KTB Q3 2025: Helly Hansen Drives 11% Revenue Surge, Expanding Margin and Global Reach
Helly Hansen’s double-digit growth and integration synergies powered KTB’s Q3 upside, offsetting timing-related denim softness and driving a full-year guidance raise. With margin expansion and disciplined expense control, KTB is pushing toward its deleveraging targets and positioning for continued global growth into 2026, even as Lee’s turnaround remains a work in progress. Investors should watch for the acceleration of Helly Hansen in North America and the scaling of Project Genius savings as key levers for next year’s profitability.
Summary
- Helly Hansen Integration Accelerates: Brand synergy and operational leverage are exceeding initial expectations.
- Wrangler Maintains Share Momentum: Fourteen consecutive quarters of market share gains support denim stability.
- Margin Expansion Outpaces Revenue: Gross margin gains and SG&A discipline drive improved cash flow and deleverage progress.
Performance Analysis
KTB delivered a robust quarter, with global revenue up 27% fueled by the Helly Hansen acquisition. Helly Hansen, technical outdoor and workwear brand, posted 11% revenue growth, broad-based across sport and workwear categories and all regions. Wrangler, core denim and Western brand, grew global revenue 1%, with U.S. direct-to-consumer (DTC, direct sales to end customers) up 11% and international digital up 19%. Wholesale growth was impacted by shipment timing, but underlying demand remained solid. Lee, heritage denim brand, saw a 9% revenue decline, reflecting proactive actions in China and ongoing brand realignment, though U.S. digital grew 15%.
Gross margin expanded by 80 basis points to 45.8%, with Project Genius, operational efficiency initiative, and pricing actions offsetting tariff and input cost pressures. Inventory rose 21% excluding Helly Hansen, driven by supply chain transformation and earlier-than-expected receipts, but is expected to normalize in Q4. Net debt reduction accelerated, with a $25 million voluntary repayment in Q3 and a further $185 million targeted in Q4, supporting a return to 2x leverage by year-end.
- Helly Hansen Outperformance: Surpassed expectations on both revenue and earnings, contributing $0.03 to EPS and expanding the synergy pipeline to $25 million for 2026.
- Wrangler’s Share Gains: Achieved 80 basis points of market share growth in core categories, with female business up 20% and Western segment tracking for double-digit annual growth.
- Lee’s Sequential Improvement: Digital traction and new campaigns are stabilizing brand perception, but full recovery remains gradual, especially in China.
Cash flow guidance was raised to $400 million, reflecting working capital normalization and improved operational efficiency. Adjusted EPS grew 5% and exceeded outlook by $0.09, underpinned by disciplined SG&A and gross margin gains.
Executive Commentary
"Our third quarter results highlight the power of our expanded brand portfolio. Helly Hansen grew double digits, Wrangler gained market share for the 14th consecutive quarter, and we launched Lee's first equity campaign in years while taking proactive steps to improve the health of the marketplace. While a timing shift impacted growth in the quarter, stronger gross margin expansion, and disciplined expense management drove better-than-expected earnings. Based on our year-to-date performance and improving profitability, we are raising our full-year outlook."
Scott Baxter, President, Chief Executive Officer and Chairman
"Our third quarter results reflect the strength of our operating model and the benefits from our expanded brand portfolio. In what remains a highly dynamic environment, our fundamentals are strong and we are operating from a position of strength. While a timing shift impacted revenue growth in the quarter, better than expected revenue and profitability from Helly Hansen, stronger gross margin expansion, and further improvement in operating efficiencies drove earnings upside relative to our outlook. Based on our year-to-date performance and increased visibility into the fourth quarter, we are raising our full-year revenue, gross margin, earnings, and cash flow outlook."
Joe Alkire, Chief Financial Officer and Global Head of Operations
Strategic Positioning
1. Helly Hansen Integration and Global Expansion
Helly Hansen’s integration is delivering outsized results, with the brand’s U.S. awareness still low at 29%, presenting a significant runway for growth. KTB is leveraging its global operating platform to accelerate distribution, DTC, and demand creation, especially in North America where new leadership hires and broader retail presence are planned. The synergy pipeline has expanded to $25 million, with benefits expected to scale in 2026 as supply chain, procurement, and technology investments mature.
2. Wrangler’s Consistent Share Gains and Western Category Strength
Wrangler continues to deliver market share gains, driven by strong female business (up 20%) and Western segment momentum. Collaborations and targeted campaigns are attracting younger consumers and supporting premium average unit retail (AUR, average selling price per item). The brand’s broad distribution and omnichannel presence remain key competitive advantages.
3. Lee’s Turnaround Progress and China Reset
Lee’s transformation is progressing, with digital channels leading growth and new product collaborations attracting millennials. The China business is being reset through distribution consolidation and inventory actions, with most heavy lifting now behind the brand. Sequential improvement is expected in Q4, but management acknowledges the turnaround will not be linear, with stabilization targeted by late 2026.
4. Margin Expansion and Project Genius
Margin improvement is a central theme, with Project Genius expected to reach a $100 million annual savings run rate by 2026. About $50 million in gross savings have already been realized, enabling reinvestment into growth initiatives. Pricing actions have offset tariffs, with elasticity in line with expectations. SG&A discipline and channel mix optimization are supporting profitability even as investments in demand creation rise.
5. Capital Allocation and Deleveraging
Deleveraging remains the near-term priority, with share repurchases paused. Accelerated debt repayment and robust cash generation are restoring balance sheet flexibility, setting up optionality for future capital deployment once leverage targets are achieved.
Key Considerations
KTB’s Q3 illustrates the impact of portfolio diversification, operational discipline, and targeted investment in brand equity and supply chain transformation. The quarter’s results reflect both the opportunities and complexities of integrating a global acquisition while managing legacy denim brands through market challenges.
Key Considerations:
- Helly Hansen’s U.S. Growth Runway: Low brand awareness and new distribution initiatives present a multi-year opportunity for outsized growth and margin accretion.
- Project Genius Savings Trajectory: Full impact still ahead, with incremental flow-through to profitability and reinvestment potential in 2026.
- Tariff and Input Cost Management: Pricing actions and supply chain agility are mitigating external headwinds, but further tariff increases could pressure margins.
- Wrangler’s Broad-Based Demand: Share gains and channel diversity insulate against category volatility, but shipment timing remains a swing factor.
- Lee’s Turnaround Risks and Rewards: Digital momentum and product innovation are encouraging, though China stabilization and global growth remain medium-term projects.
Risks
Tariff escalation and input cost inflation remain ongoing threats to margin stability, especially as U.S. tariffs are expected to have a $135 million unmitigated impact in 2026. Lee’s turnaround in China and global markets is not guaranteed and could drag on consolidated growth if momentum stalls. Integration risks with Helly Hansen, particularly in scaling U.S. operations and realizing synergies, could temper upside if execution falters.
Forward Outlook
For Q4, KTB guided to:
- Revenue of $970 to $980 million, including a 53rd week benefit and continued Helly Hansen outperformance.
- Adjusted gross margin of approximately 45.8%, up 110 basis points year-over-year.
For full-year 2025, management raised guidance:
- Revenue now expected at the upper end of $3.09 to $3.12 billion, with Helly Hansen contributing $460 million.
- Adjusted EPS of approximately $5.50, up 12% year-over-year.
- Cash from operations of $400 million, reflecting working capital normalization.
Management highlighted several factors that will shape coming quarters:
- Helly Hansen’s spring-summer and fall-winter order books are accelerating, supporting momentum into 2026.
- Project Genius savings and Helly Hansen synergies will scale further, with reinvestment and bottom-line impact expected to increase.
Takeaways
KTB’s Q3 demonstrates the strategic value of portfolio breadth, operational discipline, and targeted capital deployment in a dynamic retail environment.
- Helly Hansen’s outperformance and synergy realization are reshaping KTB’s growth and margin profile, with North America expansion a key lever for 2026.
- Wrangler’s channel diversity and share gains provide stability, while Lee’s recovery remains a multi-quarter journey requiring sustained investment and execution.
- Investors should watch for the flow-through of Project Genius savings, the pace of deleveraging, and the ability to mitigate tariff headwinds as critical drivers of future valuation.
Conclusion
KTB’s Q3 2025 results reinforce its transformation into a multi-brand, global apparel platform with improving margin and cash flow dynamics. Helly Hansen’s integration and synergy capture are emerging as the central growth narrative, while operational discipline and targeted investments are positioning KTB for sustained outperformance into 2026.
Industry Read-Through
KTB’s results highlight the growing importance of portfolio diversification and global supply chain agility for apparel companies facing macro and tariff headwinds. The success of Helly Hansen’s integration and the scaling of operational synergies offer a playbook for value creation through disciplined M&A and platform leverage. Channel mix optimization and digital acceleration remain critical for legacy brands navigating consumer shifts. Other apparel players should note the increasing returns from targeted investment in brand equity, DTC, and operational efficiency initiatives as key levers for resilience and margin expansion in a volatile environment.