Lee and Wrangler’s history together could be coming to an end soon.
On Thursday, parent company Kontoor Brands announced it has initiated a competitive process to divest the Lee business. The Greensboro, N.C.-based company began the process in Q1 2026 and has reportedly attracted interest from multiple parties. It anticipates entering into a definitive agreement to divest the business in 2026. As a result, the company has reported the results of the Lee business in discontinued operations.
Kontoor expects the divestiture of Lee to be immaterial to earnings per share over a 12-to-18-month period. The company said earnings contribution of the Lee business will be offset through strong capital deployment and mitigation of overhead and other expenses through restructuring and other mitigating cost actions to offset the costs that were previously allocated to the Lee business.
“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,” said Scott Baxter, Kontoor Brands president, CEO and chairman.
In the company’s Q1 earnings call, he added that the decision to initiate a sales process of the Lee business reflects the “significant opportunities” the company sees in Wrangler and Helly Hansen, which Kontoor acquired last year.
Wrangler and Lee were united in 1986 when VF Corporation acquired Blue Bell Holding company, which owned Lee and had acquired Lee in 1969. In 2019, Wrangler and Lee were spun off from VF to form a new entity, Kontoor Brands.
Despite efforts like Kontoor’s optimization-focused Project Jeanius initiative, a global marketing campaign last fall and collaborations with Paul Smith, Diesel and Crayola, Lee’s total revenue has been on a decline. In Q4, Lee brand global revenue was $198 million and increased 2 percent compared to prior year, however, Baxter said the brand was positioned for a return to revenue growth in the second half of 2026.
In comparison, Helly Hansen straddles several categories with growing addressable markets, and Wrangler, which has grown at a low single-digit rate for over the last three years, benefits from function-based value positioning and a year-round replenishment model that is supported by longer product life cycles that build product and margin efficiencies.
“We believe function and activity-based brands offer more durable, dependable, and sustainable growth characteristics with greater differentiation in the marketplace. As part of the Lee turnaround, we conducted an extensive consumer study,” Baxter said. “Our learnings confirmed the Lee brand sits outside of our strategic bull’s-eye. While Kontoor has the organizational muscle and discipline to continue to turn the brand around, we are confident our go-forward resources are better utilized in our remaining brands that are better aligned with our long-term focus.”
Kontoor’s first quarter results and updated 2026 outlook reflect the presentation of the Lee business as discontinued operations even though it’s only at an initial competitive process.
Q1 2026 revenue—including Lee’s $195 million contribution—was $808 million. Revenue from continuing operations was $613 million and increased 45 percent compared to prior year, including the contribution from the acquisition of Helly Hansen completed in the second quarter of 2025.
Wrangler brand global revenue was $436 million and increased 4 percent compared to prior year. Wrangler U.S. revenue increased 1 percent, driven by a 6 percent increase in direct-to-consumer and a 1 percent increase in wholesale. Wrangler international revenue increased 20 percent compared to prior year, driven by a 38 percent increase in direct-to-consumer and a 17 percent increase in wholesale.
Q1 2026 is the 16th consecutive quarter of market share gains in men’s and women’s bottoms, as measured by Circana. “Wrangler has a unique position in the market. It is the authority in Western lifestyle and offers an attractive value proposition for our core consumer. Its distribution footprint is healthy with significant white space opportunities in specialty, female, and direct-to-consumer,” Baxter said.
Looking forward, Joe Alkire, Konotor Brands EVP, chief financial officer and global head of operations, said he expects to accelerate investments in Wrangler’s female business, including areas such as product development, design and demand creation. “The women’s denim market, as measured by Circana, is larger than men’s, and Wrangler’s female business comprises just 10 percent of revenue today,” he said. “The runway for growth is significant.”
Further, Kontoor plans to scale Wrangler’s non-denim categories, including tops and bottoms, through investments in product and supply chain capabilities.
Helly Hansen global revenue was $176 million. Sport and Workwear revenue was $120 million and $45 million, respectively. Musto brand revenue was $11 million.
Though the growth opportunity for Helly Hansen is global, Baxter it begins in the U.S., which is the largest outdoor and workwear market in the world. While it is already among Helly’s fastest-growing markets, Baxter said the brand is significantly underpenetrated relative to its peers. Through improved focus and increased investment capacity, he said Kontoor sees a “clear path to double-digit growth in our home market.”
He also sees opportunities to accelerate investments in new category growth, including technical outdoor apparel and footwear, and increased investments in the Alps region.
Kontoor said it is “probable” that it will recover the IEEPA tariffs previously paid and therefore has recognized a net receivable of $54 million as of March 2026.
As a result, during Q1 2026, the company reduced cost of goods sold by approximately $49 million on a reported basis, representing the reversal of expense for IEEPA tariffs on inventory previously sold. Of the $49 million reduction in cost of goods sold, $29 million was related to tariffs expensed in 2025. On an adjusted basis, Kontoor has excluded the impact of the reversal of expense for 2025-related IEEPA tariffs on first quarter results and in the updated 2026 outlook.
The company’s outlook assumes a 15 percent reciprocal tariff rate on applicable inventory receipts for the remainder of the year. Kontoor added that is evaluating the impact of the United States and Bangladesh reciprocal trade framework. The company utilizes U.S. grown cotton in more than 80 percent of products sourced from Bangladesh which may qualify for a duty exemption under the trade framework.
Kontoor updated its full year 2026 outlook.
Revenue including the expected contribution from Lee is now anticipated to be in the range of $3.41 to $3.46 billion. The prior outlook range was $3.40 to $3.45 billion. Lee revenue is expected to approximate $750 million and is now reported in discontinued operations. Revenue from continuing operations is expected to be in the range of $2.66 to $2.71 billion.
Adjusted EPS including the expected contribution from Lee is now anticipated to be in the range of $6.60 to $6.70, compared to the prior outlook range of $6.40 to $6.50.
The Company’s Board of Directors also authorized a share repurchase program of up to $750 million of the Company’s common stock, replacing the existing program announced in 2023.
Baxter said the $750 million share repurchase program “reflects the confidence we have in our business moving forward and the opportunities to generate significant value from our sharper brand portfolio.”
