VF Corp. completed the separation of VF’s Jeanswear organization into the independent, publicly traded company called Kontoor Brands, Inc. on May 23, 2019.
The horizon was bright and blue for the then-newly minted parent company of legacy denim brands Wrangler and Lee. Buoyed by a strong foundation and new freedom, the Greensboro, N.C.-based company set ambitious goals to reclaim its position as a leader in denim. At the time of the spin-off, Kontoor announced five strategic priorities: scaling the denim business; growth in high-value segments channels and regions; new custom acquisition; margin expansion and improving capital efficiency; and creating an engaged and performance-driven team.
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Covid-19 stalled some of these efforts but compared to other companies in their infancy when the pandemic struck, Kontoor was in a unique position in that it had the heritage of century-old brands and an experienced team on its side.
“I think that we’ve taken on a leadership role in a short period as a company, as far as doing the right things,” said Scott Baxter, Kontoor Brands president, CEO and chair of the board. “And we’re going to continue to do that going forward.”
Here, Baxter discusses the challenges and opportunities ahead for Kontoor and how tapping into new categories is creating “a lot of heat around the heritage brands.”
Rivet: How did the five strategic priorities hold up?
Scott Baxter: They went according to plan, some a little bit better than others. The key was making sure that we continued to focus on our core business because that’s what pays the bills at the end of the day. That was what we had as our crown jewel when we spun off. We needed to make sure that we grew that, and we have done that.
As we thought about the business, there were other segments and opportunities for us to grow, like in our outdoor business, T-shirt business, workwear business, and recently, we just announced our golf business. About a year and a half ago to two years ago, we announced our Wrangler Angler, our fishing business. There were categories that we weren’t playing in that we needed to that were important for us. And then those bring in a new set of consumers and new channels of distribution. They just bring a little bit of heat to our brands in addition to our licensing business. We didn’t have a big licensing business at the spin, but we’ve put a lot of focus on it. Now it is a much bigger licensing business than we were at that point in time with the right partners and right products.
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As far as reaching new customers, we’ve become a more global company. We have our own infrastructure versus being part of a parent company in South America. We’ve got our own licensing and distribution business down there. We have our own go-to-market teams and headquarters in Europe and in Asia. It’s a more complex business but bigger and much more branded and more forward facing.
We also have a strong direct-to-consumer business in a lot of those markets I mentioned too. We talk a lot about gross margins and that’s from running a good business and creating products that people want to buy at full price through the direct consumer channel, e-commerce channel and with our big wholesale partners. From a capital standpoint, we have very low levels of debt, and we invest a lot of money into our people and our brands.
It takes a while to create culture because when you spin off another company, you kind of bring that culture. It’s clone and go on so many points so that you get the spin off done quickly and efficiently because that’s what everyone wants in the beginning. I think over the time we’ve been spun from them, and become our own company, we have created a good performance driven culture.
Lee
Rivet: In hindsight, would you change any of the decisions made during the pandemic?
SB: We made the right decisions. As a company, we cut spending across the board, which at that point in time was a really significant decision. We pulled what I would call the controllable levers to protect the company because, as you know, people stopped spending right away and companies and retailers closed. It was a very scary time, but I think the decisions we made at that point in time were right, and part of the reason for that was that we had a very experienced team.
From the standpoint of folks like me who had the financial crisis of 2000s still fresh in our minds, we remembered how difficult that period was. That was still fresh in my mind and some of the things in the playbook that we had from back then we just kind of dusted off and used. So, I was proud of the decisions, and I was proud of the speed at which we did those decisions. We moved very quickly. We would have gotten things done even faster. Without the pandemic, we would be a year or two ahead of where we are now related to our culture and related to the ERP.
Rivet: What is Kontoor’s biggest achievement since the spin off?
SB: Creating a new culture, which is very difficult to do, is probably the biggest achievement. Creating a culture of winning, a culture of excellent brands with tremendous people helping drive them. I think the fact that we resurrected two brands that were great brands but had not been invested in for many years is the achievement of the whole team—supply chain, merchandise, sales, finance. The team resurrected those brands from a real place of struggle in that they had lost that top of mind conscious with the consumer. We brought them back in five years, what I would say is a short period of time especially with a pandemic thrown in.
Rivet: How has Kontoor’s wholesale business changed?
SB: One of the things that we talk about a lot, and that’s been a key advantage for us, is that our wholesale partners are the best in class. If you think about Walmart, Target, Boot Barn, the different folks relative to who we do business with, they’re in really good shape. They’re important customers of ours and we feel really good about the people that we do business with and the people that we have really long-standing partnerships with. There’s no question that we’re going to continue to support wholesale in a very big and strategic way. It’s an important business, a core part of our business and a business that’s going to be very important for us going forward around the globe.
Wrangler
Rivet: What about Kontoor’s direct-to-consumer business?
SB: We’re building stores in all regions. One of the biggest things that we’re doing here is we think there’s opportunity for us in North America for a bigger footprint. We really don’t have that many marketplaces this size. And it’s a little bit of the same in Europe, we’ve been building full price stores and that’s going well. In India, we have a licensing and distribution model. We have partners that build stores that are local operators, and they know the marketplace and the consumer really well. We have a similar story at China, where we are going to refurbish quite a few of our stores over the next 24 months and we’ve already started. During the pandemic, China was closed a little longer than us, so they opened up a little later. So now we’re getting the chance to go ahead and invest back in those stores that have been closed for a long time.
Rivet: How is Kontoor keeping up with the innovation happening in denim?
SB: We’ve leaned heavily into water savings in our plants and with a foam dyeing process that we have with mills. Denim can consume a lot of water during the process of dyeing and now we’ve gone to a foam dyeing process which uses much less, in some cases, almost no water usage. That has been really strategic with the mills that we’ve done that. Then we focused on a reduction of energy and clean energy in our own factories and distribution centers. We spent a lot of time [innovating] ourselves and also with our partners and suppliers.
Rivet: What have been the most effective ways to reach new consumers?
SB: Everybody goes back to how they’re utilizing social marketing and different things like that, but I have a different opinion. The single most effective thing we’ve done is we built a really great product with a great design and merchandising team. People want to wear and show up to events in our product. That’s the differentiator for us. After that, most of the excitement from the consumer—the consumer wanting to pull that product into their universe—comes from creating good brand platforms, marketing platforms, social media platforms and collaborations. But it starts with product and ends with product, and I think that’s how you get the consumer involved and get them excited.
You’ve got to sell product to start creating profit to go ahead and have a company, obviously. Our big differentiator is that we went from a company that, for a long time prior to the spin, wasn’t developing and building great products. We curtailed that; we hadn’t given the investment to our people that they needed to do that. Once we opened that box up and gave them the investment to go ahead and design and build great products, that excited consumers. That’s where everything took off for us. So as far as how we’re attracting new consumers, we’re attracting them because they’re going to our website, they’re going into our e-commerce sector, seeing our product at our wholesale partners and they’re saying “holy cow, I love this product, I love this fabrication, I love this decoration, I love the flares, I love the skinnies, I love the jean dresses”—whatever it may be its product that people want to wear and that’s where it all starts for us.
Lee
Rivet: Are you reaching more female consumers?
SB: One of the things that’s a little bit different about us than from when we spun off, is we’re building a really good female franchise. I’d be remiss if I didn’t mention the work that we’ve done with Lainey Wilson. She’s a powerhouse. Wrangler was a little bit too skewed to the male category five years ago, and now that there’s a really big opportunity with the female category. They love Wrangler just as much as male consumers.
Rivet: What do you make of the current Western fashion trend?
SB: From a Western standpoint, we continue to be the leader and have been since 1947. It’s a lifestyle…and we think that there’s just a lot more fun to be had there, more product to build there and the consumer just loves playing in that space.
Rivet: What are the next opportunities for Kontoor?
SB: Kontoor will become much bigger if we focus on the big markets that matter to us. So, a real maniacal focus on North America, Europe and China. There’s huge opportunity in the outdoor space with that category becoming a $200 million business over a very short period. Our workwear business has opportunity.…Our consumer insights team is doing some really good work thinking about where the next categories are, so there’s no end in sight for us relative to growth, relative to product placement around the globe. But I think that it just goes back to focusing on our core and then supplementing it with those categories that are top of mind to the consumer, that being outdoor, T-shirts and workwear. We want to become a broader consumer lifestyle company than what we’ve done in the past.
This article appears in Rivet’s summer issue. Click here to read the digital magazine.
