KONTOOR BRANDS (-) : Leaving Lee Behind

Research evidence excerpt

KONTOOR BRANDS (-) : Leaving Lee Behind

EQUITIES

GENERAL RETAIL

KONTOOR BRANDS UNDERPERFORMPRICE* USD65.1  TARGET PRICE USD50 (DOWNSIDE 23%)

FLASH NOTE

Leaving Lee Behind

21 MAY 2026 Securities Research Report Production time: 18:48* (London time)

Research Analyst & Publishing Entities

Laurent Vasilescu BNP Paribas Securities Corp (1) (+1) 212 634 4971 Laurent.Vasilescu@us.bnpparibas.com

What happened?

This morning, KTB announced the sale of the Lee brand for $750m + an earnout of $250m over the next five years in

three tranches. The tax implications should be considered, and we estimate the proceeds for this year will be roughly

$600m after catching up with the company. We think it is important for the company to provide quarterly proforma cash

flow numbers, especially with last week’s 10Q showing that two-thirds of cash flow was generated by Lee.

BNPP View:

Today’s presentation details that there is $0.90 of lost EPS for FY26 plus an additional $0.55 of EPS lost from dis-

synergies, netting to adjusted EPS of $5.15-5.25 from continuing operations. The presentation notes that there is $1.45

of EPS generated from use of proceeds and cost mitigation. We hope that KTB breaks out the recognition of the $1.45

EPS across use of proceeds and cost mitigation actions going forward. We note that the EPS bridge on slide 7 is shown

on an adjusted basis and not GAAP. As we’ve highlighted repeatedly, GAAP EPS has been stuck at $4 for years.

Bullish investors will call out strong cash flow generation. However, we note that KTB has increased its factoring

program from $1bn pre-Covid to $1.5bn last year despite the fact that wholesale has not grown over that timeframe.

We are curious to understand the implications to the factoring program as KTB divests Lee. Also, there are likely