen, 2 iconic brands with significant global growth opportunities. The divestiture of Lee will reduce operational complexity, enable more concentrated and choiceful investments, faster execution and improved returns on our largest strategic initiatives. Within Wrangler, we expect to accelerate investments in our female business, including areas such as product development, design and demand creation. The women's denim market, as measured by Circana, is larger than men's, and Wrangler's female business comprises just 10% of revenue today. So, the runway for growth is significant.

Further, we will continue to scale our non-denim categories, including tops and bottoms through investments in product and supply chain capabilities. And we expect to invest and supercharge our digital business through improved capabilities in AI, site experience and an expanded loyalty program. We will also accelerate the pace of growth in our U.S. full-price store footprint as we establish a true omnichannel brand experience for consumers. Wrangler's full-price store in Fort Worth, Texas is a great example and has delivered strong growth and returns since its opening several years ago. We are excited to open additional doors in Texas as we deepen our presence in the heartland of Western Lifestyle and see further expansion opportunities in the Western and Southern United States. These doors further solidify Wrangler's authenticity and will create a unique brand experience that differentiates Wrangler in the marketplace.

Turning to Helly Hansen. Helly is a growth asset and is already a significant contributor to our revenue and profit growth engine. The streamlining of our portfolio will free up enterprise-level resources and investment capacity to further advance our strategic initiatives and position the brand for accelerated growth in 2027 and beyond. Within sport, we intend to accelerate investments in geographic, category and channel expansion. Under the highly capable Helly leadership team, we are bolstering the organization with more meaningful investments in the commercial and product teams. And we are scaling investments in digital and brick-and-mortar retail as well as increased demand creation to drive brand awareness globally.

To fuel accelerated expansion in technical outdoor apparel and footwear, we are making investments in product development, design and innovation. Technical outdoor apparel and footwear is the largest category within the broader outdoor market and brings better balance to the revenue and profit seasonality of the Helly business. Further, we are supporting geographic expansion, including specific investments targeting the U.S. and ALPS region in Europe. Within Workwear, we are accelerating geographic expansion. In the U.S., we are bringing increased focus through dedicated resources across the organization and in areas such as demand creation. The demand for premium workwear is increasing around the world, driven by a combination of structural factors we believe support years of profitable growth.

From a profitability perspective, we remain committed to improving Helly's operating margin from the high-single digits today to mid-teens through a combination of gross margin expansion, operating expense leverage and synergies. We are leveraging our global operating model, supply chain and technology platforms, planning capabilities as well as Project Genius. The early benefits of these improvements can be seen in better-than-expected profitability and earnings accretion in 2025 and the first quarter of 2026, where operating margin has nearly doubled as compared to a year ago.

Second, the planned divestiture of Lee strengthens our long-term TSR algorithm, resulting in higher growth, profitability and returns on capital and favorably shifts our portfolio towards higher growth categories, geographies and channels of distribution. Wrangler and Helly Hansen are strongly positioned within the combined $400 billion outdoor, workwear and denim markets globally. These large addressable markets have structural tailwinds that afford attractive long-term growth opportunities.

Helly continues to elevate its place as a leading technical performance brand in the outdoor category with high consumer loyalty. Within Workwear, Wrangler and Helly Hansen are complementary and span the entire price spectrum from value to premium with limited overlap. And within the global denim market, Wrangler's function-based value positioning and year-round replenishment model is supported by longer product life cycles that build product and margin efficiencies.

Underpinning our strategic investments for both brands is a clear focus on the consumer. We are utilizing more robust consumer insights capabilities to better inform future growth opportunities, including category adjacencies, consumer segments and distribution decisions. In addition to improved category mix, the planned divestiture enhances the quality of our distribution footprint and favorably shifts our portfolio towards the higher-growth DTC channel where we have the deepest connection with our consumers and are in the early innings of unlocking new data and analytics capabilities. Our profitability algorithm is also expected to improve. Going forward, we expect to drive further operating margin expansion as we scale Helly Hansen's profitability, while Wrangler's highly efficient operating model supports strong cash generation and returns on invested capital. As a result, we expect an improvement in our TSR algorithm driven by stronger revenue and earnings growth and durable cash generation.

And third, the planned divestiture significantly increases our capital allocation optionality. Expected proceeds from the planned divestiture later this year will enhance our balance sheet flexibility and create greater optionality, including accelerated share repurchases, deleverage and reinvestment in the business. We anticipate the primary use of proceeds from the divestiture of Lee will be used for accelerated share repurchases under our new $750 million authorization. A portion of the anticipated proceeds are also expected to be used to solidify our balance sheet and reduce net interest expense as we remain committed to exiting 2026 with net leverage at or below 1.5x.

Moving on to where we are in the Lee divestiture process. During the first quarter, we initiated a competitive process to divest the Lee business. The process has attracted strong interest from multiple parties, and the company anticipates entering into an agreement to divest the Lee business later this year. As a result, we now report the results of the Lee business as discontinued operations. Consequently, our near-term P&L on a continuing operations basis will be temporarily impacted by approximately $40 million of full year unmitigated expenses that have previously been allocated to the Lee business. We expect the divestiture of Lee to be immaterial to earnings per share over a 12- to 18-month period. The earnings contribution of the Lee business will be offset through strong capital deployment and mitigation of overhead and other expenses that have previously been allocated to the Lee business through restructuring and other mitigating cost actions.

Now let's review our first quarter results, starting with Wrangler. Global revenue increased 2%, driven by 9% growth in DTC and 2% growth in wholesale. In the U.S., revenue increased 1%, driven by 6% growth in DTC and 1% growth in wholesale. Growth was broad-based, driven by strength in denim, female and Western. POS increased at a low single-digit rate in the first quarter, consistent with trends over the past 12 to 24 months. And as measured by Circana, Wrangler gained over 100 basis points of market share in our men's and women's bottoms business. Wrangler International revenue increased 9%, driven by 24% growth in DTC and 7% growth in wholesale. We believe the brand is well positioned to drive another year of broad-based growth in 2026.

Turning to Helly Hansen. Global revenue of $176 million increased 16% compared to prior year on a pro forma basis. Within Sport, growth was balanced across all channels in North America and Europe. Sell-through is strong, retail inventory levels are clean, and order books are healthy. Within Workwear, strong momentum has carried into the year, led by growth in the Nordics and Southern and Eastern Europe. Moving to China. As a reminder, Helly Hansen's revenue results exclude the direct contribution of the China joint venture with our partner, Youngor, as the results are not consolidated under the equity method of accounting. First quarter results were strong with revenue increasing by approximately 100%, along with further improvement in profitability.

Including the China JV, Helly Hansen global revenue increased by more than 20% on a pro forma basis. While still early, the acquisition of Helly is off to a great start. We're driving significant benefits as a more synergistic brand owner and expect the business to be a significant contributor to revenue and earnings growth in the years ahead, which we will review in more detail at the Investor Day in Norway in September.

Moving to the remainder of the P&L. Adjusted gross margin expanded 470 basis points to 50.6%, driven by the benefits of Project Genius, the contribution from Helly Hansen and channel mix. This was partially offset by increased product costs, net of pricing actions. Helly Hansen was accretive to adjusted gross margin by approximately 200 basis points. Adjusted SG&A was $224 million. Adjusted SG&A increased 60% compared to prior year, driven by the impact of Helly Hansen as well as increased investments in demand creation, DSC and volume-based variable expenses. These increases were partially offset by the benefits of Project Genius. Adjusted SG&A includes the impact of unmitigated expenses previously allocated to the Lee business that have now been reported in discontinued operations. And adjusted EPS was $1.06, increasing 67% compared to prior year.

Helly Hansen contributed $0.26 per share. Adjusted EPS includes an $0.11 impact from unmitigated expenses previously allocated to the Lee business that has now been reported in discontinued operations. Including the contribution from discontinued operations, adjusted EPS was $1.55.

Turning to the balance sheet. Inventory at the end of the first quarter was $464 million, including the contribution from Helly Hansen. We are pleased with the quality and composition of our inventory. We finished the quarter with net debt of $1.1 billion and $56 million of cash on hand. Our $500 million revolver remains undrawn. We've made voluntary term loan payments of $250 million since the closing of the Helly Hansen transaction. We intend to use a portion of the expected proceeds from the sale of Lee to further strengthen and fortify our balance sheet.

Earlier today, we announced our Board of Directors approved a $750 million share repurchase authorization, which replaces our prior program. The new program reflects the confidence we have in our business and the opportunities to generate significant value from our optimized brand portfolio. During the quarter, we repurchased $25 million of shares under our prior authorization with additional capacity for future share repurchases given the strong cash generation of the business. In addition, we intend to use the majority of the expected proceeds from the planned divestiture of Lee to accelerate share repurchases. And as previously announced, our Board declared a regular quarterly cash dividend of $0.53 per share.

Moving on to tariffs. Following the U.S. Supreme Court's decision that the Emergency Economic Powers Act does not authorize tariffs, the U.S. Court of International Trade has ordered U.S. Customs and Border Protection to refund IEPA duties. We believe it is probable that we will recover the IEPA tariffs previously paid and therefore, have recognized a net receivable of $54 million as of March 2026. As a result, during the first quarter of 2026, we reduced cost of goods sold by approximately $49 million on a GAAP basis, representing the expense for IEPA tariffs on inventory previously sold. Of the $49 million reduction in cost of goods sold, $29 million was related to tariffs expensed in 2025. On an adjusted basis, we have excluded the impact of IEPA tariffs expensed in 2025 on first quarter results and in the updated 2026 outlook.

Our outlook assumes a 15% reciprocal tariff rate on applicable inventory receipts for the remainder of 2026. For applicable inventory receipts effective February 24, 2026, a 10% reciprocal tariff rate applied and remains in effect. Applicable inventory owned prior to February 24 is exempt from reciprocal tariffs. This updated outlook includes the impact from increases in tariffs on all countries from which we source product with the exception of Mexico. Based on currently available information, our imports from Mexico to the U.S. remain exempt under USMCA. We are currently evaluating the proposed trade agreement with Bangladesh. We utilize U.S. grown cotton in more than 80% of our products sourced from Bangladesh, which may qualify for a duty-free exemption under the trade agreement.

Now let's review our updated outlook. Full year revenue, including discontinued operations, is now expected to be in the range of $3.41 billion to $3.46 billion. This compares to our prior outlook range of $3.40 billion to $3.45 billion. Lee revenue is expected to approximate $750 million and is now reported in discontinued operations. Revenue from continuing operations is now expected to be in the range of $2.66 billion to $2.71 billion, which has strengthened as compared to the assumptions embedded in our prior outlook. We expect solid growth from both the Wrangler and Helly Hansen brands for the full year.

For the first half of 2026, we expect revenue from continuing operations to be in the range of $1.19 billion to $1.20 billion, reflecting approximately 3% growth for Wrangler and high-single-digit growth for Helly Hansen on a pro forma basis. Lee revenue is expected to approximate $370 million and is now reported in discontinued operations. On a comparative basis, combined revenue of $1.56 billion to $1.57 billion is consistent with our prior outlook. Full year adjusted gross margin from continuing operations is expected to be in the range of 48.3% to 48.5%, representing an increase of 180 to 200 basis points compared to prior year. Our gross margin outlook reflects the benefit of Project Genius, favorable channel and product mix and the contribution from Helly Hansen, partially offset by the increase in product costs and tariffs, net of pricing and other mitigating actions.

For the first half of 2026, we expect adjusted gross margin from continuing operations to be in the range of 50.3% to 50.5% representing an increase of 400 to 420 basis points compared to prior year. Full year adjusted SG&A from continuing operations is expected to increase approximately 18%, reflecting the annualization of Helly Hansen as well as increased investments in demand creation and other strategic growth initiatives, partially offset by Project Genius and the impact of the 53rd week in the prior year. Adjusted SG&A expense includes the impact of $35 million of unmitigated expenses that have previously been allocated to the Lee business now reported in discontinued operations. Adjusted operating income from continuing operations is expected to be in the range of $411 million to $418 million, including approximately $40 million of unmitigated expenses that have previously been allocated to the Lee business now reported in discontinued operations.

Lee operating income is expected to be approximately $65 million, excluding the impact of expenses that have been reclassified. On a comparative basis, operating income, including the expected contribution from the Lee business now reported in discontinued operations is expected to be in the range of $516 million to $523 million compared to our prior outlook range of $506 million to $512 million. Full year adjusted EPS from continuing operations is expected to be in the range of $5.70 to $5.80 before the impact of $0.55 of unmitigated expenses that have previously been allocated to the Lee business now reported in discontinued operations. Including this impact, adjusted EPS from continuing operations is expected to be in the range of $5.15 to $5.25. The expected EPS contribution from the Lee business now reported in discontinued operations is approximately $0.90 or approximately $1.45, including the impact of the expenses previously allocated to the Lee business that have now been reclassified to continuing operations.

We expect the divestiture of Lee to be immaterial to earnings per share over a 12- to 18-month period as the earnings contribution of the Lee business will be offset through strong capital deployment and mitigation of overhead and other expenses that have previously been allocated to the Lee business through restructuring and other mitigating cost actions. We expect the actions we are taking to offset the earnings impact of the planned Lee divestiture, coupled with stronger growth and profitability from Wrangler and Helly Hansen to result in higher earnings and earnings growth moving forward into 2027 and beyond.

For the first half of 2026, adjusted EPS, including the expected contribution from discontinued operations, is expected to be in the range of $2.77 to $2.82. This compares to our prior first half outlook range of $2.25 to $2.30. For the full year, we anticipate an effective tax rate of approximately 20%, reflecting synergy benefits as we integrate Helly Hansen into our global tax platform. For the first half of 2026, our effective tax rate is expected to approximate 25%.

Finally, we continue to expect another year of strong cash generation. Cash from operations is now expected to approximate $450 million, including the expected contribution from the Lee business now reported in discontinued operations. We'll leverage and expand our supply chain and AR financing programs to include Helly Hansen in 2026. These programs and capabilities will be a significant unlock for the business while supporting accelerated cash generation and deleverage. Our outlook assumes voluntary term loan payments of $225 million, excluding potential additional voluntary debt repayments with a portion of the expected proceeds from the planned divestiture of Lee. We're tracking ahead of our original deleverage plan and anticipate returning to less than 1.5x net leverage by the end of 2026. We expect total acquisition-related debt repayments of $475 million or approximately 70% of the total debt incurred at the close of the Helly Hansen transaction in just 18 months.

Before opening it up for questions, a few closing comments. The anticipated divestiture of Lee is a reflection of our disciplined approach to capital allocation and portfolio management and reinforces our commitment to maximize long-term value for shareholders. Our heightened focus on Wrangler and Helly Hansen will allow for increased investment in our 2 largest high-performing, strategically aligned brands that offer the greatest returns. The transaction also favorably shifts our portfolio toward higher-growth categories, geographies and channels with large addressable markets with attractive growth characteristics. Further, our streamlined portfolio offers sharper brand positioning built on complementary function and activity-based brands with significant global growth opportunities. And importantly, the divestiture will result in an improved TSR algorithm driven by accelerated revenue and earnings growth and strong cash generation that supports increased capital allocation optionality while further strengthening our balance sheet.

When coupled with an increased emphasis on a more growth-oriented performance-based culture, I am confident we are on a path to fully unlock the potential of Kontoor Brands and create significant value for our shareholders in the years to come.

This concludes our prepared remarks. I will now turn the call back to the operator.

[Operator Instructions] The first question is from Ike Boruchow from Wells Fargo.

I guess 2 questions for me. First, at a high level on Lee. Maybe just more information on kind of how we got here. You guys have put a lot of work into the reset. You were kind of getting comfortable that maybe we were going to stabilize. And I understand you're weighing the pros and cons of owning the brand. But kind of just how did this all play out? Because it kind of felt like you guys have done a lot of work and we're getting ready to see some stabilization.

I'll go ahead and kick it off. It's Scott. This really was about us reaching our full potential as a company and how and why. And after the acquisition of Helly Hansen, it really helped us shift into growth mode, which was really, really important for our company, important for our investors that we believe that we have the team and the assets in place to be a real high-level growth company. And Helly really gave us that confidence to do that and how Helly is accelerating. And then it made us really think about how well Wrangler has been doing and what if we put a full concerted effort in all of our energy and investment from a denim side in Wrangler that we think right now can be a $5 billion global brand, not that long from now in the 2030s.

So, when you think about those 2 things and the powerful combination of both, it was just leaning into our strengths and giving Lee a chance to be important to someone else in their portfolio. And we really wanted to prioritize that growth culture because it's got our folks pretty excited about how well Helly is doing, about how well Wrangler has always done and about the investments we can make and the focus that we can have on those 2 big brands. And I think it's one of those things that we see a great opportunity on both and now it was time to bring that to the marketplace and show everybody why. And so, it's going to be one of those situations now where over time, you're going to see the results of that focus and that investment on the brands and why we pivoted to a growth company. So, we have expectations of even improvement on what they're both doing right now, which is really good, but we have high expectations that both are going to improve because we're going to invest more in both, spend more time and really focus on their efforts going forward. So those expectations will grow with time.

We think that that is the right time to do it, and we've got Helly under control. We've done an amazing job integrating Helly. I couldn't be more proud and happy with the team -- both the team in Norway and the team here and the supply chain and the whole group as far as bringing that asset in-house, making sure that it's in a really good place and putting it on a steady course. So that's why the timing of it now. And we have had a lot of discussions like you said. And one of the things that was really important to us, and I want to make this point very clear, is that we were going to make sure that when we did divest this business, we were going to make sure the business was in a good place. And you heard today in our commentary that the business is in a very good place. So, I think I'm really proud of the teams that have been behind that, and it puts us in a good place because we're selling on our front foot, which is the most important thing when you're selling an asset. So that's kind of what our thinking has been.

Yes. No, that makes sense, Scott. It sounds like you'll probably get a better price because of the work you guys did. I guess my follow-up, I don't know, Scott, if this is you or Joe, and I know this is not going to be an easy answer. But just a follow-up on the whole divestiture and the timing and flow-through of how this plays out. I guess, specifically, the Street is around $7 for next fiscal year. Do you think that number needs to move down based on the timeline? Or does that still seem like a reasonable or even a conservative number now, albeit with very different drivers to get there post today's news?

Yes, it's Joe. I can start. Yes, I think short answer is no, I don't think that's an unreasonable number, but it's a question of Horizon. And the reason I say that is until we get the business sold, we get the business closed, we won't have the ability to begin to mitigate these overhead costs that will come back to Kontoor, and we won't have the benefit of the use of proceeds. So big picture, you're going to have the Lee earnings coming out. And then over a period of 12 to 18 months, we'll mitigate those costs. We'll have use of proceeds. We'll put more investment behind the Wrangler and Helly business, which we believe we can accelerate growth, profitability and returns, et cetera, et cetera. So big picture, no, just how that plays out quarter-by-quarter, we'll see how this process unfolds with Lee.

And Ike, I'll make a quick point. No one does it better than us from a cost standpoint. We are best-in-class period. So, when I think about the fixed costs that are in the business that we have to go ahead and take care of, I have 100% confidence and guarantee that we will get that done quickly, and we will get all of it period. So, no worries there at all.

The next question is from Bob Drbul from BTIG.

Just got a couple of questions from my side, I don't know if Aaron is in the room, but the Helly order book and the distribution expansion plans, can we just talk through the visibility that you have, the U.S. piece specifically, how the order book shaped up for the fall, the door expansion that you were targeting, how that's going? And I guess the other question I have is just on the $750 million share repurchase authorization. Just in terms of is it predicated off of the sale of Lee? Just updated current thoughts around capital allocation and the timing of it.

So let me go ahead and start. We are in a really good place, what we committed to from a Helly Hansen standpoint on our distribution, on how we're going about that and also the geography that we're hitting. So let me give you a really good example. We are going to, this fall, have our first distribution with DICK's Sporting Goods in their House of Sports concepts. And as you know, that is a fantastic concept, great store, heavy outdoor store, and we will have a really nice product placement there for the first time. So that gives you an example about distribution and new stores that we're getting. And there are others, too.

So, our commitment to North America is on track. We're very close to hiring a general manager for the region, and we're also placing some assets in our workwear business in the marketplace, too. And that is coming along as smoothly and even better than we thought it was going to at the very beginning. So, we feel really good about that business and still feel really good about the upside everywhere. And I do want to make a quick point from a standpoint on product. We just saw the new product coming out. All of us got a chance to go over and see that at the sales meeting and also at corporate headquarters and the product looks amazing. We're a product company and I couldn't be more proud of what's coming to the marketplace here real soon. And I think that's going to be a real eye-opener for everybody out there. So, with that, I think I'll pop it over to you, Joe, so you can talk about Bob's second question.

Bob, so for 2026, we expect to generate over $400 million of free cash flow. We've earmarked $225 million for debt repayment. We committed to getting our leverage at or below 1.5x. So, the residual gives us some excess capacity to continue to buy back shares. We have not included any additional buybacks in the outlook. So that could be a source of upside. And then we've got the proceeds of Lee, which based on the confidence we have in our forward plans, where the stock is currently trading from a valuation standpoint, the majority of those proceeds we would intend to deploy against the buyback, which is why the Board gave us the approval on the $750 million.

And so, Bob, I think you heard from Joe right there that our priority would be the buyback, pay back a little bit of the debt. But as you know, and you saw that we have been aggressively paying back that debt way ahead of time. Joe, how far ahead are we now on that debt payback?

We're probably 6, 9 months ahead of where we thought we would be.

So,6, 9 months ahead. So, we'll do both those things. And we already pay a fairly significant dividend, and we're pretty happy with our dividend right now. Not that we wouldn't increase it going forward, but we're going to focus our efforts from the optionality piece on the buyback and also reducing our debt.

The next question is from Adrienne Yih from Barclays.

Nice to see the changes that are being made. So, I guess my first question is kind of as you think about kind of -- taking out Lee and then incorporating Helly, Helly certainly has a little bit more seasonality to it. So how do you think about kind of structuring the business to be fairly consistent over time? And then secondly, kind of more kind of near-term tactically, are you seeing anything given kind of the global macro, oil going up, et cetera? I know that there's probably no demand incidents or issues right now. But anything on the forward order book, anything in terms of kind of freight going up, obviously, but changes in sort of input costs, et cetera, that we should be thinking about as we exit the year because you have inventory probably for the next 2 to 3 quarters?

Adrienne, I'll start, and then I'll hand it over to Joe. From -- it's a good question because I've dealt with it before in my past, obviously, from the seasonality of the outdoor brand. And we are spending -- it's one of the initiatives that we have with the brand. So, I'm glad you asked because it's really important. When I mentioned that we saw a product as a team here recently, one of the things that we did see was a real emphasis on Q2 and new lines of product and categories that we're going into relative to that seasonality in that time. So, a long way to just say that, yes, we've captured this time from a product standpoint, and Helly hasn't really done that before. They've been very focused on the winter months. We've captured those other months, those warmer months with some product, and I'm really excited for the marketplace to see it.

But when I step back and I think about Helly Hansen and I think about the entirety of the business, there are a couple of things going for Helly Hansen that are a little bit different than other outdoor brands. That being that we have a very strong #1 position in sailing, which is a year-round business. So, it's very steady. It's really good. We hold the preeminent position, and we're on -- everybody's back that's on the ocean, and it's a really steady business that we like.

Two, our workwear business is even bigger than our sailing business. It's a 12-month business. It's very steady. There is no up and down cycle. And we're also starting to see a little bit more work happening around the globe, I guess, is the best way to see people going back to work and the type of product that we sell. And just as importantly, that is predominantly a European business because there was never an effort or a focus to bring that to the states in a really significant way, but that is also one of our initiatives to go ahead and increase our penetration of business in North America. So, when I step back and think about a pure outdoor company and think about the struggles that some had during that seasonality, a big chunk of our business is that sailing and also workwear. So, we have some of that eliminated already, and then we will fix that Q2 issue, and then we'll have a really nice machine all year long and taking that seasonality bump out of it.

Adrienne, on the macro, no, we're mindful of it. We're watching it just like everybody else. But in terms of POS, what we're seeing from the consumer, it's been fairly consistent. We've talked previously about a little bit more week-to-week, month-to-month volatility. But when we look at the business and the trajectory of the business mid- to longer term, we really haven't seen it. POS has been solid. Inventory levels are lean. The breadth of the growth is what gives us a lot of confidence. You've heard us talk about Wrangler, D2C, female, right, et cetera. On the Helly side, similar story. Breadth of the growth is pretty strong. We're seeing nice growth by geography, by channel, by mix of category.

I will say on the supply chain side, on the input cost side, we have seen more volatility. From a product flow standpoint, we're not that impacted by what's going on in the Middle East. We have seen input costs rise a bit. We planned for input costs to be up. We've seen a little more over the last couple of months, but we've absorbed that in the outlook that we gave this morning.

The next question is from Brooke Roach from Goldman Sachs.

As you prioritize the growth drivers of the business following the divestiture of Lee, can you contextualize the pace and magnitude of the acceleration that you think is possible for the core Wrangler brand over the next 12 to 18 months? How fast are you planning on expanding distribution of the women's business? Are there any other core accelerators that you're going to lean into for this brand now that you're fully focused on Wrangler and Helly? And how many additional full-price stores do you think that you can open per year?

I'll start, and we'll do our best to go ahead and make sure we get the information out there that we think that we have tied down for you. But relative to new categories, for instance, we think that there's a tremendous opportunity in women's right now, just 10% of our business. We think that, that should be much, much higher than that. We've got a full line coming out in -- not to get too far into the soup, but we just made an additional commitment to hiring quite a few people within the women's category from a standpoint. Now that takes a little bit of time because those hires are coming on right now and bolstering what we already have. So that will take a little bit of time. But the way that we look at it is that's growth for years to come down the line. So, we're really pleased about that.

And right now, the Western business is very strong, continues to be very strong. We see that continuing to expand. The international business now will have a little bit different focus because it will be our only business on the denim side from an international standpoint. So, we think that there's a tremendous opportunity from an international business standpoint. And then yes, we do have some full-price stores on the docket, and they are coming, and we are rolling those out. And we are making a much more concerted effort now that we're down to that one denim brand, which is much easier for us to do from a D2C standpoint, both from a digital standpoint and also from a store standpoint, and it's just -- it's much more pure when we think about those marketplaces in those DMAs that Wrangler really has incredible strength that we could support a full-price store. Expect to see those, and we can talk about those happening.

You've seen our Fort Worth store that is a great store, and we're about to announce and maybe I can just announce it here, we're about to announce an Austin store that we're opening up in Texas. So, you'll see that, too. That's going to be a terrific store in an incredible Wrangler marketplace for our products. So that's how we're thinking about that being very strategic on how we do that but moving forward with it quickly.

Yes, Brooke, I'll chime in here. I would say some of your questions seem like great topics for an Investor Day, which you'll see the first one in September in Norway. But look, we're looking to drive high-quality, sustainable growth in both of these brands, right? It's going to take a little bit of time to turn that dial up on the growth side. We're making the appropriate investments to do that. We've got a lot of confidence in our ability to do that in both of these brands. But what -- maybe behind your question, are we going to see a dip in operating margin as we start to invest more? The answer is no. We see this as a gradual build in terms of top line growth acceleration, continued margin expansion, strong cash generation, similar to the model that you've become accustomed to, just a bit stronger now that we're more focused on Wranger and Helly.

The next question is from Mauricio Serna from UBS.

First on Helly Hansen, I mean, I think you talked about 16% growth in the quarter. Just to confirm that's in constant currency. And maybe could you talk about how that growth looks by channel and what you've been doing there to drive that growth? And then I guess, just if I look at the first half guidance, you mentioned high-single digits for Helly Hansen. So that implies some deceleration in Q2. So, I just wanted to understand what's happening there on a pro forma basis. And then just a follow-up, you gave the continuing adjusted EPS guidance of $5.15 to $5.25. What was the continued ongoing operation -- sorry, continuous operations adjusted EPS for 2025?

So let me try to cover all those, Mauricio, let me know if I miss one. So, on Helly, the 16% growth in the first quarter was on a reported basis. There is an FX benefit in there. You can think of the constant currency growth as being more in that high single-digit range, consistent with what we're trying to drive. So, our outlook for the year is consistent with that. We see high single-digit growth for the brand first half, second half. We're a few more months down the road. We've got more visibility into the fall/winter order books. So, we're feeling good about the trajectory of Helly. On the continuing ops piece, we will come behind our print today at some point soon and give you guys restated quarters with the breakout between continuing ops and discontinued ops. That will give you both the adjusted and GAAP earnings so you can clean up and get a better sense for what the baseline is moving forward.

Great. And just on the Heny Hansen piece, could you talk about what you -- what's driving like the growth across channel and just the kind of growth you're seeing by channel in Q1?

It's pretty broad, Mauricio. The spring/summer order book was fairly strong. That was landed very well. There's distribution expansion, there's market expansion. We've had pretty solid performance from a DTC standpoint. So, the breadth of the growth of the brand today is fairly broad, which is what gives us a lot of confidence in the trajectory of the business moving forward.

And just -- I mean, I wanted to understand like on the distribution side, is that like North America? Is it also like in Europe? Just trying to get a better sense of like what are the things that are happening.

Yes. It's North America, it's the U.S. It's all of Europe. We talked about China, which is why we keep saying the growth is fairly broad. It's not one market that's overdriving the growth of the business.

And not one category either. It's outdoor, it's sailing, it's workwear.

The next question is from Blake Anderson from Jefferies.

So, I wanted to first ask on the -- given the Lee divestiture you're announcing, how to think about for the rest of the year, if you're able to see margin upside? I know you've had a big emphasis on cost savings. But if you do see margin upside, how do we think about that flow-through versus the potential accelerating investments that you're talking about as you see revenue opportunities?

Yes. So, I'll take that, Blake. So, there's margin expansion embedded in the guide. So, we've got operating margins expanding, operating income growth above the pace of revenue growth. If the question is around the $0.55 and really the stranded costs, we'll begin to mitigate those once the transaction is closed, but the planning and those mitigation plans are already underway.

Got it. And then on Wrangler, I just wanted to ask on the quarter. If you could talk about how that business was across the segments, U.S., international, D2C, just any more color would be curious on how it performed versus what you're thinking.

Sure. Very strong across all segments. International is very strong, especially in Europe. There's a real denim movement going on in Europe, and Wrangler is a huge part of that, and we're pretty excited about that future. We think it's got a lot of legs there going forward. And our distribution is starting to pick up, which is really important. Business continues to be really strong in North America. As you saw in our announcement in our press that we went ahead and gained market share again via the Circana information that we get. Our women's business grew very steadily. Our Western business was strong again. Our work business.

When you think about what's going on in the world right now and people talk about discretionary income, for us, that's a really important part of our business. But what happens is the people that wear our product for work still are working and still need our product. The people that wear our product for Western and the weekends and the Western shows and how they run their ranches are still buying our Western product, and we're picking up steam internationally. And we've got this women's initiative that's really strong.

So in a lot of fronts, we continue to push the envelope really aggressively and see our product grow. But that's because we've done a fantastic job with the product. It just looks great, and we're telling a great story to the consumer and they're really interacting with us, and we're opening up new channels. You heard me talk about the new full-price stores that we're opening up, and we've opened up some new distribution. So, all in all, the Wrangler business is strong, continues to be strong, and it's now going to get a heck of a lot more attention than it used to. And I think everyone here understands this because you've been through these type of divestitures with other companies that there are choices that companies make ongoing about where to invest in their businesses and making sure that their current business model stays really profitable and really strong. So basically, I'm saying you have to feed all your children.

Well, we now have 2 mouths to feed instead of 3, and we're going to be very aggressive there. So, I think that's going to put our business in a very advantageous position going forward. And I couldn't be any more bullish on this company right now with how we're running it and the things that we're doing to make sure that we are going to grow this business going forward.

The next question is from Peter McGoldrick from Stifel.

First, I just wanted to clarify on the $5 billion target in the 2030s. It sounded like you said that about Wrangler, but I wanted to clarify that, that was about the consolidated pro forma Kontoor business.

We think Wrangler can grow significantly well into the next decade. And we think there's growth for a long time to come, and we're going to accelerate that growth. And we're going to see this brand late into the 2030s, that's going to be a much, much larger brand than it is right now. And we've got very aggressive goals to get it to that place. So no, I was speaking specifically about our Wrangler business.

Okay. I guess I'd like to dive in there then that's a material acceleration to the high-single-digits. Is that driven by expanding the women's? And if so, is that taking up some of the distribution from the lead business? Or any other drivers that would help us think about moving the growth rate structurally higher?

Over time, you'll see us go ahead and grow and move that growth rate over time. And you're going to see it happen in female. You're going to see it happen in international. You're going to see it happen in our own digital footprint, our digital business in addition to our own stores. So, you're going to see all those categories grow and have investment over time over the next 15 years. So yes, we're really excited about it and pretty geared up for it.

This concludes the question-and-answer session. I'd like to turn the floor back over to Scott Baxter for closing comments.

Just a quick couple of comments before we break today. Thanks all for your participation today. I know we probably surprised a few of you today with what we presented and talked about today. I know we have follow-up calls, and we'll be able to answer all your calls in a more elegant way so that we can go ahead and make sure that you have all the information that you need. But certainly appreciate your participation and your followship with the company and look forward to talking to you again next quarter and want to make sure that everybody has the Helly Hansen Investor Day on your calendar going forward. So, thanks, everybody. Look forward to talking to you soon. Appreciate it.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Kontoor Brands Q4 2025 Earnings Call. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the conference over to Michael Karapetian, Vice President, Corporate Development, Enterprise Strategy and Investor Relations. Thank you, Michael. You may begin.

Thank you, operator, and welcome to Kontoor Brands' Fourth Quarter and Full Year 2025 Earnings Conference Call.

Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to materially differ. These uncertainties are detailed in documents filed with the SEC. We urge you to read our risk factors, cautionary language and other disclosures contained in those reports.

Amounts referred to on today's call will often be on an adjusted dollar basis, which we clearly defined in the news release that was issued earlier this morning and is available on our website at kontoorbrands.com.

Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in today's news release. These tables identify and quantify excluded items and provide management's view of why this information is useful to investors.

Unless otherwise noted, revenue growth rates referred to on this call will exclude the impact of the 53rd week and will be in constant which exclude the translation impact of changes in foreign currency exchange rates. Joining me on today's call are Kontoor Brands' President, Chief Executive Officer and Chairman, Scott Baxter; and Chief Financial Officer and Global Head of Operations, Joe Alkire. We anticipate this call will last one hour. Following our prepared remarks, we will open the call for questions. Scott?

Thanks, Mike, and thank you all for joining us today. 2025 was a transformational year for Kontoor. We completed the acquisition of Helly Hansen, Wrangler delivered another year of healthy growth in market share gains, we made progress repositioning Lee and executed Project Jeanius. Driven by the strength of Wrangler and strong contributions from Helly Hansen, we achieved record revenue, earnings and cash flow in 2025 while returning over $140 million to shareholders through our dividend and share repurchase programs. Importantly, our results highlight our ability to grow revenue and earnings over the near term while investing in the long term. I am particularly proud of the strong execution our team delivered in a dynamic environment. Sharp focus and clarity on our strategic priorities gives me confidence 2026 will be another record year for Kontoor.

Let's discuss our priorities, starting with Helly Hansen. Helly is a growth asset. In 2026, we will further integrate the business while taking steps to accelerate growth and profitability. Integration and growth are not sequential. They're parallel. In the 7 months under our ownership, we have strengthened the leadership team, delivered better-than-expected revenue and earnings accretion and leveraged our multi-brand platform to drive greater synergies, operational discipline and cash generation. We are bringing a renewed sense of focus to Helly's strategy while leveraging synergy opportunities to accelerate investments across the organization. We are in the early innings of unlocking geographic category and channel opportunities that will begin to accelerate in 2027 and beyond.

We will bring the strategic vision to life at the Investor Day on September 2 in Oslo, Norway. We are excited to invite many of you to Helly's headquarters, where we will share the significant opportunity that exists under our ownership.

Second, accelerate growth in Wrangler. 2025 marked another strong year for the brand. We expanded market share in our core bottoms business, drove double-digit gains in female, Western and D2C and invested behind our product assortment to drive greater category and channel diversification. Wrangler is on an incredible trajectory, and I'm confident this momentum will continue in 2026.

Third, position Lee for improving fundamentals and a return to revenue growth. We have strengthened the identity of the brand, realigned product distribution, launched the most significant equity campaign in years and elevated consumer perception. We have built the foundation needed to improve the performance of the Lee brand. We expect further progress in 2026 with improved profitability and a return to growth in the second half of the year.

And finally, finish Project Jeanius strong. When we initiated the project in 2024, we outlined how it would enhance our organization, create capacity for investment and establish a world-class multi-brand platform. With half the project now complete, I can confidently say it is delivering. The strong profit improvement and increased investment capacity we expect in 2026 is a reflection of our Project Jeanius and the benefits it has created across the business. Our global sourcing organization has been optimized to drive greater efficiency in our vendor network. Our planning teams are driving greater inventory productivity and our shared operating platform is creating immediate benefits for Helly Hansen. We will complete Project Jeanius later this year, transforming Kontoor into a best-in-class global multi-brand organization while improving our overall financial profile.

Now let's review highlights from the quarter, starting with Wrangler. Wrangler finished the year strong with revenues increasing 3%. We are seeing broad-based growth across categories and in our men's and women's bottoms business, which delivered its 15th consecutive quarter of market share gains as measured by Circana. Our female and Western business continue to be standout performers with both increasing at double-digit rate in 2025. Wrangler's innovative female franchise, Bespoke more than doubled in the fourth quarter as we continue to scale this platform and our denim bottoms business grew at a mid-single-digit rate. We linked into this momentum in the fourth quarter through incremental demand creation investments including activations around key events such as college football. Our collaborations are also performing well with Filson and Stranger Things, generating well over 3 billion media impressions and strong consumer demand. The team is executing on all fronts, and I am confident 2026 will be another exceptional year.

Turning to Lee. Revenue declined 6%. In the U.S., revenue inflected positive to 1% growth driven by increases in both wholesale and digital. Digital continues to lead the way, fueled by our refreshed creative vision that is generating results and improving brand KPIs. This is translating to increased revenue on our own digital platform as well as our wholesale partners. 2026 will be a transition year for Lee as we address distribution challenges, including U.S. mid-tier and position the brand for our return to growth in the second half of the year. We have identified growth opportunities that are better aligned with Lee's refreshed brand positioning and are evaluating opportunities to optimize distribution in Europe and Asia. I am confident we are down the right path to position Lee for sustained success.

Turning to Helly Hansen. The acquisition of Helly has exceeded expectations by every measure, and we are just getting started. In the fourth quarter, revenue grew 10% and earnings outperformed our plan by 50%. It starts with product and 2025 was a record year. We won 6 Red Dot design awards, our most ever in a single year. And recently, we were awarded 4 ISPO awards, including a gold for Lifa Merino KnitEvo.

Our innovation engine is fueled by our connection with professionals. In 2025, we celebrated the fourth anniversary of International Ski Patrol Day partnered with national ski teams in Norway and Canada and deepened our connection with the ocean and sale communities as an official partner of the Ocean Race Europe. The connection to professionals distinguishes Helly from among our peers and will be foundational to the growth acceleration in the coming years. We look forward to sharing more at the upcoming Investor Day, which we will follow with a broader Kontoor Investor Day in the first half of 2027.

Before turning it over to Joe, let me reiterate the confidence I have in our ability to achieve our '26 plan, driven by intense focus on execution and strategic clarity. Wrangler enters the year with momentum, driven by market share gains in both denim and non-denim, accretive category growth within Western and Female and incremental brand investments that are translating to strong consumer demand. Lee's turnaround is progressing supported by a clearer brand identity, improving consumer perception and double-digit growth in digital. Helly Hansen is performing ahead of plan, including better-than-expected revenue, earnings accretion and cash generation. In 2026, we will grow the business, expand operating margins and position the brand for breakout growth in 2027. And finally, we anticipate another year of strong cash generation that supports an accelerated deleveraged path and our commitment to return cash to shareholders.

While the environment remains dynamic, we are executing at a high level, and I am confident we are well positioned to create significant value for our shareholders. Joe?

Thanks, Scott, and thank you all for joining us. We delivered a strong finish to 2025, resulting in record fourth quarter revenue, earnings and cash flow while deploying approximately $250 million of capital towards debt repayments, opportunistic share repurchases and dividends. For the full year, revenue increased 18%. Adjusted operating earnings increased by more than 20%, and we generated over $450 million of cash from operations. Relative to the outlook we provided following the Helly Hansen acquisition, we outperformed our commitments across every measure.

2025 was a transformational year for Kontoor as we achieved the strongest financial performance in the company's history. Wrangler is executing at a high level. Helly Hansen is significantly improving our value creation potential and the Lee turnaround is progressing. Our Project Jeanius transformation program is having a significant impact on our results. And we're building a more performance-based culture with a greater emphasis on growth and more aligned incentives across the organization and the brands in our portfolio.

We're entering 2026 from a position of strength with sharp strategic clarity, a relentless focus on execution and a commitment to continue to drive strong returns for our shareholders. Now let's review our fourth quarter results.

Starting with Helly Hansen. Global revenue of $251 million increased 10% compared to prior year reported results. Growth was broad-based across both sport and workwear and in all geographies and product categories. On a full year pro forma basis, revenue of over $700 million increased 7%. Within sport, Full year pro forma revenue increased at a high single-digit rate. Growth was balanced across wholesale, digital and brick-and-mortar retail. Sell-through was strong during the fall/winter season, retail inventory levels are lean and we're chasing demand across several of the brand's largest product franchises.

Moving to workwear. Full year pro forma revenue also increased at a high single-digit rate. Growth accelerated to a mid-teen rate in the second half of the year, driven by greater focus on new customer acquisition and key account growth as well as improving construction activity in Europe. We've seen this momentum continue in early 2026.

The global workwear opportunity is significant. Helly's product and innovation pipeline is unmatched and demand for premium workwear is increasing around the world, driven by a combination of structural factors and consumer trends we believe will support years of profitable growth at scale.

Moving to China. As a reminder, Helly Hansen's revenue results exclude the direct contribution of the China joint venture with our partner, Youngor, as the results are not consolidated under the equity method of accounting. On a full year basis, Helly's China business generated revenue of approximately $100 million, increasing 95% compared to prior year. As a reminder, the China JV for Helly was established just 5 years ago, so the business is just getting started and the market opportunity is massive. Including the China JV, Helly Hansen global revenue increased at a mid-teen rate on a pro forma basis for the full year. The economics of the 50-50 JV in our financial results are reflected in royalty income and our share of the net income contribution is accounted for under the equity method. The China JV generates a mid-teen operating margin, and we expect another year of strong revenue and profit growth in 2026.

The acquisition of Helly is off to a strong start, and the integration is progressing well. While still early, we're driving significant benefits as a more synergistic brand owner with a streamlined organizational structure and a strong management team in place in Oslo. Fourth quarter earnings exceeded our outlook by more than 50%, driven by stronger revenue growth, gross margin expansion and operating expense leverage due in part to synergies, all cornerstones of our operating model.

Operationally, we're driving increased discipline into the Helly business globally. On the front end, we're optimizing distribution and elevating Helly's premium position in the marketplace. We're investing more meaningfully in the commercial and product organizations and in areas such as consumer insights and innovation. We're also scaling demand creation investments with an increased focus on brand building to drive increased awareness ahead of Helly's 150th anniversary next year.

On the back end, we're strengthening the inventory management and demand planning capabilities of the business and investing in a more robust planning organization. We're seeing early returns on these investments such as improved sales quality, higher gross margin and an ability to capture more revenue opportunities. Leveraging our strong supply chain and operational capabilities were also driving a significant increase in working capital efficiency. More specifically, we've reduced inventory days outstanding by approximately 100 days compared to prior year.

In the 7 months under our ownership, Helly generated $100 million of cash from operations. As a result, we're ahead of our planned deleverage path, supporting increasing capital allocation optionality over both the near and long term. And in 2026, we expect to unlock additional working capital benefits and drive another year of strong cash generation.

Helly Hansen is a growth asset. The brand provides access to significant growth vectors in the attractive outdoor and workwear TAMs globally. The business diversifies our portfolio and complements our operational strengths. We expect Helly to be one of Kontoor's largest growth engines and a significant contributor to revenue and earnings growth in the years ahead. We're positioning the brand for accelerated growth in 2027 and beyond, and we look forward to sharing the specifics of our long-term strategic plan at the Investor Day later this year.

Now turning to Wrangler. Global revenue increased 3%, driven by 10% growth in DTC and 2% growth in wholesale. In the U.S., revenue increased 3%, driven by 10% growth in DTC and 3% growth in wholesale. Growth was broad-based, driven by strength in Denim, Female and Western. Following a softer October, trends improved in the combined November, December period with POS increasing at a low single-digit rate, consistent with the year-to-date average. Wrangler International revenue was flat with prior year, driven by an 11% increase in DTC, offset by a 3% decline in wholesale.

On a full year basis, global revenue increased 4%, driven by double-digit growth in Female, Western and DTC as well as consistent share gains in our denim and non-denim bottoms business. We expect the momentum of Wrangler to continue and the brand is well positioned to drive another year of broad-based growth in 2026.

Turning to Lee. Global revenue decreased 6%. The U.S. revenue increased 1%, driven by 8% growth in digital and 1% growth in wholesale. We're encouraged by the momentum in our digital business, which increased 11% for the full year, supported by our brand realignment initiatives and incremental demand creation investments. Lee international revenue decreased 15%, with declines in wholesale offsetting mid-single-digit growth in our brick-and-mortar stores. In China, growth in our brick-and-mortar stores was offset by declines in wholesale and digital.

As we've discussed in prior calls, 2026 will be a transition year for Lee as the turnaround continues to progress as anticipated. We expect first half revenue to decline at a low single-digit rate with second half revenue inflecting positively with improving profitability.

Moving to the remainder of the P&L. Adjusted gross margin expanded 210 basis points to 46.8%. Excluding Helly Hansen, adjusted gross margin expanded 30 basis points, driven by the benefits of Project Jeanius and channel and product mix. This was partially offset by increased product costs and the impact from increases in tariffs net of pricing actions. Helly Hansen was accretive to adjusted gross margin by approximately 180 basis points.

Adjusted SG&A expense was $326 million. Excluding Helly Hansen, adjusted SG&A increased 11% compared to prior year driven by increased investments in demand creation and volume-based variable expenses, including the impact of the 53rd week. These increases were partially offset by the benefits from Project Jeanius.

Relative to our prior outlook, we made an incremental $8 million brand and demand creation investment, primarily within the Wrangler brand in support of our growth initiatives. And adjusted earnings per share was $1.73, increasing 25% compared to prior year. Adjusted EPS was $0.09 above our prior outlook. Organic EPS included approximately $0.10 of incremental brand and demand creation investments compared to our prior outlook. Helly Hansen contributed $0.44 per share compared to our prior outlook of $0.29.

Now turning to the balance sheet. Inventory at the end of the fourth quarter was $567 million. Total inventory decreased by $198 million or 26% compared to the third quarter. The sequential decline in inventory exceeded our plan by $78 million as a result of stronger revenue growth, disciplined inventory management and net working capital improvements at Helly Hansen. We finished the quarter with net debt of [ $1.108 ] billion of cash on hand.

Our $500 million revolver remains undrawn. On a pro forma basis, our net leverage ratio was 2.0x. During the quarter, we made a voluntary $200 million term loan payment ahead of our expected $185 million payment as a result of stronger operating earnings and cash generation. We've made voluntary term loan payments of $250 million since the closing of the Helly Hansen transaction. We're tracking ahead of our original deleverage plan and anticipate returning to less than 1.5x net leverage by the end of 2026, while consolidating a significant increase in revenue, earnings and cash flow and meaningfully improving our growth profile.

During the quarter, we repurchased 25 million of shares. We are within our targeted net leverage range of 1 to 2x and we'll look to opportunistically repurchase shares, consistent with our commitment to return cash to shareholders. We have 190 million remaining under our current share repurchase authorization. And as previously announced, our Board declared a regular quarterly cash dividend of $0.53 per share. Finally, on a trailing 12-month basis, adjusted return on invested capital was 29%, improving from 23% in the third quarter.

Before moving to our outlook, let me provide an update on tariffs. Our 2026 outlook reflects the impact of higher tariffs on all countries from which we source products with the exception of Mexico, which remains exempt under USMCA. We have assumed a 15% reciprocal tariff rate effective February 24 on applicable inventory receipts on or after that date. We have assumed at least a 20% reciprocal tariff rate on applicable inventory owned as of the end of fiscal 2025 and up to February 24, 2026. We're currently evaluating the recent U.S. Supreme Court ruling on tariffs and proposed trade agreement with Bangladesh. We utilize U.S. grown cotton in more than 80% of our products sourced from Bangladesh, which may qualify for a duty-free exemption under the trade agreement. Our outlook does not assume any refunds for tariffs previously paid, which remains subject to more specific guidance from U.S. Customs and Border Protection and the International Court of trade. Trade policy is rapidly evolving, and we expect the level and structure of tariffs moving forward to remain uncertain and difficult to predict.

Now let's review our updated outlook. Full year revenue is expected to be in the range of $3.40 billion to $3.45 billion, representing growth of approximately 9%, including an approximate 2% impact from the 53rd week in the prior year. For the first half of 2026, we expect revenue to be in the range of $1.56 billion to $1.57 billion, representing growth of 22% to 23%, including the expected contribution from Helly Hansen. We expect revenue in the first half to be more heavily weighted to the second quarter. We continue to plan the business conservatively. For Wrangler and Lee, our outlook assumes no meaningful change in recent POS trends or retail inventory positions. Inventory levels at retail remains suboptimal and our retail partners continue to be in a conservative posture with regard to inventory management and forward inventory commitments. For Helly Hansen, our outlook is supported by order book visibility, current demand trends and expanding distribution within both sports and Workwear.

Moving to gross margin. Adjusted gross margin is expected to be in the range of 47.2% to 47.4%, representing an increase of 60 to 80 basis points compared to prior year. Our gross margin outlook reflects the benefit of Project Jeanius, favorable channel and product mix and the contribution from Helly Hansen, partially offset by the increases in tariffs, net of pricing and other mitigating actions.

Tariffs net of pricing represent a headwind to our gross margin rate in 2026. We've implemented price increases for Wrangler, Lee and Helly Hansen as part of a holistic plan to mitigate the impact of the increases in tariffs. Our pricing strategies were thoughtful and developed in consideration of the fluid macro environment the strength of our brands, our elasticity expectations in certain categories and channels and the retail environment around the globe. We remain fully committed to offsetting the impact of the increases in tariffs over a 12- to 18-month period through additional measures such as transferring production within our global supply chain, strategic supplier partnership initiatives, inventory management and other proactive mitigating actions.

For the first half of 2026, we expect adjusted gross margin to be in the range of 47.1% to 47.3%. Adjusted SG&A is expected to increase approximately 12% compared to prior year reflecting the contribution from Helly Hansen as well as increased investments in demand creation and other strategic growth initiatives, partially offset by Project Jeanius and the impact of the 53rd week in the prior year. Adjusted EPS is expected to be in the range of $6.40 to $6.50 representing an increase of 15% to 16%. For the first half of 2026, adjusted EPS is expected to be in the range of $2.25 to $2.30. For the full year, we anticipate an effective tax rate of approximately 20% reflecting synergy benefits as we integrate Helly Hansen into our global tax platform. For the first half of 2026, our effective tax rate is expected to approximate 23%.

Finally, we continue to expect another year of strong cash generation. Cash from operations is expected to approximate $425 million. We'll leverage and expand our supply chain and AR financing programs to include Helly Hansen in 2026. These programs and capabilities will be a significant unlock for the business while supporting accelerated cash generation and deleverage.

Our outlook assumes voluntary term loan payments of $225 million, bringing total acquisition-related debt repayments to $475 million or approximately 70% of the total debt incurred at the close of the Helly Hansen transaction in just 18 months. Moving forward, our capital allocation optionality is expected to increase significantly. We'll continue to evaluate options to enhance shareholder value by effectively utilizing our strong balance sheet and cash generation.

Before opening it up for questions, a few closing comments. I'd like to reiterate the confidence we have in our business moving forward, the power of our operating model and the global multi-brand platform we're establishing. Our growth profile is fundamentally improving, supported by the strength of Helly Hansen, continued momentum at Wrangler and our progress repositioning Lee. We expect the benefits of our transformation initiatives to continue to scale, providing us with greater investment capacity and improved operational efficiency. And we expect another strong year of cash generation, supporting an accelerated deleverage path and an increase in capital allocation optionality.

Strategic clarity, a relentless focus on execution, disciplined capital stewardship, agility and resilience. These attributes are deeply embedded in the Kontoor way. When coupled with an increased emphasis on growth in a more performance-based culture. We're excited about the road ahead and the opportunity to unlock the full potential of Kontoor brands. It has been a transformational year for Kontoor. On behalf of Scott, myself, our executive leadership team and our Board, we'd like to thank the organization for their passion, commitment and success you continue to drive for Kontoor every day. This concludes our prepared remarks, and I'll now turn the call back to the operator.

[Operator Instructions] Our first questions come from the line of Ike Boruchow with Wells Fargo.

Congrats. A couple of questions for me. First, on Helly, I'm not sure if it's for Scott or Joe. Did you specifically give an organic growth rate for Helly this year? And kind of curious the thought process around 2027 really being a much -- it sounds like 2027 is a much bigger year for the brand. Can you just kind of walk us through how we should be thinking about the brand's growth trajectory in '27?

And then just a quick follow-up on Helly. On China, Joe, I appreciate the details. Any color on what the China business for Helly should be doing with this year in 2026? And do you have any optionality to take that business in-house? Is that something you're considering? Just kind of curious on that too.

Thanks, Ike. I'll go ahead and get it started and then turn it over to Joe. From a Helly standpoint, we are making a significant investment in the team from a product standpoint in headquarters in Oslo, building out a significant and real team in the U.S. and North America, which we haven't had before. We've got some really strong leaders in that marketplace, but we need to surround that team with added talent and build a fully capable team, which is going to be a big unlock for us from a brand standpoint going forward.

And how we thought about it is '26 the first half, we haven't invested greatly from a marketing standpoint, but you're going to see it in a very significant way in the second half to build momentum going into '27. So we feel really, really good about how we thought about our plan going forward. And we have seen from the consumer a real appetite for our products. So now we're thinking about the right distribution in the U.S. marketplace going forward and making sure we see that in the correct way and really creating an atmosphere that there's a lot of opportunity for growth for a very long time brand in this marketplace and then continuing to accelerate the rest of the world, too.

So hopefully, that answers kind of how we're thinking about it here. And then Joe?

For Helly on a full year basis, revenue increased about 7%. In the back half, Q3, Q4, under our ownership, revenue increased 10% to 11%. There's a couple of points of benefit in there from a currency standpoint. As we move into 2026, mid-single-digit growth, mid- to high single-digit growth. That's what we expect for the brand. We've anchored everybody from an expectation standpoint on high single-digit growth for the brand moving forward. And we think we have an opportunity to accelerate growth even beyond that.

On China, look, we're very pleased with the performance of the China JV. We've got a strong partner in Youngor. We've got a strong management team on the ground in China that's executing very well. Part of our acquisition thesis was a view that the China business was on the cusp of an inflection, and that's exactly what has played out. This business is beginning to contribute quite meaningfully to revenue and earnings. So as part of our integration strategy, we're connecting the Helly China business more closely with the brand centered in Oslo. We're reaping the early benefits of that stronger collaboration between those two teams. So for 2026, we expect another year of strong revenue and earnings growth for the JV north of 50%.

Our next questions come from the line of Bob Drbul with BTIG.

Just a couple of questions from me. On the Helly integration, can you just talk maybe about what you've learned 7 months in so far, sort of any surprises, any disappointments? And then I think in the release, you talked about $8 million of incremental demand creation. Can you talk about sort of the overall spending level that you're thinking about for '26 maybe by brand?

Sure. Bob, I'll go ahead and start. Thanks for the questions. From a Helly standpoint, we've done a lot of these in the past, as you know, you've covered the different companies that we've been associated with and where we are now. And this has been hands down without question the best integration ever. Just I've never seen anything like it. From the execution from both teams, from the collaboration from both teams, you've heard me say it starts culturally and these two teams meshed from the very beginning. And we found the Helly team in a situation where they were kind of not a real integral part of their past company for a lot of reasons, and now they're an incredibly integral part of our company. We talk the same language, which they haven't had before. That's apparel and product. And it's just been -- I just can't get over how well this has gone. Every single part of it and I think the most important thing is that you see what's happening in the business because of this really strong integration. So incredibly pleased about this and really excited about what the future looks like here for the team.

So from an investment perspective, we're driving double-digit increases in investment behind really all the brands and demand creation, in product and consumer insights, D2C, all the areas you would expect. Those investments, that capacity is being funded in large part by Project Jeanius, which was precisely the point, right? So we'll continue to appropriately balance and evaluate our opportunities to invest with our goal of accelerating growth, but also expanding profitability and returns on capital over time.

Great. And if I could just ask one more. On capital allocation, can you just talk about the sort of plans or trade-offs here between buyback and deleverage?

Well, Bob, I'll tell you really how we're kind of thinking about it is our cash flow is so strong and improving that we feel very strongly that we can and will do both in the upcoming year. We think there's going to be certainly an opportunity to buy some share backs and look forward to that. And obviously, we're out there with a statement right now that we're going to take $225 million off of the table relative to deleveraging. So way ahead of the game on where we planned on being from a deleverage standpoint and plan on continuing to do that and then we'll be opportunistic from the standpoint of share repurchase. But as you saw, started that in the fourth quarter. We saw an opportunity there, and we'll continue in 2026 on both -- just in a position with our balance sheet that we can do both and can do them both pretty strongly.

Our next question has come from the line of Jonathan Komp with Baird.

I want to follow up on Helly Hansen. I believe it was mentioned you're expanding distribution in both sport and workwear. So if you could maybe share more thoughts on the initial thesis there, the types of opportunities you see. And then separately, just on the Wrangler business, could you maybe talk or [indiscernible] quarter some of the organic volume drivers that you see looking forward?

Thanks, Jon. Appreciate it. I'll go ahead and start with Helly. We made the acquisition and part of the thesis was the opportunity in North America because we know the market so well. And we just don't have an incredible amount of distribution right now in North America or that large of a D2C channel. So we think, going forward, we know going forward with the product that we have and the knowledge that we have in the marketplace from past experience in this category that there's a very large D2C expansion opportunity, if done right, and we're in the process of all of that planning right now.

And there's a really -- and I want to make this statement really clear for everybody, there's a really nice opportunity to grow our wholesale business with the right partners, which we're doing, and you're actually going to see some pretty significant rollouts in the second half this year. And we can talk about those. We'll talk about those in one of the upcoming quarters coming up. There's some really nice momentum from the brand and from a consumer standpoint, they're really finding the brand now.

And we think there's opportunity to do that over a period of time. So what I mean by that is we're going to go ahead and build that momentum going forward. We're just not going to go all in.

And I think that from past learnings, we are not going to try to be everything to everyone and grab any point of distribution we can just because the brand is doing really well. We're going to really cultivate the brand going forward. So hopefully, that's a great message for everybody to think about the growth opportunities here for a very, very long time.

And then from a Wrangler standpoint, really pleased with what the Wrangler team is doing. I'm very encouraged by D2C going forward. And maybe we should try to talk about that in an upcoming call. I'm very encouraged by what I'm seeing in the Western business. just from the incredible product that we're making in Western female, which has also been really, really accretive to us. And then also in things like Bespoke and our female business in general. So we continue to take Circana market share gains on a pretty significant basis, continue to grow the portfolio. And I think we have a full offering for our consumers, too, that are really attaching to the brand and we think that the future relative to Wrangler and the growth opportunity for a very long time is very, very significant.

Our next questions come from the line of Mauricio Serna with UBS.

On Helly Hansen, I think you also mentioned in your prepared remarks that you are looking to expand margins this year. Could you talk about the margins of the business on a full year basis last in 2025? And how are you thinking about that in 2026?

Yes, sure. I'll take that. So look, we're not going to provide specific guidance by brand. but we do expect strong earnings growth from Helly in 2026. That's going to be driven by both gross and operating margin expansion. We expect to grow operating earnings somewhere in that low teen rate kind of range in terms of the increase over 2025. That's inclusive of synergies, that's inclusive of the investments we're making behind the business. We've got a full year of intangible asset amortization that was created in purchase accounting as well as the impact of tariffs.

So beyond operating income, the integration of Helly into our tax platform, that's driving synergy below the operating income line. you're going to have lower interest expense in the second half of '26. That will be a tailwind that will continue into '27 as we rapidly pay down the debt incurred with the acquisition.

In terms of shaping for the first half, remember, Helly historically generates operating losses in the first half of the year, particularly in the second quarter, which is their smallest quarter of the year. In the first half, we also have interest expense, incremental interest expense from the acquisition that we did not have a year ago. So the growth -- the earnings contribution from Helly will be more back half weighted.

Very helpful. And then just a quick follow-up on gross margin. You guided to an expansion this year. Could you maybe quantify like the benefit that you get, like from the tariffs going to 15% from 20% as of -- the impact that will be for you after February? And then any sense of how much you could benefit from the -- if we do get like a -- that trade deal with Bangladesh and the cotton is exempt, giving [indiscernible] that 80% of the cotton for the U.S. is -- sorry, 80% of the products from Bangladesh uses U.S. cotton.

Yes. So a couple of things. We expect our gross margin to expand between 60 and 80 basis points for 2026. There are some pretty meaningful puts and takes within that. We expect Helly Hansen to be accretive by about 100 basis points. We expect Project Jeanius channel product mix to drive about 180 basis points and these benefits will be partially offset by higher product costs and somewhere between 160 and 180 basis points of pressure from tariffs, net of our mitigating actions.

In terms of how that's going to flow through, remember, all the inventory we owned at the end of 2025, all the inventory that we received January, February, that inventory has a 20% tariff rate attached to it. So that's going to turn through the P&L really through the first half of the year. And then the impact of the 15% tariff rate will start to influence the P&L as we get to the second half of the year.

On Bangladesh, in particular, look, there's still a lot of uncertainty around the level and structure of tariffs. We expect trade policy to remain pretty dynamic and difficult to predict. We're awaiting specific guidance from CBP as it relates to the applicability of trade agreements announced prior to the Supreme Court ruling and subsequent actions by the administration. Of particular interest to us is the trade agreement with Bangladesh, which we highlighted. That trade agreement reflected a potential reciprocal tariff ranging from 0% to 19% depending on the U.S. grown cotton content of products sourced from Bangladesh. More than 80% of the product we source from Bangladesh does include U.S. grown cotton, Bangladesh is our largest country of origin from a sourcing perspective. So by nature, it's also our largest source of tariff pressure. So we've not included any such benefit from Bangladesh trade deal in our forward outlook as, again, the applicability of the trade agreement remains uncertain. But it's material for us, potentially material for us, so we wanted to flag it for investors.

Our next questions come from the line of Brooke Roach with Goldman Sachs.

Scott, can you dive a little bit deeper into how you're feeling about the U.S. consumer and demand trends in your core U.S. denim business? What contribution are you expecting from pricing what actions are you taking in the mid-tier channel? And how impactful are those opportunities as you balance a dynamic macro backdrop into this year?

Sure I can. I think that myself and the team, and we've had quite a bit of discussion about this. We feel really, really good about the North American market and the U.S. business. I think that the consumer here is incredibly resilient. If you think about the consumer as it relates to our channels and our products, it's just really, really strong right now. And I think the macro backdrop here is only going to improve over time. I really do. And I think that we're in an age here that things are really strong, really good, really transparent. We're going to be able to go ahead and move forward with our business in a pretty significant way. I like the big wholesalers that we're aligned with that win with winners mentality. So I think we've got ourselves aligned in the proper way. And speaking to that, how we're aligning Helly Hansen going forward from a win with winners mentality and making sure that we're aligned with the right customers and the right consumers to make sure that, that brand has a long trajectory of growth.

From the standpoint of pricing, I think that we've always done. We listen to our consumers, we have really great relationships with our wholesalers. And I think we've always done a really good job of balancing that. And I think we continue to. So I think one of the things is this market has been fairly fluid from a tariff situation. So we've had to be nimble from that standpoint. And I think that we need probably 30, 60 days for some more information to come out so that we can go ahead and make some good decisions.

But I think that you've come to see from us for a long time now that we make really good decisions relative to pricing, understand our elasticity because we have a lot of data here that we've had for many years. So we understand what the ceilings are and what the floors are. So I feel really good relative to how we're strategically thinking about that both at a D2C level and at the wholesale level. And from a mid-tier standpoint, certainly hope that they continue to do the things that they need to do to get stronger, new management in several of our big mid-tier retailers, which is wonderful. New CEO leadership, which is bringing incredible energy, and that's what we're hearing. So have a lot of hope that, that is going to continue to get better with some new leadership and new energy, some new ideas, new focus, and we'll be right there for them from that standpoint.

But I think if I can just encapsulate it, I think I would say that in my time as the CEO here since 2018, I don't know that I've ever felt better about the U.S. marketplace and/or our positioning in the U.S. marketplace. I would say that right now, I'm as bullish as I've ever been.

That's great color. And then just an update for Joe. Can you provide a level set of where we are on Project Jeanius achievements to date the expected project Jeanius contribution that's embedded in this year's guide and the opportunities for future margin improvement from Project Jeanius as we look to 2027 and beyond?

For Project Jeanius, we delivered gross savings of over $50 million in 2025. For 2026, we will approach $100 million of gross savings. The benefits will build over the course of the year, and we expect to reach a full run rate in the second half of '26. So the savings we expect to deliver in 2016 are significantly bigger than those that we achieved in '25, again as the program continues to scale. You can see these benefits pulling through really both in the gross margin but also the SG&A. And these savings have allowed us to reinvest back into the business at a level beyond what we previously anticipated, and those investments continue to fuel our growth and momentum. The $8 million that we announced, the incremental $8 million in the fourth quarter is a great example of that.

So Project Jeanius remains on track. We're executing really well. And by the back half of this year, we will have delivered what we set out to do at the beginning.

And Brooke, I'm going to go ahead and tag on to Joe here a little bit. Relative to every time you run a big project like this and you transform, one of the things that became an attachment to this was that we are now moving and are really pushing forward with what we call a performance organization, which we have not put in place before. And we have a world-class HR organizational team led by [ Pete ] and just an incredible team that he has put together. And we are pushing to make our entire organization accountable driven by performance and rewarded by performance. And that all kicked off this year on January 1, and we are really excited about what results and also the actions and behaviors that's going to drive. But that is all an attitude of thinking about Project Jeanius, all that's come from Project Jeanius, how to make sure that we take those Project Jeanius learnings and everything that we're doing relative to Project Jeanius and continue to push it forward, but motivate our people the right way. And it seems to be dovetailing really nicely together. And it's one of the things that I'm most excited about for us as an organization in 2026 and beyond.

Our next questions come from the line of Blake Anderson with Jefferies.

I wanted to start with tariffs. I might have missed this, but did you quantify the gross tariff headwind as well? And then could you size up what are your key mitigating levers between pricing cost savings and sourcing [ and able ] to mitigate the tariffs and kind of what gives you confidence you can mitigate those more fully over the next 12 to 18 months as you mentioned?

Yes, I'll take that, Blake. So for 2026, the gross tariff impact remains over $100 million, right? So it still presents a significant headwind to the business. We are getting a bit of a reprieve from the 15% reciprocal rate that will begin to impact the P&L in the second half of the year. Our mitigating actions are larger in the second half of '26, and those will carry into the first half of '27 by which time we expect to fully mitigate the tariffs. That's the 12 to 18 months that we continue to talk about.

From a lever standpoint, it's really all of it, right? Pricing, we highlighted strategic supplier partnerships, right, inventory management. This is what our supply chain is really good at. We've got the ability to navigate situations like this around the globe. So we remain really confident in our ability to offset this as we get to the back half of '26 and into early '27.

Great. And then I wanted to ask on Lee, you mentioned that remains in a transition year, but you're expecting [ much ] in the growth in the second half. Can you elaborate on the key drivers of that inflection? What gives you confidence? And any more color on the quarterly trends there throughout the year?

You bet, Lee, this is Scott. From a lease standpoint, really proud of the work that the team has done relative to -- we've gone back, we put a national ad campaign together that we haven't had for many years. We're much more engaged from a marketing standpoint, both digital and regular. So that really feels good going forward.

Probably the single thing that I'm most happy about is product. We've done a really, really nice job with the product. It needed [ some ] grading, and we went ahead and have done it. And I think that the product offering that we have coming out this year and into '27 is the best that Lee has ever had. And then you just co-joined that with a really strong marketing campaign. And just more energy from the marketplace and the team about this lead turnaround and the product that they're seeing. I think all of that just kind of coming together at the same time.

These things do take a little bit of time, but we have had some really nice green shoots and we've been happy with that. And we watch things like digital and how the consumer can respond to new offerings immediately. And that's been really strong. So we've been really happy about that. So going into the second half, and you heard our commentary about where Lee will be there's a growing level of confidence. I don't think that we're getting ahead of ourselves and -- but we feel really good about the progress that Lee has made, the track that it's on, the product, the advertising, all of the above, just much, much better than it was a year to two years ago.

Our next question will come from the line of Peter McGoldrick with Stifel.

Yes. First on Helly Hansen. I wanted to ask about your comments about new distribution. Can you help us think about the reception among the key retailer base and how those retailers are supporting the rollouts that you mentioned in the second half?

Yes, I sure can, Peter. This is Scott and I'll pass it over to Joe after. But from my vantage point of doing this with another big outdoor brand for a very long time, I think that what we're seeing from key retailers is that they'd like to have another option. They'd like to go ahead and have another big, strong growing brand in their portfolio that I think there's just right now, a little bit of fatigue with some other brands, and this is exciting. It's new. It's really good product. We're really dialed in. You heard us talk about some of the awards that we've won and that brings footsteps into retailers, and it brings excitement. And so we are in a really great period right now where the opportunity, the phone calls aren't outgoing their inbound where people are asking, "Hey, we'd really like to talk to you about you being part of this here going forward, and we have the opportunity to be a little bit selective", which is really nice. And you're going to hear some of that. Like I mentioned earlier, we're happy to go ahead and expand on that a little bit at one of the upcoming calls, so that you know what to expect in the second half going into '27.

But that's happening pretty significantly here in the United States. But also, I should mention that our European team has done a fantastic job with that too in our Canadian team. So we're just seeing that there's an uptick in Helly. There's a real uptick in people that are talking about how great the product is and then some of the things that we've done relative to how we outfit some certain mountains and have some relationships with ski providers and ski mountains and what have you and put it on the experts in the coaches and all the volunteers. I think that's really helped the brand too relative to the brand strength and just creating kind of an aura around the brand, which is really nice. But like I said, I've been here before and seeing this all happen, learn some lessons along the way, and we're going to make sure that we implement those lessons as this brand starts to really blow up. And I think our team has done a really nice job with that.

And I am excited about we did buy the brand because not all -- this isn't specific, but one of the reasons we bought the brand because there was a really big opportunity here in North America and our team is getting after that right away. And you'll hear from us too, we're about to fill some very strategic North American positions that we haven't had before that if you want to play in this category, in this channel, you have to have those types of positions and we're about to do that. So lots of really good things, lots of big momentum, much more to come from a Helly standpoint. So stay tuned.

And then certainly, we're really looking forward to having everybody over to Oslo in September and having an Investor Day where we can really talk about the brand and you can meet the team and see the people and see some product and what's coming up, what's upcoming. So lots of good things happening with Helly and looking forward to the September date too in a pretty significant. Joe, anything that you would add?

I would just add the workwear opportunity around the globe is significant, right? This business has grown pretty consistently at a high single-digit rate over time. This business is primarily a European business today, but the global opportunity for workwear is significant, including in the U.S.

That's really helpful. And then there were some encouraging comments about Helly Hansen's integration. And I was hoping you could help us think about the key remaining integration milestones. Any cost synergy targets for 2026 and when you expect to reach the full run rate of synergies?

Yes, I'll take the synergies. So we continue to have direct line of sight to significant synergies across the business. That list is growing. The deeper we get into it, and we're working very collaboratively with the leadership team in Oslo. We have now identified synergies of more than $40 million. We were at $25 million before. These will come in the areas primarily sourcing logistics, distribution, technology, tax, all the things that you would expect as well as some back-end operating efficiencies. So we've got synergies baked into 2026. We will reach full run rate in terms of the $40 million as we move into 2027.

I'll tell you, Peter. This is kind of a fun one, but we talk a lot about colabs, actually, we would like to see a come between Helly and some of our other brands. That would be kind of fun from a synergy standpoint.

Thank you. We have reached the end of our question-and-answer session. I would now like to hand the call back over to Scott Baxter for any closing comments.

Thank you, everyone, for joining us today. As you can see that there's a lot of effort and energy coming from Kontoor brands. A huge thank you to our global team. I think you can count on us to keep our heads down, working really hard and continue to drive this business forward.

And -- just again, I wanted to thank the entire Helly team and welcome them to our corporation. It's been a lot of fun, a great integration that just haven't seen the likes of it in my career. And I think that you can count on us to continue to work hard in this marketplace and take advantage of the opportunities that we have.

One or two things that I would like to mention is we do have the upcoming Investor Day, and we'd like to hopefully see a strong showing for that so that we can spend the day together and really talk about the Helly brand. And then we thought because there were so many questions about that, that we do that first and really focus on it because it's such a focal part and an important part of what we're trying to do here. And then we'll follow that up very quickly, very quickly in 2027 back here in the United States with a full KTB Investor Day. So we'll hit that, kind of Bam!, Bam! right after the other. But thanks again for your questions and also your support. Really appreciate it, and we look forward to seeing everyone in September, but we look forward to talking to you at the end of the first quarter on our call. Thanks, everyone. Take care.

Thank you, ladies and gentlemen. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time, and have a wonderful day.

Greetings, and welcome to the Kontoor Brands Q3 2025 Earnings Conference Call and Webcast. [Operator Instructions]

As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Michael Karapetian, Vice President, Corporate Development, Strategy and Investor Relations. Michael, please go ahead.

Thank you, operator, and welcome to Kontoor Brands Third Quarter 2025 Earnings Conference Call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to materially differ. These uncertainties are detailed in documents filed with the SEC.

We urge you to read our risk factors, cautionary language and other disclosures contained in those reports. Amounts referred to on today's call will often be on an adjusted dollar basis, which we clearly defined in the news release that was issued earlier this morning and is available on our website at kontoorbrands.com.

Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in today's news release. These tables identify and quantify excluded items and provide management's view of why this information is useful to investors. Unless otherwise noted, amounts referred to on this call will be in constant currency which exclude the translation impact of changes in foreign currency exchange rates.

Joining me on today's call are Kontoor Brands' President, Chief Executive Officer and Chairman, Scott Baxter; and Chief Financial Officer and Global Head of Operations, Joe Alkire. Following our prepared remarks, we will open the call for questions. Scott?

Thanks, Mike, and thank you all for joining us today. Our third quarter results highlight the power of our expanded brand portfolio. Helly Hansen grew double digits Ranger gained market share for the 14th consecutive quarter, and we launched Lee's first equity campaign in years, while taking proactive steps to improve the health of the marketplace.

While the timing shift impacted growth in the quarter, stronger gross margin expansion and disciplined expense management drove better-than-expected earnings. Based on our year-to-date performance and improve the profitability, we are raising our full year outlook while the environment remains dynamic, we are well positioned to finish the year strong and enter '26 with momentum.

Now let's review highlights from Q3, starting with Helly Hansen. Third quarter results exceeded expectations with revenue growth of 11% and $0.03 of earnings accretion. Growth was broad-based across both sport and workwear in all regions. The business is performing at a high level, the integration is progressing well, and we continue to uncover new opportunities to create significant value together. To build on this momentum, we are focused on our strategic pillars.

First, accelerate growth. It starts with product. Our iconic platforms, including crew, Alpha Legendary and Lifa Merino continue to differentiate Helly in the marketplace and generate strong demand from our consumers. And our latest product launches have made '25 a record year.

We won 6 Red Dot design awards, our most ever in a single year. Award-winning products include the Odin Ultimate Infinity jacket, Arctic Patrol Down Parka and within Workwear, the Magne Evolution jacket. These are scalable platforms that we will drive global growth and nowhere is that opportunity greater than in the U.S. We see significant room to grow through a combination of new distribution D2C growth and investments in demand creation to increase brand awareness.

Currently, awareness in the U.S. is only 29%. This has grown by 6 points since 2019, while revenue has more than doubled. Starting next year, we will be making investments in top funnel demand creation to increase awareness in fuel accelerated growth.

Within Workwear, there are considerable market share opportunities, leveraging Helly's unique dual brand position the connection to technical outdoor products worn by professionals on the mountain or water has made Helly a leader in pro-grade workwear in Europe. In the U.S., we are leading with footwear in regions where Helly sport penetration is greatest.

Over time, this will expand to include the broader apparel assortment supported by further development of our lightweight and cooling platforms to drive growth in warmer climates. Outside the U.S., we see opportunities entering new markets in Asia and increasing penetration in key markets within Europe, including Germany, Austria and Switzerland.

In addition, we will continue to support our business in China, which we operate through a joint venture. China is on track for over 70% growth this year; and second, double operating margin. We expect to increase operating margin from high single digits today to mid-teens through a combination of gross margin expansion and SG&A benefits. We are leveraging our global operating model supply chain and technology platforms as well as Project Genius. This will create greater back-end efficiency and increased investment capacity to support our growth initiatives.

Helly is headed into the fourth quarter with incredible momentum, and I could not be more confident in the opportunities ahead. Turning to Wrangler. Global revenue increased 1%, including 12% growth in digital Wholesale growth was impacted by a timing shift into the fourth quarter. Excluding this shift, global revenue increased at a mid-single-digit rate. The third quarter marked Wrangler's 14th consecutive quarter of share gains according to -- in our core men's and women's bottoms business, we gained 80 basis points of market share.

Our female business had another strong quarter with growth of 20%. Our collaboration with Lane Wilson continues to exceed expectations. Her latest collection is performing very well while supporting more premium AURs and increase penetration with younger consumers, and Bespoke is now the #1 female style at select specialty retailers. This has been a banner year for our female business, and we expect double-digit growth for the year.

Western grew high single digits in the quarter as the #1 Western apparel brand, we have never been stronger. At the upcoming Wrangler National Finals Rodeo in Las Vegas, we will be represented by some of the top athletes in the world as well as host events at the annual Cowboy Christmas where the Western world converges to showcase the best of Western apparel.

In addition, Wrangler Country Music Star's Lady Wilson and Cody Johnson will perform sold-out shows. Western is on track for double-digit growth this year. To support this momentum, we will continue to invest behind our demand creation platforms, including live sports, streaming and social media. In particular, our highly successful -- good morning, make for better days, campaign will continue through the balance of the year as we build momentum for the holidays and '26.

Turning to Lee. Revenue declined 9% as we took proactive steps to improve the health of the marketplace in China. Excluding these actions, revenue declined 4%. And we are encouraged by the progress we are making against our brand realignment. Digital is leading the way with growth of 15% in the U.S. As we previewed last quarter, we launched our built likely equity campaign in September.

The first of this scale in years. While early days, we are encouraged by the reaction in the marketplace and have seen improvements in both brand equity and perception. We are also making progress in aligning products to our refreshed brand position. In addition to activating our iconic platforms, we are seeing success with new introductions such as Velocity Pant and collaborations with Crayola and Buckiso. Crayola will be Lee's strongest collaboration ever and our second collaboration with Buck Mason is outperforming the initial launch.

Importantly, our 2025 collabs are attracting 3x more millennial purchasers. While the lead turnaround will not be linear, we will do this the right way. We expect sequential improvement in the fourth quarter.

Finally, we announced this morning, we made an additional $25 million voluntary debt repayment in the third quarter, and we expect to further reduce debt by $185 million in Q4.We are tracking ahead of our deleverage plan and expect to return to approximately 2x by year-end while consolidating a significant increase in earnings and cash flow.

Deleverage is our near-term priority, but we will take an offensive posture to deploy our cash generation to support our capital allocation framework, including our dividend and share repurchase programs.

Before turning it over to Joe, let me reiterate the confidence we have in achieving our '25 plan, our expanded brand portfolio provides significant opportunities to create value through strong fundamentals and increasing capital allocation optionality and while the environment remains uncertain, we are being proactive with initiatives such as Project Genius to offset headwinds in the marketplace. We are executing at a high level, and I am confident we are on a path to drive strong value for shareholders. Joe?

Thanks, Scott, and thank you all for joining us today. Our third quarter results reflect the strength of our operating model and the benefits from our expanded brand portfolio. In what remains a highly dynamic environment, -- our fundamentals are strong, and we are operating from a position of strength. While the timing shift impacted revenue growth in the quarter, better-than-expected revenue and profitability from Helly Hansen stronger gross margin expansion and further improvement in operating efficiency drove earnings upside relative to our outlook.

Based on our year-to-date performance and increased visibility into the fourth quarter, we are raising our full year revenue, gross margin, earnings and cash flow outlook. We are well positioned to finish off a record year with good momentum as we enter 2026. Let's review our third quarter results.

Global revenue increased 27%, including the contribution from Helly Hansen. By brand, Wrangler Global revenue increased 1%. Revenue growth was impacted by a shift in the timing of wholesale shipments from the third to the fourth quarter. Excluding the shift, global revenue increased at a mid-single-digit rate as a result of strong demand for the brand around the globe.

In the U.S., revenue increased 1%, driven by 11% growth in DTC. Wholesale was flat to prior year. However, excluding the previously mentioned timing shift U.S. wholesale revenue increased at a mid-single-digit rate. Growth was broad-based, driven by strong increases in female, Western as well as continued market share gains. -- denim grew at a low single-digit rate.

Following a strong July and August, POS moderated to a low single-digit increase in September, consistent with the year-to-date average. October POS was flat compared to prior year with POS increasing at a mid-single-digit rate over the past 2 weeks. Wrangler international revenue increased 2% driven by 19% growth in digital and 1% growth in wholesale.

Turning to Lee. Global revenue decreased 9%. During the quarter, revenue was impacted by proactive actions in China to address challenges in the marketplace. We discussed our intent to execute these actions on our second quarter call. Excluding the actions taken in China, Globally revenue decreased 4%, reflecting sequential improvement in the revenue comparison from the second quarter, and we expect further improvement in the fourth quarter.

U.S. revenue decreased 9% as we work to address challenges within certain segments of our distribution footprint and drive more consistency with the brand's realignment and go-forward strategy. Digital revenue increased 15%. We remain encouraged by the momentum in our digital business, which has continued into the fourth quarter. We International revenue decreased 9% and with declines in wholesale offsetting mid-single-digit growth in our brick-and-mortar stores. Excluding the actions taken in China, Lee international revenue increased approximately 3%.

Now turning to Helly Hansen. Global revenue of $193 million increased 11% compared to prior year reported results. Growth was broad-based across both sport and workwear and in all geographic regions. We are encouraged by the stronger-than-expected results. The integration is progressing well and we are confident Helly will be a significant contributor to both revenue and earnings growth in the coming years.

We now have line of sight to greater than $25 million of run rate synergies, which will begin to meaningfully impact profitability in 2026. These synergies will help fund investments in business, including geographic and category expansion, demand creation, DTC, supply chain capabilities and our technology platform. As we look forward to 2026, we expect Helly's momentum to continue to build. The Spring/Summer order book has accelerated from fall/winter 2025 and work where preorders are up at a double-digit rate.

We recently kicked off the fall/winter 2026 selling season, and the feedback from the marketplace has been strong, reflecting the robust product and innovation pipeline of the brand.

Moving to the remainder of the P&L. Adjusted gross margin expanded 80 basis points to 45.8%. Excluding Helly Hansen, adjusted gross margin expanded 140 basis points, driven by the benefits of Project Genius channel and product mix as well as targeted pricing actions. This was partially offset by increased product costs and the impact from recently enacted increases in tariffs.

Helly Hansen was diluted adjusted gross margin by approximately 60 basis points. During the quarter, we took actions to improve inventory turnover, increase cash generation and accelerate debt repayment. There is a significant opportunity at Helly Hansen to improve both gross margin and net working capital by leveraging our supply chain capabilities in the areas of planning, procurement and inventory management.

Adjusted SG&A expense was $269 million. Excluding Helly Hansen, adjusted SG&A was flat compared to prior year, supported by lower distribution and freight expenses and the benefits of Project Genius. We remain focused on driving further improvements in operating efficiency in light of the environment. And adjusted earnings per share was $1.44, increasing 5% compared to prior year.

Adjusted EPS was $0.09 above our prior outlook. Helly Hansen contributed $0.03 per share compared to our prior outlook of breakeven earnings. Turning to the balance sheet. Inventory at the end of the third quarter was $765 million. Excluding Helly Hansen, inventory increased 21% to $560 million driven by a temporary increase in inventory to support our supply chain transformation, earlier-than-expected inventory receipts as a result of improved sourcing lead times as well as the impact of tariffs.

We expect inventory to normalize in the fourth quarter and decreased approximately $120 million from the third quarter to approximately $645 million. We finished the quarter with net debt of $1.3 billion and $82 million of cash on hand. Our $500 million revolver remains undrawn. On a pro forma basis, our net leverage ratio was 2.5x. During the quarter, we made a voluntary $25 million debt repayment. We are tracking ahead of our deleverage plan and expect to make an additional $185 million voluntary payment in the fourth quarter.

We anticipate returning to approximately 2x net leverage by year-end. Share repurchase activity remains on pause near term as we focus on paying down acquisition-related debt and reducing leverage. We have $215 million remaining under our current share repurchase authorization. And as previously announced, our Board declared a regular quarterly cash dividend of $0.53 per share, a 2% increase.

And finally, on a trailing 12-month basis, adjusted return on invested capital was 23%, improving from 22% in the second quarter.

Now let's review our updated outlook. Full year revenue is now expected to be at the upper end of our prior outlook range of $3.09 billion to $3.12 billion, representing growth of approximately 19% to 20%. Helly Hansen is now expected to contribute $460 million to full year revenue compared to our prior outlook of $455 million. Excluding Helly Hansen, we expect revenue growth of approximately 2% and compared to our prior outlook of 1% to 2% growth.

For the fourth quarter, we expect revenue to be in the range of $970 million to $980 million, representing growth of 39% to 40%, including the expected contribution from Helly Hansen. Our outlook includes the impact of a 53rd week, which is expected to benefit the fourth quarter by approximately 4 points of revenue growth. We continue to plan the business conservatively.

For Wrangler and Lee, our updated outlook assumes no meaningful change in POS trends or inventory positions at retail for the balance of the year. This is consistent with our prior outlook. Excluding Helly Hansen, October revenue growth was approximately 6%, tracking slightly ahead of our anticipated organic revenue growth for the fourth quarter, excluding the 53rd week.

For Helly Hansen, our revenue outlook is supported by current demand trends in the fall/winter 2025 order book, which accounts for the majority of support revenue.

Moving to gross margin. Adjusted gross margin is now expected to be approximately 46.4% compared to our prior outlook of approximately 46.1%. Our outlook represents an increase of approximately 130 basis points compared to prior year. We expect fourth quarter adjusted gross margin of approximately 45.8%, representing an increase of approximately 110 basis points compared to prior year.

Adjusted SG&A expense is expected to increase approximately 24%, reflecting the contribution from Helly Hansen as well as increased investments, primarily in the areas of demand creation, technology and direct-to-consumer. Excluding Helly, we expect SG&A to increase at a low single-digit rate, consistent with our prior outlook.

We continue to anticipate Project Genius savings to mature to a full run rate in excess of $100 million of annual savings over the course of 2026. Adjusted EPS is now expected to be approximately $5.50, representing an increase of 12%. This compares to our prior outlook of approximately $5.45. Helly Hansen is expected to benefit full year 2025 adjusted EPS by approximately $0.20, consistent with our prior outlook.

We have not included any benefit from synergies in our outlook. We expect fourth quarter adjusted EPS of approximately $1.64, reflecting growth of about 19%.

Finally, we continue to expect another year of strong cash generation. Cash from operations is expected to approximate $400 million, including the contribution from Helly Hansen. This compares to our prior outlook for cash from operations to exceed $375 million. Starting in the fourth quarter, we will begin to leverage and expand our supply chain and AR financing programs to include Helly Hansen. These programs and capabilities will be a significant unlock for the business while supporting accelerated cash generation and deleverage.

Before opening it up for questions, let me reiterate the confidence we have in achieving our 2025 objectives. While the environment remains dynamic, we are operating from a position of strength. The integration of Helly Hansen is progressing well. We are ahead of our planned deleverage path and Wrangler and Lee are on track to deliver a strong fourth quarter.

Our operational execution and discipline continues to drive further improvements in our business fundamentals, supporting higher returns on capital and significant capital allocation optionality moving forward. This concludes our prepared remarks. I will now turn the call back to the operator.

[Operator Instructions]

Our first question is coming from Ike Boruchow from Wells Fargo.

A couple from me. I guess, Joe, could you just clarify Wrangler U.S. wholesale, it seems like it was probably up mid- to high single digits in the third quarter extashift. Can you confirm that? And then on the -- can you kind of work with us on what's embedded in your -- in the Wrangler wholesale number there, both with the ship and then also organic? And I know you said POS flattened out in October, but then it sounds like it's accelerated the last couple of weeks. So kind of curious what's in the plan.

Yes. So on the timing shift, so the timing shift impacted Q3 revenue by about 2 points, with the primary impact being on the Wrangler brand. Excluding the shift, total revenue would have been above our prior outlook driven by Helly with Wrangler increasing at a mid-single-digit rate. So we had our largest September ever as a company. However, order flow, shipment flow was more back half weighted than what we anticipated in our prior outlook.

So the demand was solid. We just had a shift in shipment timing focused on a couple of the key accounts. We did see that pull through in October. I think I said in the prepared remarks, October was up 6% organically compared to the prior year. That's a little ahead of what we have contemplated in in terms of growth, excluding the 53rd week.

So nothing we see from a demand standpoint. In fact, we've moved to the high end of the revenue range based on our our year-to-date performance and our visibility into Q4 and Wrangler is probably the biggest part of that.

Got it. So no red flags on the consumer thus far in terms of what you're seeing?

And I would tell you, with our broad distribution and the campaigns that we're running right now with both of our denim brands right now that are out in the marketplace. In addition to the product and the design and just the demand, 14 consecutive quarters now. I mean you've seen that of market share gains with Wrangler, we've put ourselves in a really good position, really like where we sit now for the foreseeable future, and we'll continue to really work that through design great product, tell great stories, broad distribution. It's been a really nice formula of success for us going forward.

Okay. Great. Moving to Helly. So up 11% pro forma growth. I think your first half, you were kind of trending more at 1% to 2%. It's a nice acceleration. What's driving the near-term inflection and Helly brand revenue already. And then I guess based on the order book commentary, which is accelerating into next year, could we see Helly growth rates actually continue to accelerate over the next 12 months?

So I'll go ahead and start. What you're seeing is you're seeing a company that's thriving inside of another apparel company. They haven't had that ecosystem before relative to where they've sat the last decade or so, and now they're inside our ecosystem. We're thriving as far as partners working together. They're accelerating in all fronts, the European business, the China business, the U.S. business is really starting to take off. But obviously, we're feeding that.

So we're investing in that and we're seeing really good results. And I think the thing it starts with is they're really building great product. And I think they're having a lot of fun being part of our organization. I think the 2 companies are working really well together. And I think we see a bright future. And I think one of the things that's been really important because we talked about it and it's important that we talk about it again, is we see a big opportunity in North America in addition to what we already have. and that is starting to come to fruition.

Just having the capability, having our resources in North America to lean on and then now going ahead and making it a priority because we have made that a priority. We're starting to see those results early. So we're really, really excited about what's happening there in the future. Joe, anything to add?

Yes, I'd say on the order book, Spring/summer '26, that order book for sport reflects an acceleration compared to fall/winter '25, fall/winter '25 accelerated versus spring/summer '25 and even fall/winter '24. So that business is performing really well. Workwear preorders have been strong, up at a low double-digit rate, and we just kicked off the fall/winter '26 selling season, and it's off to a really good start. The feedback from the marketplace has been really good.

We also will put more investment behind the business in '26, which should help further accelerate growth. So just a tremendous opportunity for the brand globally across both sport and work.

And I think one of the things that's really been beneficial is management and the team is intact on the acquisition.

So they were already a strong team, and we're only making it stronger by adding and helping, but we've got a good core team that we kept through the merger and the acquisition, and it's really played out really well for us.

That's great. And then a quick one, lastly. On the inventory, Joe, can you help us get comfortable with that number? I think you said up 21% organic for the end of the year, which implies mid-teens organic. Just it doesn't sound like there's any issues at all, but can you kind of hold our hand a little bit because it is a decent growth rate above where the core growth rate is for the business. So any more color there would be helpful.

Sure, Ike. So we ended the quarter, excluding Helly Hansen, up about 21%, about $98 million versus the prior year. So roughly $25 million of that increase related to inventory investments we made to support our supply chain transformation. So we closed our Tore on manufacturing facility in Mexico during the third quarter as part of Project Genius, and we carried excess inventory to support the operational transition.

So that excess inventory will wind down over the course of the fourth quarter and into the first quarter, and that transition has gone really, really well. About $25 million of the increase relates to higher tariffs. So the cost of that is now embedded in our inventory and about $20 million related to earlier-than-expected receipts of sourced product as a result of lead times improving.

So the remaining increase is really in support of the growth plans that we have for the business. We said in our prepared remarks, we expect about $120 million reduction in Q4, and we remain pleased with the overall quality and composition of our inventory.

Our next question is coming from Bob Drbul from BTIG.

Just question on pricing. When you look at your business and you look at sort of the plans into next year, what's happening with pricing with your own product? And I guess, I'd be curious to just see what you're seeing competitively on pricing as well.

Yes. Bob, I would say for us, pricing has been part of a holistic strategy to combat the impact of the tariffs, right? Pricing for us went into effect mid-June in our own DTC and in July at Wholesale. So something we're watching very closely with our retail partners and look, these plans were put together in collaboration with them and all of the elasticity assumptions are reflected in the outlook.

We were very surgical, as you would expect, in terms of where we took price just as we have been in the past. And these price increases were not just a U.S.-focused effort. I think that's part of the power of a global multi-brand portfolio.

So Overall, the price elasticity equation has been largely consistent with our expectation. It varies a bit by brand and category and channel, certainly, certain parts of the market are more sensitive, other more premium areas less so. But overall, the pricing elasticity equation has been in line with what we expected.

And Bob, one of the things that we pay particular attention to as an organization is that if you look at all of our brands globally and in the marketplaces where each operates, we really like from a higher arch standpoint, where we sit -- so we're really comfortable with where our brands are positioned and how they're priced compared to our competitors within those marketplaces.

So we've been very thoughtful for a long time about how we price and the product that we have. So I'm comfortable with where we sit right now.

Got it. And just two questions on Helly, if I could. I guess the first one, Scott, I think you mentioned you're seeing new opportunities. Just wondering if you could elaborate on that. And within the U.S. business, growing it from the $150 million level, is it like new distribution targets? I just if you could expand a bit on the plan in the U.S., that would be helpful.

Absolutely.Actually, it's everywhere and everything. So it's ski shops, it's independents. It's definitely U.S. wholesale. It's across the board. It's digital, it's owned and operated retail. So we've got multiple plants that come into different stages.

As you can imagine, we've thought it out from a capital standpoint on how we're going to embrace each one. And it's really interesting, Bob, we sat back and we said to ourselves, it's even better than we thought at acquisition time. We think there's more than we thought about. It's more robust than we thought. And people are really reacting and responding very positively to our brand because they've seen it around the world before and they just haven't seen it enough here in the United States and it's new and it's fresh and it's creating some excitement, but they haven't had the distribution to go ahead and purchase it for themselves.

But now we're going to give them that, and that is starting. And then just so you know, because we'll talk about this in the future, we are adding some really key personnel here over the next 12 to 18 months in some significant leadership positions to help support that going forward. So like we said before, it was a big opportunity, 1 of the strategic reasons we bought it. But as we sat back and know gotten ourselves involved in this business, we think the opportunity is even bigger than we thought across the Board.

Your next question is coming from Jonathan Komp from Baird.

I want to follow up and ask the raise to the high end of the organic revenue growth to 2% for the year. Can you just maybe talk a little bit more directly what's driving that confidence? And then Joe, it sounds like from your inventory buildup, you may be planning healthy organic growth into 2026. Just any color there would be helpful.

Yes, Jon, it's Scott. I'll go ahead and start. Really, Jon, we're looking at our business and we're just seeing real strength across the board. Let me start with Helly. I mean we've talked about the fact that Helly is really coming online very quickly, faster than we thought. Companies are working really well together, and we're seeing opportunity across the board.

And more importantly than anything we're seeing our consumer want to take out our business. So our POS is strong. We watch really closely our digital business because it's an opportunity for our consumer to purchase immediately. And it's been very strong across our brands and strong with Lee 2, which gives us confidence in our turnaround because it's the first opportunity that people can interact with us after we put our turnaround in play.

But across the Board, really strong from a digital standpoint. So that gave us confidence. The strength of our business here in the third quarter as we reached towards the end of the third quarter and saw this really strong uptick in POS gave us a lot of confidence. And then I would tell you that October gave us a lot of confidence. October came in on plan, no issue at all.

So really feeling good about that as we come through the first month of the fourth quarter, feel confident there. And then more than anything, our team is designing really good product in. We've got 2 right now, 2 national campaigns going on with Wrangler and Lee, which has got us in the marketplace in a fairly significant way, which is really important. And weather is really cooperating.

I'll give you a great example. Helly is a rainwear, outdoor and ski and active and Pro business. And we've had more rain across this world Europe, Asia and the United States. And now we've got early snow across Europe and also here, which we didn't have last year at this stage. So that gives us a really, really good push forward as we enter into that really critical period. So lots to be thankful for right now, but mostly for our great folks here that have got their heads down and working hard.

Yes, Jon. And on inventory, I know it's a little noisy here with the addition of Helly and some of the transitory impacts that I highlighted. But we're comfortable with the composition of the inventory, the sequential progression we have planned how that's positioned in support of the growth plans. And Helly as well. We've talked on prior calls about the net working capital opportunity.

At Helly, you'll begin to see the impact of that starting in the fourth quarter and into the first half of next year, which will help contribute to some strong cash generation as we move into next year.

Okay. Great. That's helpful. And maybe as a follow-up, as we look to 2026, could you help to frame up as we think about the contribution from Genius where you stand and the incremental benefit that you may achieve? And then also the Helly Hansen operating contribution, I think you reiterated $0.20 for this year. But what are some of the factors that might impact how that can grow into next year?

Yes, I'll take that, Jon. So on '26, certainly not giving an outlook today, but I'll give you a high-level framework just given all of the moving parts. So we expect the organic business to continue to grow. We are performing well. That's going to be mainly driven by the Wrangler brand. '26 will be a transition year for Lee. Helly business is performing really well. As you've seen, we will delever quickly, which will create an earnings tailwind as well as additional capital allocation optionality as we consolidate and grow that cash flow and that earnings stream, you'll have synergies that will scale more meaningfully across 2026, and you've got Project Genius savings that will be maturing to more of a to more of a full run rate.

We will have a bigger impact of tariffs next year for 2026. The full year unmitigated impact is about $135 million, which were we're clearly working to mitigate a significant portion of that. But those are the biggest factors influencing '26. We like where we are. We like our model, and we've got a lot of optionality to continue to drive the growth and returns that we expect.

Next question is coming from Mauricio Serna from UBS.

First, maybe could you tell us or confirm like what kind of like the Q4 organic revenue growth that you're expecting in your guide? I mean, you talked about October being 6%. I just wanted to get a sense of what's expectation for the fourth quarter?

And then on heavy consent, you raised revenue contribution a little bit for the year, but there was no really change in the EPS revision of $0.20. So just was wondering what were the puts and takes on that?

Mauricio, I'll take those. So for the full year outlook, we raised the outlook, right? Part of that was outperformance that we had. Part of that is the increased visibility into the fourth quarter. So we now expect to be at the high end of the prior outlook range on revenue organically. We've got a stronger contribution from Helly Hansen and we increased our gross margin, earnings and cash flow. For the fourth quarter, our outlook implies about 6% growth on an organic basis. That includes the 53rd week, which is contributing about 4 points to the growth. You also have the benefit of the timing shift that impacted us in the third quarter.

So when you put all that together, we have modest growth contemplated for the business in the fourth quarter. Helly Hansen is expected to contribute close to $240 million of revenue as well in the fourth quarter, growing nicely compared to the prior year. So the assumptions underlying the organic revenue, we've assumed POS trends that are modestly positive, which is what we've seen for the majority of the year.

Things have been a little stronger over the last couple of weeks. -- as weather has been more cooperative. And then inventory levels at retail, we really haven't assumed any meaningful change. Our retail partners remain in a fairly conservative posture as they have all year, and we don't expect that to change.

Got it. Very helpful. And then maybe just very quickly on Lee, you sound very positive about the feedback that you're getting from the equity campaign. Maybe could you talk a little bit more about more green shoots on the brand and you've mentioned like sequential improvement for fourth quarter. Is that sequential improvement versus the 9% decline or versus like the 4% excluding the China proactive actions?

Yes. Mauricio, I'll take the latter part, and then Scott can take the first part. So the sequential improvement that we referenced is excluding the impact of the China actions in the third quarter. So I would think about sequential improvement relative to the 4% decline that we saw in the third quarter.

So Mauricio, I would tell you, similar to some of the comments that I've already made, we're seeing that our investment is paying off. And what I mean by that is we've invested dramatically in both our product engine and also our advertising and marketing. And so creating the right product for the marketplace, specifically in the channels that we sell the product in at the right price, as I mentioned earlier, and in telling a really great story behind that.

it takes a little bit of time because, as you know, this business order out over a period of time. So to see your results, it takes 6, 9 months, sometimes a year, except for in the digital component. And what we've seen here early on is a very strong response in the digital component from both male and female, which is really important to us. Our female business is doing exceptionally well.

So our conversations with our wholesale partners across the globe and also our own retail stores across the globe have been very positive. I've been pleased. We've been at this, as you know, for about 18 months now and still have a little ways to go. We're never going to be satisfied obviously, going forward. But those are some of the key components as to how we look at the business and how we measure and monitor how it's doing.

And the sequential improvement has been really important because it's also a shot from a morale standpoint to the team, too, as you can imagine. -- when they're making product that's really working and the marketplace is talking about it, they feel really good about it. So we've got that type of momentum, too. So more to come over time because I think we've been very transparent in sharing the story as we've gone along, and we'll continue to do that. But right now, the way I would describe it is that everything is on track to how we planned it from the very beginning.

Next question is coming from Paul Kearney from Barclays.

My first is clarifying on the October organic growth [indiscernible]. is that including the shift of timing from Q3 into Q4? And then on the Q4 guidance, just curious on it assumed in the Q4 guidance a continuation of the POS at mid-single digit that you saw in the last 2 weeks? And then a follow-up.

Paul, it's Joe. On October, yes, it does include the impact of the timing shift that we talked about. And for POS, the POS assumptions for Q4 does not assume that the mid-single-digit increases that we've seen over the past several weeks continue for the balance of the quarter. Our POS assumptions for Q4 are modestly positive.

Okay. And my next is on -- I think you pointed to $25 million of run rate synergies for Helly Hansen for 2026. I guess -- can you speak to any clarity on timing on achieving some of those synergies? How should we think about flowing those through in our model versus reinvestment? And just when should we expect to achieve those and which ones.

Yes, I'll take that, Paul. So we do have direct line of sight to pretty significant synergies across the business. That list of synergies is growing. The deeper we get into the business, as you can imagine, Part of that is just we are a more synergistic owner as a global brand operator and a lot of the pain points for the Helly business are -- there are strengths. So they'll benefit greatly.

Helly will benefit greatly from being part of our platform as we more fully integrate the business. The $25 million that we talked about, we're starting to see it now. It's smaller for 2025. We're starting to see some of those benefits now. Those will scale more meaningfully across the course of '26, and we'll lay that out in the full context of our '26 outlook in February.

Your next question today is coming from Brooke Roach from Goldman Sachs.

Scott, Joe, I'm hoping you could provide an update on where you stand on Project Genius savings realization. What proportion of the greater than $100 million savings have been realized to date? What's still on the horizon into 4Q and to 2026 as you mature into those savings? And how should we be thinking about the opportunity for flow-through to the bottom line as you contemplate continued investments into each of your core brands, including demand creation?

Yes. Brooke, so for 2025, we've got about $50 million of gross savings embedded in the outlook. That's above our previous expectations. So those savings compared to our initial outlook have allowed us to reinvest back into the business at a level beyond what we previously anticipated, and those investments are certainly part of of the fuel for the growth and the momentum that we're seeing. The benefits of Genius and the investments we've made, like I said, they're fully reflected in the outlook.

We do expect those benefits to scale materially in 2026 and reached $100 million of annual savings run rate. We will reinvest a portion of those savings. But as we've said from the very beginning, a portion of these savings will be reinvested back into the business and a portion of these savings will drop to the bottom line and drive profitability and returns improvement.

Great. And just a follow-up. I was hoping we could double-click on the Lee China business. Are you fully reset in that business today? And do you expect that business to begin to return to growth as we turn the corner into -- where are we in the transition?

Yes, I'll start, Brooke. So there's no change to the significant opportunity we see in China longer term. We're more confident in our approach going forward than we've been over the past couple of years, we've got a strong team on the ground there. For the past months or so, we've been working to reestablish our foundation in China for Lee as part of the brand's global approach to the turnaround. Our results have improved over the past year, but there's still more work to be done, and this market remains very dynamic, as you know.

The actions we discussed in our prepared remarks reflect the next set of initiatives to really strengthen our presence in the market and build a stronger foundation going forward. So -- more specifically, we've been consolidating distribution partners. We've been partnering with larger, more sophisticated partners in the market that can invest with us to build and drive the brand going forward.

We've taken actions to address inventory challenges in the market. We've elevated our own DTC presence. So there's a number of things that we've been working on behind the scenes. But I'd say the majority of the heavy lifting is behind us from here.

And I would just add, if you step back a little bit, Brook, some of the things that came out of COVID and what the world went through, there were some things that happened and some bad practices and what have you. And we've got ourselves now at a point where we've got a really impressive leadership team and a great leader over there.

But in addition to that, probably the most important thing is we really have a real strategy there now that makes a lot of sense for what this marketplace is going to look like going forward. So over the last 9 to 12 months, have become much, much more happy with kind of how we're thinking about it and kind of really like the thought process and the strategy that's gone into it. So we felt -- and this is the point we felt really confident to make this investment, and that's what drove that. We like the strategy. We like where it's heading.

We're happy to make an investment to put them in really good footing and then we move forward from there. So I think that from the standpoint of what's happened here in the last 5 or 6 years with the whole world that we're in a better place than we've been in China in a long time. And I think the future looks bright.

Best of look going forward.

Next question is coming from the line of Laurent Vasilescu from BNP Paribas.

Joe, I was hoping to get a little bit more color around FY '26. I remember last year on the third quarter call, you provided preliminary thoughts, particularly on the top line. I think you mentioned -- should grow 4%. Just curious to know, is there any rationale why we're not getting any preliminary thoughts for 1H '26 top line on an organic basis? And then I think, Scott, you mentioned Lee is not going to be linear, but how do we think about when should we actually return to growth in all markets.

Yes. Yes, I'd say on '26, I gave the framework, if you will. I'd say, this year versus last year are a few more moving pieces, as you know, and we're right in the middle of our planning process now. So we'll be back in February and give the detailed outlook as we normally do.

Laurent, as product flows and how we create and make product and go to market, I think our confidence is really building that late '26, fall/winter '26, you're going to see us even out and then start our growth algorithm right after that.

So feeling really good entering this year. We feel really good about how the product is going to flow in and feel really good about the product itself. -- that will go ahead and resonate with some stabilization by the end of the year and then growth by the end of the year, beginning of the next year.

Okay. Great, helpful. And then so just one sticking point here. There's $0.78 of adjustments is actually larger than the actual GAAP EPS number. Curious to know what the adjustments we should contemplate so we're going to actually have our models buttoned up for 4Q. What kind of adjustment should we have for 4Q? And when longer term, I think you mentioned the book, there's $50 million of gross savings from Project Genius, but when should we see the adjusted and GAAP EPS converge? And of the $100 million, how much of it actually flows through to the bottom line?

Yes, I'll take that, Laurent. So as we've discussed on prior calls, we will have onetime adjustments as we move through Project Genius as we move through the acquisition of of Helly Hansen. I think those are pretty difficult given the transformational nature of those projects. I would say the cost to date have been in line with our expectations.

The the onetime adjustments that we saw in the third quarter, primarily related to the closure of our Trion manufacturing facility as well as the integration of Helly Hansen on the SG&A side. But look, we don't pay our bills with adjusted earnings. We don't pay our shareholders with adjusted cash. So we're measuring the cash returns of Genius and the returns on Helly and our cash generation remains robust. We raised the cash flow outlook for '25, and we expect another year of strong cash generation in '26, and that includes the impact of the onetime adjustments.

Next question is coming from Peter McGoldrick from Stifel.

I am interested on the cash flow guidance following up on Laurent's question. The the step-up is significantly higher than the adjusted earnings increase in the outlook. So I'm curious if you can bridge the gap on working capital adjustments or any other items influencing the outlook to $400 million operating cash flow.

It's really the working capital. Peter, it's the sequential reduction in the inventory in addition to the earnings growth for both the organic business as well as Helly.

Okay. And then on the increased gross margin guidance for the year, can you work through the puts and takes here, whether it be by brand, Helly Hansen versus the denim brands any fundamental drivers? Or if there's any influence from the tariff assumption and inventory timing flow through?

Yes, I'll take that, Peter. So on Q3, we were up 80 basis points overall, 140 basis points, excluding Helly Hansen. For the organic piece, mix was about 170 basis point benefit, that's channel mix, product mix, business mix. Our Project Genius benefited gross margin by about 90 basis points. and then tariffs net of our mitigating actions as well as higher product costs hurt us by about 120 basis points.

For the fourth quarter, we've got 110 basis points contemplated. The organic business will be up modestly with Genius and mix being offset by tariffs, net of the mitigating actions as well as higher product costs. So the year-over-year increase in Q4 gross margin is primarily head related, which will be nicely accretive for us in the fourth quarter.

We reached end of our question-and-answer session. I'd like to turn the floor back over to Scott for any further closing comments.

Thank you. I just wanted to say a big thanks for spending time with us today and all your thoughtful questions and -- as you can see, we're working really hard here and our consumers are trusting us because they're choosing us going forward, which is really important, and we certainly appreciate that.

We've got a much broader story to tell as Helly Hansen unfolds, but I just wanted to mention that we couldn't be more pleased with our acquisition and how it's going and really enjoy working with the team there, a really good team and -- and it's been a really thoughtful merger of our 2 companies and just going really well, which we'll spend some more time talking about going forward. And because we won't spend any time together before the end of the year, I want to wish everybody a happy holiday season, and we'll look forward to seeing you after the first of the year. But again, thanks for your interest in our company. We really appreciate it.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.