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Lee and Wrangler stock rises 4% after public debut

New York (CNN Business)The owner of Lee and Wrangler jeans looked like it was going to have a tough day as a separate company on the New York Stock Exchange on Thursday.


But shares rallied at the end of the day to finish about 4% higher. The stock had dropped 7% earlier on an admittedly rough day for the broader market as stocks plunged on US-China trade war fears.


Kontoor Brands was spun off from VF Corp. (VFC), the apparel maker that owns the Vans brand of sneakers, Timberland boots and The North Face jackets. Kontoor is trading under the ticker symbol "KTB."


Scott Baxter, president & CEO of Kontoor Brands, said in an interview with CNN Business that he's "fired up and ready to compete" with the likes of newly public Levi Strauss (LEVI) and other apparel companies now that Kontoor Brands is independent.


"The jeanswear business at VF Corp. didn't get the attention we thought they deserved," Baxter said, adding that Kontoor Brands can now focus more on expanding in China, increasing digital distribution and creating new clothes for female consumers.


Chinese expansion and women customers


Baxter said that while Lee has about an equal number of men and women as customers, Wrangler is still viewed as more of a men's brand, with only 15% of its sales coming from women's jeans. He added that the company has hired a global designer for Wranger and Lee for the first time to help increase sales.


Lee and Wrangler face a tough battle with Levis, though. And in VF Corp.'s latest earnings report Wednesday, the company said that jeans sales and profits fell in the fourth quarter and for all of 2018. So a cynic could argue that VF Corp. spun off Kontoor Brands to shed a business that was lagging behind the growth of its sneakers, boots and active and outerwear.


What's more, recent data from research and polling firm YouGov showed that nearly a third of US consumers over the age of 18 said they'd be willing to buy something from Levi's when shopping for clothing, compared to 22% for Wrangler and 17% for Lee.


But Baxter isn't concerned. He said that the company will continue to focus on keeping prices low to attract customers in the United States and China. He said that Walmart (WMT), Kohl's (KSS), Target (TGT) and Alibaba (BABA) are among the company's biggest retail partners.


Renting jeans may not be the way to go


Baxter added that he's also not too worried about the rise of apparel renting sites like Rent the Runway and Stitch Fix (SFIX), which allow consumers that may not want to keep buying shirts, pants and other clothing to wear new fashion.


"Our current consumer is not renting on a large scale basis," Baxter said. "We're willing to adapt to the marketplace and we can do that more quickly as an independent company, but this is not a big trend from a denim standpoint."


But renting is clearly growing in popularity. Apparel retailer Urban Outfitters (URBN) announced this week that it plans to launch its own service called Nuuly, while Loft now has one as well that's dubbed Infinitely Loft.


So what will Kontoor Brands be investing in now that the company is free from VF Corp.?

Baxter suggested that the company could diversify into other lines of clothing. He said that's why the company chose the name Kontoor (the more conventional spelling of "contour" was already trademarked, he said) instead of using something with Lee, Wrangler, jeans or denim in the corporate name.


"As we grow, we want to be more than just a denim company. We want to be an apparel company," he said. "So if we make an acquisition that's not in denim, we're not tied to that with a Lee or Wrangler name."


Author: Paul La Monica

Original article: https://edition.cnn.com/2019/05/23/investing/kontoor-brands-lee-wrangler-vf-corp/index.html


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