What Are Kontoor Brands Growth Catalysts? Analyst Highlights Key Margin Tailwinds and Brand Investments

Goldman Sachs analyst Brooke Roach upgraded the shares of Kontoor Brands Inc KTB from Neutral to Buy and raised the price target from $51 to $56.

Strong execution and investments in marketing and product have enabled KTB to capture significant market share over the last couple of quarters compared to its competitors, said the analyst.

The analyst expects further share gains looking ahead, with growth supported by product diversification, KTB’s value-based market positioning, and attractive end-market exposure.

While the majority of KTB’s revenues come from the wholesale channel, the analyst notes the company’s relative exposure to mass retail could support a more normalized growth rate moving forward.

The analyst also sees upside for KTB to drive growth in DTC globally and capture share in China as the company builds the Wrangler brand in that region.

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The constructive thesis around KTB, according to the analyst, is driven by strong brand momentum, which is manifesting in market share gains and opportunity for better sell-in trends to key wholesale partners following a year of destocking in the channel.

Significant margin tailwinds in 2H23E and 2024E, including raw material cost recapture and cycling prior year manufacturing fixed cost deleverage, strategic investments in brand diversification and DTC distribution that are beginning to scale, and an attractive dividend also contribute to the positive narrative.

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Price Action: KTB shares are trading higher by 2.90% at $47.22 on the last check Thursday.