Key Takeaways:
- Kontoor Brands announced plans to divest its Lee denim brand with the sale process described as “in an advanced state.”
- Helly Hansen posted 16% pro-forma revenue growth in Q1 2026, generating $176 million globally.
- Kontoor CEO Scott Baxter said on the Q1 earnings call that Helly Hansen is significantly underpenetrated in the U.S. and that the brand’s first distribution through Dick’s Sporting Goods’ House of Sport is planned for fall 2026.
Kontoor Brands is making a major strategic bet, announcing plans to divest its Lee denim business to sharpen its focus on what it sees as its two highest-growth assets: Helly Hansen and Wrangler.
The Greensboro, N.C.-based company announced the move alongside strong first-quarter results on May 7, reporting revenue from continuing operations of $613 million, up 45% year over year, driven by 4% growth in Wrangler and 16% pro-forma growth in Helly Hansen.
“Our strong first quarter results reflect the power of our operating model combined with strong execution,” said Scott Baxter, Kontoor’s president, CEO and chairman of the board, in the company’s earnings press release. “Wrangler drove another quarter of broad-based growth and market share gains, and Helly Hansen delivered better-than-expected revenue and profitability. Our decision to divest Lee enables sharper focus on the opportunities with greatest potential to maximize shareholder returns as we align the Kontoor brand portfolio to a higher growth profile.”
Baxter said on the earnings call that the Lee divestiture reflects the company’s long-term focus on function- and activity-based brands, noting that while Lee’s fundamentals improved in 2025 after a turnaround effort, the brand no longer fits that strategic direction. “We believe this will be a great outcome for Kontoor and the Lee business,” he said.
The Lee sale process is described as “in an advanced state” with multiple interested parties, and Kontoor expects to complete the transaction this year. Lee revenue was approximately $195 million in Q1 and is now reported as discontinued operations. For the full year, Lee is expected to generate roughly $750 million in revenue.
Kontoor Brands announced the definitive agreement to acquire Helly Hansen on February 19, 2025, purchasing the Norwegian outdoor and workwear brand from Canadian Tire Corporation for approximately $900 million, representing roughly 11 times Kontoor’s full-year 2025 adjusted EBITDA outlook for the brand. The transaction closed on June 2, 2025, marking Kontoor’s first corporate acquisition and its entry into the outdoor and performance apparel market.
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Helly Hansen: The Huge U.S. Opportunity
For the outdoor and active lifestyle space, the more immediately relevant news is what Kontoor intends to do with the capital and focus freed up by the Lee exit, and much of that attention is pointed at Helly Hansen’s U.S. business.
Baxter told analysts on the Q1 earnings call that Helly Hansen remains significantly underpenetrated in the United States, which he described as the largest outdoor and workwear market in the world. He said the company sees a clear path to double-digit growth in its home market and is making investments in team and infrastructure to get there.
One concrete U.S. distribution step Baxter highlighted on the call: Helly Hansen is preparing for its first distribution through Dick’s Sporting Goods’ House of Sport concept this fall, a potential foot in the door at the country’s largest sporting goods retailer.
New leadership hires are already underway. In early April, CFO Joe Alkire assumed global oversight of the Helly Hansen brand in addition to his existing responsibilities, and in early May the company appointed Erinn Murphy as VP and global head of finance and operations for Helly Hansen and corporate investor relations. A search for a dedicated North America general manager is also underway.
In Q1, Helly Hansen generated $176 million in revenue globally, with $120 million from Sport, $45 million from Workwear, and $11 million from the Musto brand. On an adjusted basis, the brand contributed $0.26 to Kontoor’s adjusted EPS of $1.06 for the quarter. Adjusted operating income from continuing operations rose 60% year over year to $87 million, and adjusted gross margin improved 470 basis points to 50.6%, driven in meaningful part by the Helly Hansen mix benefit.
Kontoor’s full-year 2026 outlook, raised alongside the Q1 results, calls for revenue from continuing operations of $2.66 to $2.71 billion and adjusted EPS from continuing operations of $5.15 to $5.25. The company expects to generate more than $400 million in free cash flow for the year.
Kontoor Tariff Refund Windfall
The company also booked a significant tariff benefit in the quarter. Following the U.S. Supreme Court’s ruling that IEEPA-based tariffs were unauthorized, Kontoor recognized a $54 million net receivable
Looking ahead, Kontoor’s outlook assumes a 15% reciprocal tariff rate on applicable inventory receipts for the remainder of 2026, with imports from Mexico continuing to benefit from USMCA exemptions.
Analyst Reaction to Planned Lee Sale
Wall Street responded positively to the move overall, though not without some reservations. UBS analyst Mauricio Serna said Helly Hansen’s momentum could accelerate through the planned Dick’s House of Sport distribution, and that resources freed by the Lee divestiture could also boost underpenetrated segments like women’s and DTC at Wrangler, which he sees becoming a mid-single-digit growth business, according to Retail Dive. Without Lee, Kontoor “owns two powerful brands with significant long-term potential across several categories, channels, and geographies,” Serna said.
BNP Paribas analyst Laurent Vasilescu offered a more cautious read on Helly Hansen specifically, calculating that the brand declined in fiscal 2024, grew only in the low-single digits in 2025, and missed Q1 expectations. “In our view, (Helly Hansen) was a no-growth brand for the last few years and it is materializing again in 2026,” Vasilescu said in a post-earnings note according to Retail Dive.
