Greensboros Kontoor to sell Lee jeans for $1 billion

Kontoor Brands Inc. is selling its Lee jeans business to Authentic Brands Group in a deal that could be valued at up to $1 billion.

The Greensboro jeans manufacturer announced Thursday its fast-track deal with Authentic features an initial value of $750 million, along with a potential $250 million in future years based on the performance of Lee under Authentic's ownership.

Authentic expanded its apparel portfolio in October 2024 when it purchased the iconic global Champion operations from HanesBrands Inc. for just more than $1 billion after HanesBrands heeded investor pressure to sell the brand.

The Lee transaction, which was unanimously approved by Kontoor's board of directors, is projected to close in the second half of fiscal 2026, pending regulatory approvals.

"The Lee transaction is a deliberate step to sharpen our brand portfolio and unlock investment capacity to fuel accelerated growth for the future of Kontoor," Scott Baxter, Kontoor's chairman, president and chief executive, said in a news release.

The company declines to provide a workforce breakdown by brand, and it's unclear how the sale will affect the Lee workforce in the Triad.

Kontoor spun out of VF Corp. in 2019, dependent on the Lee and Wrangler brands for its livelihood with 800 headquarters employees and 360 at its Mocksville distribution center.

Kontoor reported earlier in May it has about 2,800 U.S. employees, including about 700 at its headquarters and about 350 in Mocksville.

In August 2023, Kontoor confirmed in August that corporate operations had been affected by a global restructuring. Kontoor did not specify how many jobs - local and overall - were eliminated. Baxter said in August 2023 he referred to that restructuring phase as natural growing pains from the spin-off.

Authentic's business model typically is outsource manufacturing and most operational production.

Early on, the manufacturer recognized its future depended on moving beyond legacy processes that were designed to protect Lee and Wrangler's market share.

In launching its first major global restructuring initiative - nicknamed Project Jeanius - in March 2024, Baxter said it "differentiate us from everyone else in our sector in a very significant way going forward."

Kontoor disclosed in its May 7 first-quarter earnings report that it was in "advanced state with interest from multiple parties" to sell Lee.

"I want to reinforce our commitment to support Lee through the sale process and to personally thank the Lee team for getting us to where we are today. We believe this is a great outcome for Kontoor, the Lee business and Authentic," Baxter said.

"By increasing our focus on Wrangler and Helly Hansen, two iconic brands with significant white space opportunities, we are better positioned to fuel a higher growth profile and create even greater value for our shareholders."

Baxter said Kontoor was not surprised when multiple potential buyers emerged. "We've been good stewards of the brand," he said.

Baxter said another component of the timing to sell Lee was "we're selling on our front foot, which is the most important thing when you're selling an asset."

"Lee is in a good place operationally. With Helly Hansen and Wrangler growing very nicely, that's why we felt it was the right time to do this.

"We believe this will be a great outcome for Kontoor and Lee, giving Lee a chance to be important to someone else in their portfolio."

Kontoor completed on March 3 the sale of its Rock & Republic brand and associated business. It did not disclose the buyer or the sale price.

A WWD.com report said a potential Authentic goal with Lee would be to expand the brand's presence with Costco and Sam's Club, as well as mass market channels.

Authentic already has a significant presence in both the Triad and the apparel industry through its eclectic portfolio of more than 50 celebrity-driven, trendy and traditional consumer brands.

Familiar brands with Triad roots include Nautica - which was bought from VF Corp. in May 2018 - Thomasville Furniture and Van Heusen.

Other well-known brands include Sports Illustrated, Brooks Brothers, Aeropostale, Eddie Bauer, Izod, Forever 21 and Arrow. They also own the rights or estates of several celebrities, including Marilyn Monroe, Elvis Presley, Muhammad Ali, Julius Erving, David Beckham.

Lee was founded in 1891. It currently has distribution in more than 100 countries and more than 900-branded retail locations. The brand was acquired by VF in 1969.

Lee sales represented $194.2 million of its $807.6 million, or 24%, of first-quarter revenue.

By comparison, Wrangler represented just under 54% at $435.8 million. Helly Henson accounted for 20.5%, or $165.5 million.

Baxter acknowledged that affordability concerns are affecting the apparel industry, but he said Helly Hansen and Wrangler are doing well because they are what he calls "functional brands," work clothes, western wear, outdoor skiing, mountain climbing clothes that are competitively priced.

Although Kontoor will shift back to a two-brand manufacturer with the sale of Lee, Baxter said it is open to other acquisitions.

"We're not married to just two brands," he said. "We're always willing to consider a purchase if it makes great financial sense, a great fit, if we can be really proud of it and add value to it - just as we found in Helly Hansen.

"We made them a better company, and we're a better company for having them."

The board authorized in May a new share-repurchase program of $750 million. The company repurchased $25 million worth of shares during the first quarter.

Kontoor chief financial officer Joe Alkire said much of the share repurchase program will be paid from the sale proceeds of Lee.

"Our $750 million share repurchase program reflects the confidence we have in our business moving forward and the opportunities to generate significant value from our sharper brand portfolio," Baxter said.

"We have a strong enough cash flow. We are committed to that $750 million buyback whether we do this sale or not."

Kontoor ramped up Lee's marketing and licensing partnerships in recent years, including with J.Crew in March, Goody Hair in January, Crayola in August, a global advertising campaign that launched in September and a men's golf apparel collection in May 2024.

On Tuesday, Kontoor announced a licensing partnership with country music singer Kacey Musgraves as its first celebrity-focused collection.

The 100-plus men's and women's denim and workwear collection, branded Kasey Lee, is being sold exclusively at Walmart.

Prices are projected to range from $8 to $42 for apparel, and $6 to $25 for accessories and pet products.

Baxter said Kontoor has spent an appropriate amount of resources on marketing Lee during its ownership.

However, Baxter said an "extensive consumer study confirmed the Lee brand sets outside of our strategic bullseye."

"As we stated last year when we announced the acquisition of Kelly 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."

Baxter told analysts that the decision to sell off Lee was about Kontoor "reaching our full potential as a company" following its $900 million purchase of Helly Hanson that closed a year ago. Helly Hansen focuses on mid- to high-end outdoor and skiing apparel.

Baxter said Kontoor was not pushed or forced to sell Lee by an investor seeking a short-term profit boost.

"When it comes to selling a business, it just makes a heck of a lot more sense to sell it when it's doing well versus selling when it's doing poorly." Baxter said.

Baxter also stressed that purchasing Helly Hansen did not compel the sale of Lee.

"The acquisition of Helly Hanson really helped us shift into growth mode, which was really, really important for our company, important for our investors," Baxter said. "We believe that we have the team and the assets in place to be a real high-level growth company."

Baxter said that when comparing Wrangler and Lee's recent sales, the decision was made to "put a full concerted effort in all of our energy and investment from a denim side into Wrangler."

Baxter said Kontoor sees the potential for Wrangler reaching $5 billion in annual global sales in the 2030s.

"We have high expectations that (Helly Hansen and Wrangler) 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."

"When you think about those two brands and the powerful combination of them both, it was just leaning into our strengths."

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