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Jefferies Upgrades Kontoor Brands Following $750M Sale of Lee Jeans

BullishMedium impact
KTB$69.61 1.66%

Kontoor Brands, Inc. (NYSE:KTB) received an analyst upgrade to Buy from Hold following the divestiture of its Lee denim brand to Authentic Brands. The apparel maker sold Lee for $750 million, enabling management to streamline focus and direct capital toward its primary Wrangler brand alongside Helly Hansen. Following the news, Kontoor shares gained over 1% to reach $69.26.

The transaction allows Kontoor to concentrate resources on a single core denim business instead of dividing investment between two brands. Management intends to deploy the $750 million in sale proceeds toward accelerated share repurchases and debt reduction. An analyst at Jefferies set a new price target of $89, indicating that target investments in women's apparel, direct-to-consumer sales, and product innovation could elevate Wrangler's annual growth rate above 4% within three years, up from its recent 2% to 3% range.

Looking ahead, market participants will observe whether Kontoor successfully recovers the earnings per share lost from selling Lee within the expected 12- to 18-month timeframe post-closing. Investors will also monitor growth in the company's workwear segment, expanded domestic distribution, and execution on debt reduction and share buybacks.

Key points

  • Jefferies upgraded Kontoor Brands, Inc. (NYSE:KTB) to Buy from Hold with an $89 price target.
  • Kontoor sold its Lee Jeans brand to Authentic Brands for $750 million.
  • Proceeds from the deal will be used for accelerated share repurchases and debt reduction.
  • Annual growth for Wrangler is expected to rise above 4% within three years through targeted investments.
  • Earnings per share lost from selling Lee are expected to be recovered within 12 to 18 months after closing.

Written by our AI from expert market sources across the web. It can contain mistakes: check the facts before acting on them. Write-ups powered by the free AI API at FreeTheAI.org

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Questions and answers

Why did Jefferies upgrade Kontoor Brands?

Jefferies upgraded Kontoor Brands to Buy because the sale of Lee Jeans allows the company to focus capital and growth efforts on its Wrangler brand and use $750 million in proceeds for share buybacks and debt paydown.

How much did Kontoor Brands sell Lee Jeans for?

Kontoor Brands sold the Lee Jeans brand to Authentic Brands for $750 million.

What will Kontoor Brands do with the Lee sale proceeds?

Kontoor Brands plans to use the $750 million in proceeds from the Lee sale for accelerated share repurchases and debt reduction.