Q2 2026 Kontoor Brands Inc Earnings Call

August 12, 2026

Speaker #1: Greetings, welcome to this Contour Brands second quarter 2026 earnings conference call. This time all participants will be in listen-only mode. Question-and-answer session will follow the formal presentation.

Speaker #1: If anyone should require operator assistance during the conference, please press *0 from your telephone keypad. Please note this conference is being recorded. At this time, I'll now turn the conference over to Aaron Murphy, Vice President, Global Head of Finance and Operations, Halle Hansen, and Corporate Investor Relations.

Speaker #1: Thank you. You may begin.

Speaker #2: Thank you, operator, and welcome to Contour 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.

Speaker #2: 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.

Speaker #2: Amounts referred to on today's call will be in on an adjusted dollar basis, which we clearly define in the news release that was issued earlier this morning.

Speaker #2: And is available on our website at contourbrands.com. Reconciliations of gap measures to adjusted amounts can be found in the supplemental financial tables, included in today's news release.

Speaker #2: 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.

Speaker #2: And reported results and our outlook are stated on a continuing operations basis, unless otherwise noted. Joining me on today's call are Contour Brands' Chief Executive Officer and Chairman, Scott Baxter, and President and Chief Financial Officer, Joe Alkire.

Speaker #2: Following our prepared remarks, we will open the call for your questions.

Speaker #1: Greetings. Welcome to the Kontoor Brands Q2 2026 earnings conference call. At this time, all participants will be in listen-only mode. A question and answer session will follow the formal presentation.

Operator: Greetings. Welcome to this Kontoor Brands Q2 2026 earnings conference call. At this time, all participants will be in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I will 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.

Speaker #3: Scott, thanks, Aaron. 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.

Speaker #3: 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.

Speaker #1: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. Please note, this conference is being recorded. At this time, I will now turn the conference over to Aaron Murphy, Vice President, Global Head of Finance and Operations; Halle Hansen, and Corporate Investor Relations.

Speaker #3: 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 Halle Hansen and finish Project Genius strong.

Speaker #1: Thank you. You may begin.

Speaker #2: Thank you, operator, and welcome to Kontoor Brands Q2 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.

Erinn Murphy: Thank you, operator, and welcome to Kontoor Brands' Q2 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.

Speaker #3: 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.

Speaker #2: 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.

Speaker #3: Let's begin with Halle Hansen. In June, we celebrated our 1-year anniversary together, when we announced the transaction, the goal was clear: drive greater value for our shareholders and structurally increase our TSR potential.

Speaker #2: 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.

Speaker #3: To ensure we deliver on our commitment, we established a value creation framework built on 4 pillars: accelerate revenue growth, achieve mid-teams operating margin, increase capital establish Contour as an employer of choice.

Speaker #2: 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.

Speaker #3: 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.

Speaker #2: 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 excludes the translation impact of changes in foreign currency exchange rates.

Speaker #3: This is 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.

Erinn Murphy: 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, Joseph Alkire. Following our prepared remarks, we will open the call for your questions. Scott?

Speaker #3: 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.

Speaker #2: 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.

Speaker #3: We're making investments in talent and separating the sport and work-wear commercial organization under Bora's leadership. These are distinct businesses with their own set of opportunities.

Speaker #3: In North America, we are creating 2 GMs to drive increased focus. We will replicate this globally over time. This is something that Halle Hansen team has discussed for years and under Contour we are making it happen.

Speaker #2: Following our prepared remarks, we will open the call for your questions. Scott, thanks. Aaron.

Scott Baxter: Thanks, Erinn, and thank you all for joining us. I am pleased to share our Q2 results and the progress we have made advancing our strategic priorities. Through the H1 of the year, we have elevated the portfolio, positioned the company to accelerate revenue and profit growth, and increased our capital allocation optionality. Simply said, we have 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 Lee 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 us begin with Helly Hansen. In June, we celebrated our one-year anniversary together.

Speaker #3: Thank you all for joining us. I am pleased to share our Q2 results and the progress we have made advancing our strategic priorities.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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 Lee divestiture; integrate and accelerate Helly Hansen; and finish Project Genius strong.

Speaker #3: 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 backend efficiency.

Speaker #3: 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.

Speaker #3: This is an area where we add great expertise and has been a meaningful contributor to improved profitability. We remain committed to expanding operating margin while increasing investment capacity.

Speaker #3: Let's begin with Halle 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.

Speaker #3: 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.

Scott Baxter: 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. 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 H1 2026, with pro forma reported revenue growing at a low double-digit rate compared to our high single-digit outlook. We have 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.

Speaker #3: 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.

Speaker #3: Third, increase capital allocation optionality. Last year, Halle Hansen generated $100 million in cash from operations, driven by improved profitability and net working capital. We are ahead of our planned deleveraged path, allowing for greater optionality even earlier than expected.

Speaker #3: 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.

Speaker #3: Year to date, we have returned more than $130 million to shareholders, including 75 million of share repurchases. And finally, establish Contour as the employer of choice in the industry.

Speaker #3: This is 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.

Speaker #3: Attracting and retaining top talent will ensure long-term success. We continue to be impressed by the Halle Hansen organization. There is depth at all levels.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: We're making investments in talent and separating the sport and work where commercial organization under Bora's leadership. These are distinct businesses with their own set of opportunities.

Scott Baxter: We are making investments in talent and separating the sport and work wear commercial organization under Bora'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 H1 2026, 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.

Speaker #3: 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.

Speaker #3: In North America, we are creating two GMs to drive increased focus. We will replicate this globally over time. This is something that Halle Hansen team has discussed for years and under Kontoor we are making it happen.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: This is an area where we add great expertise and it has been a meaningful contributor to improved profitability. We remain committed to expanding operating margin while increasing investment capacity.

Scott Baxter: This is an area where we add 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 H2 of the year, we will deploy these resources to drive accelerating growth. Third, increase 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.

Speaker #3: These spoke as the number one female style at Select Specialty Retailers and new collaborations and brand activations are elevating the brand in the marketplace.

Speaker #3: Over the last 12 months, we have done just that. As we move to the second half of the year, we will deploy growth. Third, increase capital allocation optionality.

Speaker #3: 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.

Speaker #3: Last year, Halle Hansen generated $100 million in cash from operations driven by improved profitability and net working capital. We are ahead of our planned deleveraged path, allowing for greater optionality even earlier than expected.

Speaker #3: 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.

Speaker #3: Year to date, we have returned more than $130 million to shareholders, including 75 million of share repurchases, and finally, established Kontoor as the employer of choice in the industry.

Speaker #3: Our teams are working well together and the process with ABG has been smooth and efficient. I want to thank the Lee organization and ABG for their professionalism and dedication to supporting the brand during this important transition.

Speaker #3: Attracting and retaining top talent will ensure long-term success. We continue to be impressed by the Halle Hansen organization, there is depth at all levels.

Scott Baxter: 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 H1 2026, global revenue increased approximately 3% on a reported basis, in line with our expectations. It starts with building on the momentum we have created in our core bottoms business.

Speaker #3: At the 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: We launched Project Genius to create investment capacity to accelerate growth while expanding profitability. We are in the final stretch, and our firmly on track to exceed $100 million in gross savings.

Speaker #3: 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.

Speaker #3: 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.

Scott Baxter: We have incredible opportunities in female, direct to consumer, and non-denim categories, but we will not lose sight of Wrangler's identity. In Q2, as measured by Circana, we drove over 100 basis points of share gains in our core bottoms business. With female, our success continues. H1 revenue grew 20%, with trends accelerating in Q2. Our investments in talent, product development, design, and demand creation are working. These spoke as the number 1 female style at select specialty retailers, and new collaborations and brand activations are elevating the brand in the marketplace. Within Western, H1 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.

Speaker #3: 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 lead divestiture, integrate and accelerate Halle Hansen and finish Project Genius strong.

Speaker #3: 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.

Speaker #3: These spoke as the number one female style at select specialty retailers, and new collaborations and brand activations are elevating the brand in the marketplace.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Scott Baxter: 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 Q4. Our teams are working well together, and the process with ABG has been smooth and efficient. I want to thank the Lee organization and ABG 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 the 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.

Speaker #3: Joe, thanks, Scott.

Speaker #1: 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 Contour.

Speaker #1: I am energized by the opportunity ahead and deeply grateful to the talented people across the organization whose commitment to excellence has positioned Contour to compete and win.

Speaker #1: 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.

Speaker #3: 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.

Speaker #1: Since late last year, our leadership team has been developing a comprehensive strategy centered around Contour's next chapter. One focused on accelerated, highly profitable growth, strong cash generation, and an enhanced TSR algorithm.

Speaker #3: 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.

Speaker #3: 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.

Scott Baxter: 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 H2 of the year focused on our largest priorities.

Speaker #1: 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.

Speaker #3: We launched Project Genius to create investment capacity to accelerate growth while expanding profitability. We are in the final stretch and our firmly on track to exceed $100 million in gross savings.

Speaker #1: 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.

Speaker #1: We plan to unveil more details about our strategy in a series of upcoming events, starting with the Halle Hansen Investor Day September 2nd in Norway.

Speaker #1: 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.

Speaker #3: Build Wrangler momentum from a position of strength and sharper focus following the lead divestiture. Integrate and accelerate Halle Hansen and finish Project Genius strong.

Scott Baxter: 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?

Speaker #1: 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.

Speaker #1: To support accelerated growth, we are leaning in to 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.

Speaker #3: Joe.

Speaker #2: 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.

Joseph Alkire: 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.

Speaker #1: Last month, we launched Toughlight, our newest material innovation for our iconic cowboy cut jean. Wrangler Toughlight jeans are up to 20% lighter without sacrificing performance and are positioned at a premium price point.

Speaker #2: 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.

Speaker #2: 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.

Speaker #1: Within 10% of total revenue today despite female comprising over 50% of the US 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.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: 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.

Speaker #1: And we recently appointed a dedicated GM for the female business and our investing in and elevating our talent in the areas of product development, design, merchandising, and marketing.

Joseph Alkire: 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, 2 September 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.

Speaker #2: 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.

Speaker #1: Building on the success of our full-price store and the stockyards of Fort Worth, Texas, we are beginning to develop a focused, retail fleet in the heartland of Wrangler country.

Speaker #2: We plan to unveil more details about our strategy in a series of upcoming events starting with the Halle Hansen Investor Day September 2nd in Norway.

Speaker #1: 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.

Speaker #2: Building from the strong foundation that has been established since becoming a public company, we are increasing our investment in our largest growth opportunities and driving more clarity around the roles we expect each brand to play in our portfolio moving forward.

Speaker #2: 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.

Speaker #1: Turning to Halle Hansen, Halle is our growth engine, and we are accelerating growth in both the US and the Alps region in Europe, while expanding into a four-season brand by winning an outdoor and disrupting the workwear market.

Speaker #2: To support accelerated growth, we are leaning in to 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.

Joseph Alkire: 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 Toughlite, our newest material innovation for our iconic cowboy cut jean. Wrangler Toughlite 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 US 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.

Speaker #1: 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.

Speaker #1: Under the highly capable Halle 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 Halle business has lacked for years.

Speaker #2: Last month, we launched Tough Flight, our newest material innovation for our iconic cowboy cut jean. Wrangler Tough Flight jeans are up to 20% lighter without sacrificing performance and are positioned at a premium price point.

Speaker #1: 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 US where our aided awareness is around 30% and well below our peers.

Speaker #2: 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.

Speaker #1: Winning in the outdoor category is about extending our authority beyond ski and sailing and competing year-round. Consumers already give Halle Hansen credit for high performance gear and protection, and we believe we can extend this proposition into the technical outdoor category.

Speaker #2: 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.

Joseph Alkire: 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. 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 2 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 omni-channel 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.

Speaker #1: We are building the product and innovation roadmap thoughtfully expanding distribution and investing in storytelling to claim that territory. Workwear is one of the most compelling growth opportunities in the entire Halle Hansen portfolio.

Speaker #2: And we recently appointed a dedicated GM for the female business and our investing in and elevating our talent in the areas of product development, design, merchandising, and marketing.

Speaker #2: Building on the success of our full price store and the stockyards of Fort Worth, Texas, we are beginning to develop a focused, retail fleet in the heartland of Wrangler country.

Speaker #1: We have built a large and profitable European business, and there is significant runway to grow in the US. Structural tailwinds in workwear are fueled by higher participation in skilled trades, the rising cost of higher education, and stricter workplace safety standards.

Speaker #2: 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, enhanced site experience, and an expanded loyalty program.

Speaker #1: 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.

Speaker #1: From a profitability perspective, we are committed to improving Halle's operating margin into the mid-teens through a combination of gross margin expansion, operating expense leverage, and synergies.

Speaker #2: Turning to Helly Hansen. Helly is our growth engine, and we are accelerating growth in both the US and the Alps region in Europe, while expanding into a four-season brand by winning in outdoor and disrupting the workwear market.

Joseph Alkire: Turning to Helly Hansen. Helly is our growth engine, and we are accelerating growth in both the US 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 H2 2026, we have also identified incremental opportunities to invest behind demand creation as we scale brand awareness, particularly in the US, where our aided awareness is around 30% and well below our peers.

Speaker #1: 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, Halle's seasonally smallest quarter, we saw notable profit improvement and delivered positive operating profit.

Speaker #2: 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.

Speaker #1: 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 and always on cost excellence program to create the capacity for these investment dollars in our P&L.

Speaker #2: Under the highly capable Halle 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 Halle business has lacked for years.

Speaker #2: 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 US where our aided awareness is around 30% and well below our peers.

Speaker #1: 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 generations.

Speaker #2: 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.

Joseph Alkire: 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 roadmap, 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 US. 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.

Speaker #1: Moving on to where we are in the lead to vestiture process. We are on track to close the transaction in the fourth quarter. All workstreams are progressing well, and we have clear line of sight to offset the approximate $40 million of stranded costs over a 12 to 18 month period.

Speaker #2: We are building the product and innovation roadmap thoughtfully expanding distribution and investing in storytelling to claim that territory. Workwear is one of the most compelling growth opportunities in the entire Halle Hansen portfolio.

Speaker #1: 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.

Speaker #2: We have built a large and profitable European business and there is significant runway to grow in the US. Structural tailwinds in workwear are fueled by higher participation in skilled trades the rising cost of higher education and stricter workplace safety standards.

Speaker #1: 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.

Speaker #2: 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.

Speaker #1: Over a 12 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 Contour.

Speaker #2: From a profitability perspective, we are committed to improving Halle's operating margin into the mid-teens through a combination of gross margin expansion, operating expense leverage, and synergies.

Joseph Alkire: 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 Q2, 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.

Speaker #1: 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.

Speaker #2: 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, Halle'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.

Speaker #1: 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.

Speaker #1: 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.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: 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.

Joseph Alkire: Simply stated, our strategy will deliver accelerated revenue growth, fund the investments required while expanding profitability and continuing to drive strong cash generations. Moving on to where we are in the Lee divestiture process. We are on track to close the transaction in Q4. 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 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.

Speaker #1: 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.

Speaker #2: Moving on to where we are in the lead to vestiture 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 to 18 month period.

Speaker #1: 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 US, revenue increased 1%, driven by 9% growth in DTC as wholesale was relatively flat.

Speaker #2: 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.

Speaker #1: Growth was broad-based, driven by double-digit growth in female and Western. As measured by Circona, we gained market share in our men's and women's bottoms business, our 17th consecutive quarter of share gains.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: Over a 12 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 Contour.

Joseph Alkire: Over a 12 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 Q2 results, I want to take a moment to reflect on our performance for the H1 of the year. Revenue of $1.2 billion was at the high end of our previously communicated H1 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.

Speaker #1: Our overall POS trend remains consistent with what we've seen over the past 12 to 24 months. Wrangler International revenue increased 8%, driven by 27% growth in DTC and 4% growth in wholesale.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: Revenue of $1.2 billion was at the high end of our previously communicated first half outlook, reflecting an increase of 31% compared to the prior year.

Speaker #1: Turning to Halle 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.

Speaker #2: 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 the prior year.

Speaker #2: 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.

Speaker #1: Sport was $70 million and growth was strongest in the US, the Nordics, and the Alps region in Europe. Growth was led by healthy order book conversion, solid at-once demand, and e-commerce.

Joseph Alkire: 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 H2 of the year. Now let's review our Q2 results in more detail. Starting with Wrangler. Global revenue increased 1%, driven by 12% growth in DTC. In the US, 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.

Speaker #2: 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.

Speaker #1: Workwear was $37 million with growth across the US and the Alps region in Europe. While small today, our workwear e-commerce business was particularly robust in the second quarter.

Speaker #2: 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.

Speaker #1: Moving to China. As a reminder, Halle 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.

Speaker #1: Second quarter results were strong, with revenue increasing close to 70%, along with further improvement in profitability. Including the revenue of the China JV, Halle Hansen global revenue increased at a mid-teen rate on a pro forma basis.

Speaker #2: Growth was broad based driven by double digit growth in female and western. As measured by Circona, we gained market share in our men's and women's bottoms business.

Speaker #2: 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.

Speaker #1: While still early, the acquisition of Halle 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.

Joseph Alkire: 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 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 H2 of the year, adjusted for the 53rd week impact in 2025. Turning to Helly Hansen. Global revenue of EUR 114 million increased 6% compared to prior year on a pro forma basis, exceeding our expectations. Through the H1, global revenue increased 12% on a reported pro forma basis, with underlying constant currency growth in the mid-single digit range.

Speaker #2: Our overall POS trend remains consistent with what we've seen over the past 12 to 24 months. Wrangler International revenue increased 8% driven by 27% growth in DTC and 4% growth in wholesale.

Speaker #1: 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 Halle Hansen, and the favorable impact of channel mix, product mix, and pricing.

Speaker #2: 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.

Speaker #1: 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 Halle Hansen expenses compared to prior year, increased investment in direct-to-consumer demand creation and technology, partially offset by the benefits from Project Genius.

Speaker #2: Turning to Halle 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.

Speaker #1: And adjusted EPS was $1.06, an increase of 13% compared to prior year. This includes a 6-cent loss per share from Halle Hansen, well ahead of our expectations.

Speaker #2: Sport was $70 million, and growth was strongest in the US, the Nordics, and the Alps region in Europe. Growth was led by healthy order book conversion, solid at-once demand, and e-commerce.

Joseph Alkire: Sport was EUR 70 million, and growth was strongest in the US, 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 EUR 37 million with growth across the US and the Alps region in Europe. While small today, our workwear e-commerce business was particularly robust in the Q2. 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. Q2 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.

Speaker #1: 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 Halle Hansen.

Speaker #2: 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.

Speaker #1: We've remained 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 dollar revolver remains undrawn.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: Second quarter results were strong with revenue increasing close to 70% along with further improvement in profitability. Including the revenue of the China JV, Halle Hansen global revenue increased at a mid teen rate on a pro forma basis.

Speaker #1: 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 $53 per share.

Speaker #2: While still early, the acquisition of Halle 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.

Speaker #1: Moving to tariffs. The global trade environment remains dynamic. Following the US Supreme Court's ruling that the international emergency economic powers act does not authorize tariffs, the US Court of International Trade ordered US customs and border protection to refund AIPA duties previously paid.

Joseph Alkire: We are 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. 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 consumer demand creation and technology, partially offset by the benefits from Project Genius. Adjusted EPS was $1.06, an increase of 13% compared to prior year.

Speaker #2: 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 the prior year.

Speaker #1: As a reminder, during the first quarter of 2026, we recognized a net receivable of $54 million for AIPA tariffs previously paid. In July of 2026, we started to receive AIPA refunds, and thus far have received cash of approximately $23 million in the third quarter.

Speaker #2: Driven by the benefits from Project Genius, a stronger gross margin contribution from Halle Hansen, and the favorable impact of channel mix, product mix, and pricing.

Speaker #2: 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 the prior year, increased investment in direct-to-consumer demand creation and technology, partially offset by the benefits from Project Genius.

Speaker #1: We expect to receive the remaining AIPA refunds by the end of fiscal 2026. In May 2026, the US Court of International Trade ruled that section 122 tariffs were also invalid and these tariffs expired in July of 2026.

Speaker #1: 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.

Speaker #2: And adjusted EPS was $1.06. An increase of 13% compared to prior year. This includes a 6 cent loss per share from Halle Hansen, well ahead of our expectations.

Joseph Alkire: 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 Q2 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. 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.

Speaker #2: 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 Halle Hansen.

Speaker #1: Effective July 2026, the Office of the US Trade Representative implemented new section 301 tariff rates of between 10 and 12 and a half percent on products imported from the majority of our current trading partners.

Speaker #2: 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.

Speaker #1: 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 and a half percent.

Speaker #2: Our 500 million dollar 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.

Speaker #1: As a reminder, our imports from Mexico to the US 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.

Speaker #2: 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 53 cents per share.

Speaker #1: On an adjusted basis, the company has excluded any impacts of the 2025-related AIPA tariffs in its 2026 outlook. Now, let's review our updated outlook.

Speaker #2: Moving to tariffs. The global trade environment remains dynamic. Following the US Supreme Court's ruling that the international emergency economic powers act does not authorize tariffs, the US court of international trade ordered US customs and border protection to refund IEPA duties previously paid.

Joseph Alkire: Following the U.S. Supreme Court's ruling that the International Emergency Economic Powers Act does not authorize tariffs, the United States Court of International Trade ordered U.S. Customs and Border Protection to refund IEPA duties previously paid. As a reminder, during Q1 2026, we recognized a net receivable of $54 million for IEPA tariffs previously paid. In July 2026, we started to receive IEPA refunds, and thus far have received cash of approximately $23 million in Q3. We expect to receive the remaining IEPA refunds by the end of fiscal 2026. In May 2026, the United States Court of International Trade ruled that Section 122 tariffs were also invalid, and these tariffs expired in July 2026. Year to date, our financial results include the previously paid and expensed tariffs under Section 122.

Speaker #1: Revenue is expected to be in the range of $2.66 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 to $1.51 billion, reflecting mid-single-digit growth for both Wrangler and Halle Hansen, excluding the impact of the 53rd week in 2025.

Speaker #2: As a reminder, during the first quarter of 2026, we recognized a net receivable of $54 million for IEPA tariffs previously paid. In July 2026, we started to receive IEPA refunds, and thus far have received approximately $23 million in cash in the third quarter.

Speaker #1: 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 percent, representing an increase of 330 to 350 basis points compared to prior year.

Speaker #2: 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 2026.

Speaker #1: This compares to the prior outlook range of 48.3 to 48.5 percent. Our updated gross margin outlook reflects stronger-than-expected year-to-date results, and a stronger contribution from Halle Hansen.

Speaker #2: Year to date, our financial results include the previously paid and expense 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.

Joseph Alkire: 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 United States 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 H2 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.

Speaker #1: 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 Halle Hansen expenses.

Speaker #2: Effective July 2026, the Office of the US Trade Representative implemented new section 301 tariff rates of between 10 and 12 and a half percent on products imported from the majority of our current trading partners.

Speaker #1: 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 to $420 million, including 25 million of incremental investment, representing an increase of 15 to 17 percent compared to prior year.

Speaker #2: 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%.

Speaker #2: As a reminder, our imports from Mexico to the US remain exempt under US MCA based on currently available information. Our 2026 outlook continues to assume a 15% reciprocal tariff rate for the second half of 2026.

Speaker #1: This compares to our prior outlook range of $411 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 percent compared to prior year.

Speaker #2: 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.

Speaker #1: Our updated outlook includes approximately 36 cents 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 55 cents of unmitigated expenses that were previously allocated to the Lee business.

Speaker #2: Revenue is expected to be in the range of $2.66 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 to $1.51 billion reflecting mid single digit growth for both Wrangler and Halle Hansen excluding the impact of the 53rd week in 2025.

Joseph Alkire: Revenue is expected to be in the range of $2.66 to $2.71 billion, consistent with our prior outlook. For H2 2026, we expect revenue to be in the range of $1.46 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 Q4. 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.

Speaker #1: For the full year, we anticipate an effective tax rate of approximately 20%, reflecting tax synergy benefits as we integrate Halle Hansen into our global tax platform.

Speaker #2: 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.

Speaker #1: 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.

Speaker #1: 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.

Speaker #2: 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.

Speaker #1: 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.

Speaker #2: 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 Halle Hansen expenses.

Joseph Alkire: Full year adjusted SGA 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 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 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.

Speaker #1: 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.

Speaker #2: 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 to $420 million including 25 million of incremental investment representing an increase of 15 to 17% compared to prior year.

Speaker #1: 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.

Speaker #2: This compares to our prior outlook range of $411 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 percent compared to prior year.

Speaker #1: As we move beyond 2026, I am confident we are on a path to unlock the full potential of Contour Brands and create significant value for our shareholders in the years to come.

Speaker #2: 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.

Speaker #1: This concludes our prepared remarks, and I will now turn the call back to the operator. Thank you. We'll now be conducting a question-and-answer session.

Joseph Alkire: 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.

Speaker #1: If you'd like to ask a question at this time, you may press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue.

Speaker #2: For the full year, we anticipate an effective tax rate of approximately 20% reflecting tax synergy benefits as we integrate Halle Hansen into our global tax platform.

Speaker #1: Let me press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker #2: 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.

Speaker #1: One moment, please, for our first question. Thank you, and the first question is from the line of Matthew Boss with JPMorgan. Please receive your questions.

Speaker #2: Thanks, and congrats on a nice quarter. So, so.

Speaker #3: Thank you. Nice having you on the call.

Speaker #2: 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.

Speaker #2: So. Thanks. So, 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.

Speaker #2: Halle exceeded expectations in the first half of the year and I think lead times you've cited point to second half opportunity for you to control or greater control of that brand.

Speaker #2: 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.

Speaker #2: So, 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 multi-year?

Speaker #2: 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.

Joseph Alkire: We are tracking ahead of our original deleverage plan and anticipate returning to less than 1.5x 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 H2 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.

Speaker #3: Sure. 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.

Speaker #2: 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.

Speaker #3: Outstanding. Thank you. So, Matt, we're really pleased with the progress we're making on both brands, and we did accelerate, so thanks for the comments.

Speaker #3: And a lot of the confidence from a back half standpoint, I'm going to share with you, but I also want to point out that we have a lot of confidence in 27 in our long-range plan.

Speaker #2: 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.

Speaker #3: 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.

Speaker #2: 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.

Speaker #3: One of those being Lowe's Home Improvement. So, really excited about that. Halle 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 Halle brand here in North America.

Speaker #2: This concludes our prepared remarks and I will now turn the call back to the operator.

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

Speaker #1: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, you may press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question at this time, you may press star one from your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please for our first question. Thank you. The first question is from the line of Matthew Boss with JP Morgan. Please proceed with your questions.

Speaker #3: 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.

Speaker #3: But I'm really pleased with our continued progress in Western, with Toughlight as a new example of some innovation in Western, the business is strong there.

Speaker #1: Let me press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker #3: 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.

Speaker #1: One moment, please, for our first question. Thank you. And the first question is from the line of Matthew Boss with JP Morgan. Please proceed with your question.

Speaker #2: Thanks, and congrats on a nice quarter. So nice having you.

Matthew Boss: Thanks, and congrats on a nice quarter.

Joseph Alkire: Thank you, Matt.

Speaker #3: Great product innovation from the team. And then with Halle, we've got Crew and Life of Marino, two big platforms that we're reinvigorating going into next year.

Speaker #3: on the call.

Matthew Boss: So-

Joseph Alkire: Nice having you on the call, Matt.

Speaker #2: So, thanks. So, 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.

Matthew Boss: Thanks. Scott, Wrangler accelerated this quarter on a 2-year basis, and the inflection to mid-single digit growth in the H2 of the year, as you cited. Helly exceeded expectations in the H1 of the year, and I think lead times you've cited point to H2 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 H2 of this year and multi-year?

Speaker #3: 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 one denim brand only.

Speaker #2: Halle exceeded expectations in the first half of the year, and I think lead times you've cited point to second-half opportunity for you to control, or greater control of, that brand.

Speaker #2: Could you elaborate on the brand-building investments and the opportunity you see to accelerate the total portfolio's top and bottom line growth into the back half of this year and over multiple years?

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Sure. No problem. First though, I would like to acknowledge Joe's promotion and a congratulations to Joe. It's wonderful for our company. Wonderful for our shareholders and so well deserved and congratulations Joe.

Joseph Alkire: Sure. No problem. First, though, I would like to acknowledge Joe's promotion and a congratulations to Joe. It's wonderful for our company, wonderful for our shareholders, and so well-deserved, and congratulations, Joe. Outstanding.

Speaker #3: Joe, anything to add?

Speaker #2: No, I think you covered it, Scott. That's great color. And then, Joe, so first, I'll add my congrats on your promotion. And then second, just as we think about visibility, what's your visibility today to mid-single-digit back half revenues at Halle based on order books and real-time sell-throughs?

Speaker #3: Outstanding.

Speaker #2: Thank you Scott.

Speaker #3: Thank you. So Matt, we're really pleased with the progress we're making on both brands. And we did accelerate so thanks for the comments and a lot of the confidence from a back half standpoint I'm going to share with you but I also want to point out that we have a lot of confidence in 27 in our long range plan.

Scott Baxter: Thank you, Scott.

Joseph Alkire: Thank you. Matt, we are really pleased with the progress we are making on both brands. We did accelerate, thanks for the comments. A lot of the confidence from a back half standpoint, I am going to share with you, but I also want to point out that we have a lot of confidence in 2027, in our long range plan. We have got a lot of actions that we have 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.

Speaker #3: 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 Improvement.

Speaker #2: What have you embedded in the back half relative to the front half, if in any improvement? And then can you just walk through drivers of further profit improvement in the back half of the year at Halle Hansen?

Speaker #3: So really excited about that. Halle Hansen will be showing up this year at Dick's Sporting Goods in the House of Sport for the first time.

Speaker #3: Yeah, sure. Thanks, Matt. And I appreciate the comments. So, 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?

Speaker #3: And as you know, Dick's is a significant outdoor retailer. So really great for the Halle 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.

Joseph Alkire: 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. I am really pleased with our continued progress in Western. Toughlite as a new example of some innovation in Western. The business is strong there. We continue to have great relationships.

Speaker #3: 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.

Speaker #3: So a great start there. But I'm really pleased with our continued progress in Western. With Toughlight as a new example of some innovation in Western, the business is strong there.

Speaker #3: We continue to have great relationships and continue to lead in both men's and women's in Western. So very exciting D to C is doing well.

Scott Baxter: We continue to lead in both men's and women's in Western, so very exciting. D2C is doing well. Our women's business has been growing very significantly, and we have got a great new product introduction with Beast that has been around for a little while now, but continues to accelerate. Great product innovation from the team. With Helly, we have got Crew and Lifa Merino, two big platforms that we are reinvigorating going into next year. 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 one denim brand only. After the spin off of Lee, we are going to turn all of our attention.

Speaker #3: 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.

Speaker #3: And then our women's business has been growing very significantly, and we've got a great new product introduction with Bespoke that's been around for a little while now, but continues to accelerate.

Speaker #3: Great product innovation from the team. And then with Halle, we've got crew and life of Marino, two big platforms that we're reinvigorating going into next year.

Speaker #3: Talent on the product side, in Wrangler, for example, and the female area, we said we hired a GM of North America, for Halle, and these key hires will begin to have an impact as we move into 27.

Speaker #3: 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 one denim brand only.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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 in making sure that Wrangler continues to grow to its full potential.

Scott Baxter: We have an excellent team that is going to be focused on growing, investing, and making sure that Wrangler continues to grow to its full potential. I think that is incredibly exciting, and that is right around the corner, and we are investing in that right now to make sure that really accelerates going forward. Joe, anything to add?

Speaker #3: 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.

Speaker #3: For example, expanded distribution at Wrangler, and what we can see on the Halle side in terms of order book and the distribution expansion.

Speaker #3: Joe, anything to add?

Speaker #2: No, I think you covered it Scott. That's great color and then Joe, so first I'll add my congrats on your promotion. And then second, just as we think about visibility, what's your visibility today to mid single digit back half revenues at Halle based on order books and real time sell throughs?

Joseph Alkire: No, I think you covered it, Scott.

Speaker #2: Great color. Best of luck.

Matthew Boss: That's great color. Joe, first I'll add my congrats on your promotion. 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? Can you just walk through drivers of further profit improvement in the back half of the year at Helly Hansen?

Speaker #3: Thank you, Matt.

Speaker #2: The next question's in the line of Ike Barshaw with Wells Fargo. Please just use your questions.

Speaker #4: Hey, morning, everyone. Congrats to Joe. Congrats to everyone on the quarter. I guess two from me. First, I wanted to dive into Halle a little bit more in a more detailed way for the second quarter, maybe this is for Joe.

Speaker #2: What have you embedded in the back half relative to the front half if in any improvement? And then can you just walk through drivers of further profit improvement in the back half of the year at Halle Hansen?

Speaker #4: 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?

Speaker #3: Yeah, sure. Thanks Matt. And I appreciate the comments. So look, based on the confidence and the visibility we have into the second half of the year for really for both brands, we raised the outlook, right?

Joseph Alkire: Yeah, sure. Thanks, Matt. I appreciate the comments. Look, based on the confidence and the visibility we have into the H2 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. We took the opportunity to invest at least a portion of that upside back into both brands to accelerate growth into 2027 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, 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.

Speaker #4: 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 that seems like a notable change from a seasonality perspective.

Speaker #3: 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.

Speaker #3: Yeah, thanks, Ike. And again, thanks for the comment. Look, while small, it's a pretty big deal. I don't know when the last time, if ever, the Halle business generated positive operating profit in its seasonally smallest quarter.

Speaker #3: 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.

Speaker #3: In terms of where those dollars are going—again, in both brands—it's into the areas that you would expect: data and analytics, consumer insights, demand creation, and talent.

Speaker #3: 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.

Speaker #3: Talent on the product side. In Wrangler, for example, in the female area, we said we hired a GM of North America for Halle. And these key hires will begin to have an impact as we move into 27.

Speaker #3: 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 synergy, so a lot of the work that we've done with the team over the past year, these synergies are starting to manifest in the P&L, which is also giving us the opportunity to invest more back in the business.

Joseph Alkire: These key hires will begin to have an impact as we move into 2027. 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. 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: So the profitability improvement is meaningful. It was meaningful for the first half. It'll be meaningful for the second half. So the mid-team operating margin target that we've 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.

Speaker #3: 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 Halle side in terms of order book and the distribution expansion.

Speaker #3: In a few weeks at the investor day.

Speaker #4: Got it. Okay. And then a bigger picture question, just 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.

Speaker #2: Great color. Best of luck. The next question is in the line of Ike Foreshow with Wells Fargo. Please just use your questions.

Matthew Boss: Great color. Best of luck.

Scott Baxter: Thanks, Matt.

Operator: The next question is in the line of Ike Boruchow with Wells Fargo. Please just use your questions.

Speaker #4: Hey, morning everyone. Congrats to Joe. Congrats to everyone on the quarter. I guess two from me. First, I wanted to dive into Halle a little bit more in a more detailed way for the second quarter.

Speaker #4: I think several months ago when the lease sale was announced, you guys said there really wasn't any reason why 2027's street EPS needed to change.

Ike Boruchow: Hey, morning, everyone. Congrats to Joe, and congrats to everyone on the quarter. I guess two from me. First, I wanted to dive into Helly a little bit more, in a more detailed way for Q2. 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 Q2. Just curious because that seems like a notable change from a seasonality perspective.

Speaker #4: At the time, the street was a little above $7. Today, they're a little below $6.50. So 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.

Speaker #4: 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?

Speaker #4: 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 that seems like a notable change from a seasonality perspective.

Speaker #3: Yeah, sure. Thanks, Ike. And 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.

Speaker #3: Yeah, thanks Ike. And again, thanks for the comment. Look, while small, it's a pretty big deal. I don't know when the last time if ever the Halle business generated positive operating profit in its seasonally smallest quarter.

Joseph Alkire: Yeah. Thanks, Ike. Again, thanks for the comment. While small, it is a pretty big deal. I do not 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 have got a lot more operational discipline in the business right now in terms of inventory quality and composition. That is greatly improved. We are selling through more full price. We are being less promotional. There has been a lot of work done in that area, as well as pricing. Then you have got synergy.

Speaker #3: So 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 55 cents of expenses that were previously allocated to the lead business.

Speaker #3: 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.

Speaker #3: We've said we expect to offset those costs over a 12 to 18-month period. The planning for those actions is already well underway. That started before we even announced transactions.

Speaker #3: 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.

Speaker #3: So that takes you to about $5.80 to $5.90. From there, through strong capital, deployment, we believe we can offset the 90 cents of operating earnings that Lee is contributing today.

Speaker #3: 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 synergy. So a lot of the work that we've done with the team over the past year, these synergies are starting to manifest in the P&L, which is also giving us the opportunity to invest more back in the business.

Joseph Alkire: A lot of the work that we have done with the team over the past year, these 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 H1. It will be meaningful for H2. The mid-teen operating margin target that we put out there, fair to say we have got more confidence in that, and you will see the specifics of how we see that evolving over the next few years in a few weeks at the Investor Day.

Speaker #3: The $400 million ASR will be a part of that. That'll start immediately upon closing, and then we talked about the debt repayment. So that bridges you back to $6.70 to $6.80 pro forma kind of run rate EPS, and then from there, we can drive more accelerated growth in the Wrangler and the Halle brands.

Speaker #3: So the profitability improvement is meaningful. It was meaningful for the first half. It'll be meaningful for the second half. So the mid team operating margin target that we've 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.

Speaker #3: 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 to 18-month basis.

Speaker #3: In a few weeks at the investor day.

Speaker #4: Got it. Okay. And 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.

Ike Boruchow: Got it. Okay, then a bigger picture question. A lot of moving parts have occurred this year. While the core business is clearly outperforming, that said, I want to address the go-forward plan because I think there is some confusion with the investor base. I think several months ago when the Lee sale was announced, you guys said there really was not any reason why 2027 street EPS needed to change. At the time, the street was a little above $7. Today, they are a little below $6.50. So I honestly just want to ask you to address the discrepancy, and how you are viewing 2027 EPS power at a high level, given all the changes in the model taking place.

Speaker #4: Very helpful. Thanks, Joe.

Speaker #2: The next question's from the line of Jonathan Comp with Baird. Please just see with your questions.

Speaker #4: 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.

Speaker #5: Yeah, hi. Good morning. 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?

Speaker #4: At the time, the street was a little above $7. Today, they're a little below 650. So 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.

Speaker #5: And 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.

Speaker #3: Yeah, sure. Thanks, Ike. And look, we're not updating the long-term algorithm today or providing specific 2027 guidance, but I appreciate the significance of the moving parts to the story. Let me try to give you a high-level framework as to how to think about 2027 and into 2028.

Joseph Alkire: Yeah, sure. Thanks, Ike. Look, we are not updating the long-term algorithm today or providing specific 2027 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 2027 and into 2028. So you have got baseline continuing operations EPS that now is in the range of $5.25 to $5.35 for 2026. That is burdened by about $0.55 of expenses that were previously allocated to the Lee business. We have said we expect to offset those costs over a 12 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 $5.80 to $5.90. From there, through strong capital deployment, we believe we can offset the $0.90 of operating earnings that Lee is contributing today.

Speaker #5: So could you maybe just. Or some of the factors you're embedding in the second half implied gross margin?

Speaker #3: Sure. I'll take that, John. So for 2026, we now have a gross margin outlook of over 300 basis points in the 49.8 to 50 percent range.

Speaker #3: That's about 150 basis points above our prior outlook. Relative to the prior outlook, the stronger gross margin is really driven by Halle. That's probably the single largest driver of the increase, along with increased visibility into the second half of the year.

Speaker #3: We've said we expect to offset those costs over a 12 to 18 month period. The planning for those actions is already well underway. That started before we even announced transaction.

Speaker #3: 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 Halle to be accretive by more than 100 basis points.

Speaker #3: So that takes you to about 580 to 590. From there, through strong capital, deployment, we believe we can offset the 90 cents of operating earnings that Lee is contributing today.

Speaker #3: 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.

Speaker #3: The 400 million ASR will be a part of that. That'll start immediately upon closing and then we talked about the debt repayment. So that bridges you back to 670 to 680 pro forma kind of run rate EPS and then from there, we can drive more accelerated growth in the Wrangler and the Halle brands.

Joseph Alkire: The $400 million ASR will be a part of that. That will start immediately upon closing, and then we talked about the debt repayment. That bridges you back to $6.70 to $6.80 pro forma kind of run rate EPS. Then from there, we can drive more accelerated growth in the Wrangler and the Helly brands. All that to say, this is why we keep highlighting, we expect the divestiture of Lee to be immaterial to EPS on a 12 to 18 month basis.

Speaker #3: 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.

Speaker #3: 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 Halle and mix.

Speaker #3: 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 to 18 month basis.

Speaker #3: 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.

Speaker #4: Very helpful. Thanks, Joe.

Ike Boruchow: Very helpful. Thanks, Joe.

Speaker #2: The next question is from the line of Jonathan Comp with Baird. Please proceed with your questions.

Operator: The next question is from the line of Jonathan Komp with Baird. Please proceed with your questions.

Speaker #3: But longer term, the overall gross margin algorithm is unchanged. So structural mix Halle cost excellence initiatives, which we alluded to, that'll drive the expansion while we neutralize any other inflationary impacts through price and other efficiency initiatives.

Jonathan Komp: Yeah. Hi, good morning. I want to follow up on gross margin. Could you maybe highlight some of the areas you are 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, H2 consolidated is implied quite a bit below the H1. That is maybe a little bit different than the historical seasonality. Could you maybe just share some of the factors you are embedding in the H2 implied gross margin?

Speaker #5: And 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.

Speaker #6: Joe, just a quick comment in there to Jonathan. I would be remiss if I didn't call out our product and design teams at both Halle and Wrangler.

Speaker #6: 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.

Speaker #5: So, could you maybe just share some of the factors you're embedding in the second half implied gross margin?

Speaker #3: Sure. I'll take that, John. So for 2026, we now have a gross margin outlook of over 300 basis points in the 49.8 to 50 percent range.

Joseph Alkire: Sure. I will take that, Jon. For 2026, we now have a gross margin outlook of over 300 basis points, in the 49.8% to 50% range. That is about 150 basis points above our prior outlook. Relative to the prior outlook, the stronger gross margin is really driven by Helly. That is probably the single largest driver of the increase, along with increased visibility into the H2 of the year. From a year-over-year perspective on a full year basis, there are some pretty meaningful puts and takes within our gross margin evolution. We expect Helly to be accretive by more than 100 basis points. We have 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-

Speaker #5: That's great. And then I'm sure we'll hear a lot more in a few weeks, but just from a conceptual standpoint, as we think about Halle Hansen and growth beyond 2026, do you think there's still a meaningful period that's needed to drive acceleration on the top line?

Speaker #3: That's about 150 basis points above our prior outlook. Relative to the prior outlook, the stronger gross margin is really driven by Halle that's probably the single largest driver of the increase along with increased visibility into the second half of the year.

Speaker #5: Should we expect to see those drivers? I start to line up in 2027. Just any kind of directional color to help shape our expectations?

Speaker #3: 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 Halle to be a creative by more than 100 basis points.

Speaker #5: Thanks again.

Speaker #6: Yeah, 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 in, of course, the geographic areas that we can enter.

Speaker #3: 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.

Speaker #6: 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.

Speaker #6: 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.

Speaker #6: So I think that's really important because we've learned a lot of lessons from the past. But 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.

Speaker #6: So 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.

Speaker #3: Yeah, John, look, we're confident we're in the early innings of a multi-year growth acceleration for this brand as it continues on its path to becoming the next billion-dollar-plus brand.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: And you'll start to get a better sense for what that means.

Speaker #5: Great. Then looking forward to meeting that team. Thank you.

Speaker #2: Our next question's from the line of Adrian Yi with Barclays. Please just use your question.

Speaker #7: Great. Good morning. Congratulations Joe on the promotion or the additional responsibilities. Well deserved. So staying on the topic of Halle Hansen, I wonder if you, Scott, if you can give us kind of a little sneak peek or a little bite of kind of what we're going to see in a couple of weeks.

Speaker #7: It exceeded expectations again. You're talking about sort of more legacy innovation that's driving that. It's doing it across sport, workwear, and 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?

Speaker #7: Thank you so much.

Speaker #6: 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.

Speaker #6: So you're going to see the people that are really making this happen. And that's a team that's been around for a really long time together, and they work really well together.

Speaker #6: And 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.

Speaker #6: So 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's going to look like.

Speaker #6: 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.

Speaker #6: I think the day is set up to be outstanding and also 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.

Speaker #6: 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.

Speaker #7: Okay. Can you give a little bit more details on the pre-existing back half? What's the timing of entering into DIC? How many doors? And have you already had the upfront buy?

Speaker #7: Is that forward front-loaded into the current quarter? Any timing on that?

Speaker #6: So we'll give you an idea. So the product is on its way. It actually gets set and it'll be in stores in October. So you'll see it in the house of sports in 18 doors, in the house of sports then, our first time.

Speaker #6: So that'll give you an idea. And really, I hope that answers your question.

Speaker #7: Yep. 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.

Speaker #7: 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.

Speaker #7: Thank you very much.

Speaker #3: Hi Adrian. And again, thanks for the comment. So yeah, look, our inventory was down 3% year over year on despite 19% revenue growth. The majority of that increase really all of that increase was driven by continued improvement in the Halle brand.

Speaker #3: You'll recall that the networking capital opportunity for Halle was one of our big value drivers, and we've in fact gotten after that pretty quickly.

Speaker #3: 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.

Speaker #3: We're very pleased with the composition. The brands are a little different. Halle is more order book driven, and we buy to the order book that we see.

Speaker #3: We don't speculate Wrangler's a little more replenishment driven and our manufacturing helps us in that regard. Just given the short lead time. So 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.

Speaker #3: And we make our buys accordingly.

Speaker #7: Fantastic. Great job. Best of luck.

Speaker #2: Next question is from the line of Mauricio Serrano with UBS. Just see with your question.

Speaker #4: Great. Good morning. Thanks for taking our questions and congrats, Joe, on the expanded role. Yeah, I just was wondering first to start with Wrangler and could you talk about what you're seeing quarter to date on that business?

Speaker #4: I know you talked about POS, but I just was 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 US wholesale for that brand.

Speaker #4: And how are you thinking about the opportunity maybe for 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?

Speaker #4: Thank you.

Speaker #6: Well, Joe, why don't you go ahead and start? And I'll do the DTC.

Speaker #3: I can start. So yeah, Mauricio, I'm 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.

Speaker #3: That's consistent with the performance we saw in the first quarter and really the trends that we've seen over the past 2012 to 24 months.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: And in certain parts of the market. So 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.

Speaker #3: That's an approach that we've consistently taken to our outlook. And I think has served us really well.

Speaker #6: And Mauricio, from a D2C 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.

Speaker #6: And we feel really confident as far as rolling out that formula. So we've signed two more leases in Texas. The opening in the first quarter of '27.

Speaker #6: 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. But as we look at the landscape, we've got years of growth there.

Speaker #6: And we've got a formula that really works. Wrangler's got great momentum as you can imagine. And 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.

Speaker #6: So 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.

Speaker #4: Got it. And just a quick follow-up, was that like the reason why you expect the Wrangler business to accelerate to mid-single digits in the back half because of DTC or what's driving that acceleration?

Speaker #3: Yeah. So 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.

Speaker #3: 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.

Speaker #3: The Western business continues to perform really, really well. That's really the draw 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.

Speaker #4: Got it. And one last quick one on Halle Hampton. Maybe could you talk a little bit more, give more details on the growth rate that you saw by channel in the quarter on a proforma basis?

Speaker #4: And 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.

Speaker #4: So just trying to understand anything that's changed on that front. Thank you.

Speaker #3: No change to the outlook for Halle for the full year. So we said high single digit growth on a reported basis. We've got low double digit growth.

Speaker #3: 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.

Speaker #3: The growth rates are pretty similar first half to second half in that mid-single digit range.

Speaker #4: Got it. And the growth rates by channel, if you have any details on that?

Speaker #3: 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.

Speaker #3: Growth is pretty balanced for the brand.

Speaker #4: Thank you. Next question comes from the line of Bob Durble with BTIG. Please just use your questions.

Speaker #5: Hey guys, this is actually Jake Pachecos on for Bob. Thanks for taking my question. So Wrangler and International had a nice quarter. Just curious if you could unpack which markets or kind of outperforming your expectations.

Speaker #5: And where do you believe Wrangler has the greatest white space opportunity over the next several years? Thank you.

Speaker #6: So 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.

Speaker #6: The business is really strong. And 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.

Speaker #6: Europe was flattished 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.

Speaker #6: But more of a North American story.

Speaker #5: Great. Thank you.

Speaker #4: Thank you. The next question is from the line of Brooke Roche with Goldman Sachs. Please just use your question.

Speaker #7: Good morning. And thank you for taking our question. Scott, 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 lead business within the 12 to 18 month period.

Speaker #7: What are the biggest opportunities? How quickly can you achieve them? And how should we think about your ability to improve the underlying business margin profile in addition to this cost mitigation?

Speaker #7: Thank you.

Speaker #3: Yeah. Hi, Brooke. I can start. So we've got about 55 cents of expenses that were previously allocated to Lee that have now been reclassified to continuing operations.

Speaker #3: And just to there does appear to be some confusion on what those expenses are. These are overhead and other direct costs that were historically allocated to the lead business.

Speaker #3: 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.

Speaker #1: With where growth is pretty balanced for the brand.

Speaker #3: But 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.

Speaker #3: And that'll 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 to 18 month period.

Speaker #3: 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.

Hey guys, this is actually Jake Pikas on for Bob. Thanks for taking my question. So, 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.

Speaker #3: 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.

Speaker #6: And 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. And I will tell you, in this process, there's nothing more important than experience.

So uh thanks Jake for the question right now. Uh, it's really kind of a North American story Canada in Mexico. Uh, the product is doing really well. The business is really strong and also our Western business is really strong in both of those markets too, which is very helpful in, in really good for the brand. As you can imagine, uh, Europe was flattish to down right now. And uh, we expect that to turn relative to the year coming in, because we're going to have a focus on that brand versus having 2 Brands going forward, but more of a North American story.

Speaker #6: 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.

Great. Thank you.

Speaker #6: And we understand what to do. So I have high level of confidence in the team.

Thank you. The next question is from the line of Brooke Rowe with Goldman Sachs. Please proceed with your question.

Speaker #4: Thank you. At this time, we've reached the end of our question-and-answer session. And I'll turn the floor back to Scott for closing remarks.

Speaker #6: I just wanted to say thank you to everybody for participating in the call today. Really appreciate your interest in our company. And again, congratulations to Joe and we will look forward to catching up with you again next quarter.

Speaker #6: Take care, everyone. And thanks again.

Good morning, and thank you for taking our question, Scott and 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- to 18-month period. What are the biggest opportunities? How quickly can you achieve them? And how should we think about your ability to improve the underlying business margin profile in addition to this cost mitigation? Thank you.

Hey, hi Brooke. I can start. So, um,

we've got about 50 55 cents of expenses that were previously allocated to lie that have now been reclassified to continuing operations and just to

There does appear to be some confusion on what those expenses are. Uh, 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 uh support via a TSA type of arrangement for some period of time, but these are expenses necessary, you know, 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, uh, has been well, well underway. Um, and that'll start really upon upon close. Uh, we've got plans in place to begin to attack, uh, those costs. Um, uh, and we'll and we'll, we'll get out of those over a 12 to 18 month, period. We need a little bit of time.

Um, to, to solidify our plans. Just, um, you know, as we continue to work with ABG on the separation and how much support, you know, if they're going to need, we're committed to making sure that this transition, uh, goes as smoothly as possible. But um, we're very confident in our ability to um, you know, to get out of of 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 and m&a and I will tell you, in this process, there's nothing more important than experience. And we are really good at at this part of this, we've just had a lot of you know, 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.

Thank you.

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

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

This will conclude.

You may not disconnect your lines at this time and have a wonderful day.

Operator: Greetings. Welcome to this Kontoor Brands Q2 2026 Earnings conference call. At this time, all participants will be in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad.

Operator: Please note this conference is being recorded. At this time, I will 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.

Erinn Murphy: 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.

Scott Baxter: 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. 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 us begin with Helly Hansen. In June, we celebrated our one-year anniversary together.

Scott Baxter: 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 H1 2026, with pro forma reported revenue growing at a low double-digit rate compared to our high single-digit outlook. We have 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.

Scott Baxter: Through the H1 2026, 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.

Scott Baxter: 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.

Scott Baxter: 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 H1 2026, global revenue increased approximately 3% on a reported basis, in line with our expectations. It starts with building on the momentum we have created in our core bottoms business.

Scott Baxter: These spoke as the number 1 female style at select specialty retailers, and new collaborations and brand activations are elevating the brand in the marketplace. Within Western, H1 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.

Scott Baxter: We intend to use the majority of net proceeds from the divestiture to fund the 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.

Scott Baxter: 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 H2 of the year focused on our largest priorities.

Scott Baxter: 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?

Joe Alkire: 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.

Joe Alkire: 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.

Joe Alkire: 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, 2 September in Norway.

Joe Alkire: 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.

Joe Alkire: 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 Toughlite, our newest material innovation for our iconic cowboy cut jean. Wrangler Toughlite jeans are up to 20% lighter without sacrificing performance and are positioned at a premium price point.

Joe Alkire: Within female, our business stands at approximately 10% of total revenue today, despite female comprising over 50% of the US 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.

Joe Alkire: 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. 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.

Joe Alkire: During the quarter, we secured 2 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 omni-channel 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.

Joe Alkire: Turning to Helly Hansen. Helly is our growth engine, and we are accelerating growth in both the US 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.

Joe Alkire: 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 H2 2026, we have also identified incremental opportunities to invest behind demand creation as we scale brand awareness, particularly in the US, where our aided awareness is around 30% and well below our peers.

Joe Alkire: 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 roadmap, 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.

Joe Alkire: We have built a large and profitable European business, and there is significant runway to grow in the US. 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.

Joe Alkire: 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 Q2, 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.

Joe Alkire: 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.

Joe Alkire: Simply stated, our strategy will deliver accelerated revenue growth, fund the investments required while expanding profitability and continuing to drive strong cash generations. Moving on to where we are in the Lee divestiture process. We are on track to close the transaction in Q4. 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 to 18-month period.

Joe Alkire: 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.

Joe Alkire: Over a 12 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 Q2 results, I want to take a moment to reflect on our performance for the H1 of the year. Revenue of $1.2 billion was at the high end of our previously communicated H1 outlook, reflecting an increase of 31% compared to prior year.

Joe Alkire: 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.

Joe Alkire: 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 H2 of the year. Now let's review our Q2 results in more detail. Starting with Wrangler.

Joe Alkire: Global revenue increased 1%, driven by 12% growth in DTC. In the US, 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.

Joe Alkire: 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 to 24 months. Wrangler international revenue increased 8%, driven by 27% growth in DTC and 4% growth in wholesale.

Joe Alkire: Wrangler is well positioned to deliver another year of broad-based growth in 2026, including mid-single digit growth in the H2 of the year, adjusted for the 53rd week impact in 2025. Turning to Helly Hansen. Global revenue of EUR 114 million increased 6% compared to prior year on a pro forma basis, exceeding our expectations. Through the H1, global revenue increased 12% on a reported pro forma basis, with underlying constant currency growth in the mid-single digit range.

Joe Alkire: Sport was EUR 70 million, and growth was strongest in the US, 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 EUR 37 million with growth across the US and the Alps region in Europe. While small today, our workwear e-commerce business was particularly robust in the Q2. Moving to China.

Joe Alkire: 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. Q2 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.

Joe Alkire: We are 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. 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.

Joe Alkire: 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 consumer demand creation and technology, partially offset by the benefits from Project Genius. Adjusted EPS was $1.06, an increase of 13% compared to prior year.

Joe Alkire: 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 Q2 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.

Joe Alkire: 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. 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.

Joe Alkire: Following the U.S. Supreme Court's ruling that the International Emergency Economic Powers Act does not authorize tariffs, the United States Court of International Trade ordered U.S. Customs and Border Protection to refund IEPA duties previously paid. As a reminder, during Q1 2026, we recognized a net receivable of $54 million for IEPA tariffs previously paid. In July 2026, we started to receive IEPA refunds, and thus far have received cash of approximately $23 million in Q3.

Joe Alkire: We expect to receive the remaining IEPA refunds by the end of fiscal 2026. In May 2026, the United States Court of International Trade ruled that Section 122 tariffs were also invalid, and these tariffs expired in July 2026. Year to date, our financial results include the previously paid and expensed tariffs under Section 122.

Joe Alkire: 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 United States 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%.

Joe Alkire: 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 H2 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.

Joe Alkire: Revenue is expected to be in the range of $2.66 to $2.71 billion, consistent with our prior outlook. For H2 2026, we expect revenue to be in the range of $1.46 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 Q4.

Joe Alkire: 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.

Joe Alkire: Full year adjusted SGA 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 to $420 million, including $25 million of incremental investment, representing an increase of 15% to 17% compared to prior year.

Joe Alkire: This compares to our prior outlook range of $411 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.

Joe Alkire: 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.

Joe Alkire: 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.

Joe Alkire: We are tracking ahead of our original deleverage plan and anticipate returning to less than 1.5x 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.

Joe Alkire: The increase in our 2026 outlook reflects the strength we have delivered in our business year to date and our visibility as we enter H2 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. I will now turn the call back to the operator.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please for our first question. Thank you. The first question is from the line of Matthew Boss with JP Morgan. Please proceed with your questions.

Matthew Boss: Thanks, and congrats on a nice quarter.

Joe Alkire: Thank you, Matt.

Matthew Boss: So-

Joe Alkire: Nice having you on the call, Matt.

Scott Baxter: Sure. No problem. First, though, I would like to acknowledge Joe's promotion and a congratulations to Joe. It's wonderful for our company, wonderful for our shareholders, and so well-deserved, and congratulations, Joe. Outstanding.

Joe Alkire: Thank you, Scott.

Scott Baxter: Thank you. Matt, we are really pleased with the progress we are making on both brands. We did accelerate, thanks for the comments. A lot of the confidence from a back half standpoint, I am going to share with you, but I also want to point out that we have a lot of confidence in 2027, in our long range plan. We have got a lot of actions that we have taken, and some of the things that are happening, for instance, in the back half and into next year are for Wrangler.

Scott Baxter: 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.

Scott Baxter: 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. I am really pleased with our continued progress in Western. Toughlite as a new example of some innovation in Western. The business is strong there. We continue to have great relationships.

Scott Baxter: 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 one denim brand only. After the spin off of Lee, we are going to turn all of our attention.

Joe Alkire: No, I think you covered it, Scott.

Joe Alkire: Yeah, sure. Thanks, Matt. I appreciate the comments. Look, based on the confidence and the visibility we have into the H2 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. We took the opportunity to invest at least a portion of that upside back into both brands to accelerate growth into 2027 and beyond as we continue to build momentum in both brands, as Scott mentioned.

Joe Alkire: In terms of where those dollars are going, again, in both brands, 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.

Joe Alkire: These key hires will begin to have an impact as we move into 2027. 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.

Joe Alkire: 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.

Matthew Boss: Great color. Best of luck.

Scott Baxter: Thanks, Matt.

Operator: The next question is in the line of Ike Boruchow with Wells Fargo. Please just use your questions.

Ike Boruchow (Wells Fa: Hey, morning, everyone. Congrats to Joe, and congrats to everyone on the quarter. I guess two from me. First, I wanted to dive into Helly a little bit more, in a more detailed way for Q2. 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 Q2. Just curious because that seems like a notable change from a seasonality perspective.

Joe Alkire: Yeah. Thanks, Ike. Again, thanks for the comment. While small, it is a pretty big deal. I do not 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.

Joe Alkire: We have got a lot more operational discipline in the business right now in terms of inventory quality and composition. That is greatly improved. We are selling through more full price. We are being less promotional. There has been a lot of work done in that area, as well as pricing. Then you have got synergy.

Joe Alkire: A lot of the work that we have done with the team over the past year, these 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 H1. It will be meaningful for H2. The mid-teen operating margin target that we put out there, fair to say we have got more confidence in that, and you will see the specifics of how we see that evolving over the next few years in a few weeks at the Investor Day.

Ike Boruchow (Wells Fa: Got it. Okay, then a bigger picture question. A lot of moving parts have occurred this year. While the core business is clearly outperforming, that said, I want to address the go-forward plan because I think there is some confusion with the investor base. I think several months ago when the Lee sale was announced, you guys said there really was not any reason why 2027 street EPS needed to change.

Ike Boruchow (Wells Fa: At the time, the street was a little above $7. Today, they are a little below $6.50. So I honestly just want to ask you to address the discrepancy, and how you are viewing 2027 EPS power at a high level, given all the changes in the model taking place.

Joe Alkire: Yeah, sure. Thanks, Ike. Look, we are not updating the long-term algorithm today or providing specific 2027 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 2027 and into 2028. So you have got baseline continuing operations EPS that now is in the range of $5.25 to $5.35 for 2026. That is burdened by about $0.55 of expenses that were previously allocated to the Lee business.

Joe Alkire: We have said we expect to offset those costs over a 12 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 $5.80 to $5.90. From there, through strong capital deployment, we believe we can offset the $0.90 of operating earnings that Lee is contributing today.

Joe Alkire: The $400 million ASR will be a part of that. That will start immediately upon closing, and then we talked about the debt repayment. That bridges you back to $6.70 to $6.80 pro forma kind of run rate EPS. Then from there, we can drive more accelerated growth in the Wrangler and the Helly brands. All that to say, this is why we keep highlighting, we expect the divestiture of Lee to be immaterial to EPS on a 12 to 18 month basis.

Ike Boruchow (Wells Fa: Very helpful. Thanks, Joe.

Operator: The next question is from the line of Jonathan Komp with Baird. Please proceed with your questions.

Joe Alkire: Sure. I will take that, Jon. For 2026, we now have a gross margin outlook of over 300 basis points, in the 49.8% to 50% range. That is about 150 basis points above our prior outlook. Relative to the prior outlook, the stronger gross margin is really driven by Helly. That is probably the single largest driver of the increase, along with increased visibility into the H2 of the year.

Joe Alkire: From a year-over-year perspective on a full year basis, there are some pretty meaningful puts and takes within our gross margin evolution. We expect Helly to be accretive by more than 100 basis points. We have 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-