Kontoor Brands, Inc.: Form 10-Q for the period ended Mar 29, 2025

Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide readers of our financial statements with a narrative from management's perspective on our financial condition, results of operations and liquidity as well as certain other factors that may affect our future results. This section should be read in conjunction with the Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q.

The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in “Cautionary Statement On Forward-Looking Statements” included later in Part I, Item 2 of this Quarterly Report on Form 10-Q, in Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q and in Part I, Item 1A "Risk Factors" in our 2024 Annual Report on Form 10-K.

Description of Business

Kontoor Brands, Inc. ("Kontoor," the "Company," "we," "us" or "our") is a global lifestyle apparel company headquartered in the United States ("U.S."). The Company designs, manufactures, procures, sells and licenses apparel, footwear and accessories, primarily under the brand names Wrangler® and Lee®. The Company's products are sold in the U.S. through mass merchants, specialty stores, department stores, company-operated stores and online, including digital marketplaces. The Company's products are also sold internationally, primarily in the Europe, Middle East and Africa ("EMEA"), Asia-Pacific ("APAC") and Non-U.S. Americas regions, through department stores, specialty stores, company-operated stores, concession retail stores, independently-operated partnership stores and online, including digital marketplaces.

Fiscal Year and Basis of Presentation

The Company operates and reports using a 52/53-week fiscal year ending on the Saturday closest to December 31 of each year. Accordingly, this Form 10-Q presents the first quarter of the Company's fiscal year ending January 3, 2026 ("fiscal 2025"), which is a 53-week fiscal year. For presentation purposes herein, all references to periods ended March 2025, December 2024 and March 2024 correspond to the fiscal periods ended March 29, 2025, December 28, 2024 and March 30, 2024, respectively.

References to fiscal 2025 foreign currency amounts herein reflect the impact of changes in foreign exchange rates from the prior year comparable period when translating foreign currencies into U.S. dollars. The Company's most significant foreign currency translation exposure is typically driven by business conducted in euro-based countries, the Chinese yuan and the Mexican peso. However, the Company conducts business in other developed and emerging markets around the world with exposure to other foreign currencies.

Amounts herein may not recalculate due to the use of unrounded numbers.

Macroeconomic Environment and Other Recent Developments

Global macroeconomic conditions that continued to impact the Company during the first quarter of 2025 included ongoing elevated interest rates, moderating inflation, fluctuating foreign currency exchange rates, supply chain issues and inconsistent consumer demand.

During 2025, the U.S. government enacted significant changes to its tariff regime which increased rates on virtually all imports. Certain foreign jurisdictions have responded with reciprocal tariffs which resulted in corresponding actions by the U.S. government. Certain of these tariffs have been paused or modified, and the uncertainty of tariff rates between jurisdictions is contributing to overall macroeconomic volatility and increasing recessionary concerns. The potential for additional tariff increases may continue to result in increased reciprocal tariffs or other restrictive trade measures by the U.S. or foreign jurisdictions. These factors continued to contribute to uncertain global economic conditions and consumer spending patterns, which impacted retailers' and the Company's operations.

Inflationary pressures have moderated in recent quarters, and although these pressures continue to impact us, current period results reflect continued favorability from lower product costs compared to the first quarter of 2024. Retailers continued to conservatively manage inventory levels as a result of this uncertain macroeconomic environment, which impacted our results during the first quarter of 2025. The Company has responded to ongoing macroeconomic conditions by controlling expenses and proactively managing our global supply chain.

In connection with the recently enacted U.S. tariff regime discussed above, the Company continues to evaluate potential mitigating actions including transferring production within our global supply chain, proactively managing our mix of internally manufactured versus sourced goods, pricing adjustments and other initiatives. While we anticipate continued uncertainty related to the macroeconomic environment during 2025, including the impact of tariff increases on product costs, we believe we are appropriately positioned to successfully manage through operational challenges that may arise. We continue to closely monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand.

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Business Overview

We continue to execute on our strategic vision which focuses on four growth vectors: (i) expansion of our core U.S. Wholesale business, (ii) category extensions such as outdoor, workwear and tops, (iii) geographic expansion of our Wrangler® and Lee® brands and (iv) channel expansion focused on the digital platforms in our U.S. Wholesale and Direct-to-Consumer channels. We are focused on driving brand growth and delivering long-term value to our stakeholders including our consumers, customers, shareholders, suppliers and communities around the world.

In addition, our capital allocation strategy allows us the option to (i) invest in our business, (ii) pay down debt, (iii) provide for a superior dividend payout, (iv) effectively manage our share repurchase authorization and (v) act on strategic acquisition opportunities that may arise.

On February 18, 2025, the Company entered into a definitive agreement to acquire the global outdoor and workwear brand Helly Hansen (the "Helly Hansen Acquisition"), for a purchase price of $1.276 billion Canadian dollars ("CAD") (or approximately $900 million based on the foreign currency exchange rate in effect as of the agreement date), subject to working capital and other closing adjustments. On February 19, 2025, the Company entered into foreign currency exchange contracts totaling $1.275 billion CAD to hedge the purchase price. The Company anticipates funding the purchase price using excess cash on hand and borrowings under the Company's Credit Facility, which was refinanced on April 8, 2025, in anticipation of the Helly Hansen Acquisition (as discussed further in Note 8 to the Company's financial statements in this Form 10-Q). The Company has received all required regulatory approvals related to the Helly Hansen Acquisition, which is expected to close in the second quarter of 2025, subject to customary closing conditions.

During the first quarter of 2025, the Company incurred acquisition-related costs of $19.2 million associated with the Helly Hansen Acquisition, comprised of $10.3 million of professional and other fees and $8.9 million of losses related to foreign currency exchange contracts to hedge the purchase price, which are reflected in the Company's statements of operations within "selling, general and administrative expenses" and "other expense, net," respectively. We expect to incur additional acquisition-related costs associated with the Helly Hansen Acquisition in future periods.

During the first quarter of 2025, the Company incurred restructuring and transformation charges of $12.5 million, of which $3.3 million relates to costs associated with exit or disposal activities as disclosed in Note 15 to the Company's financial statements in this Form 10-Q. Restructuring and transformation charges included $11.6 million related to business optimization activities associated with the continued execution of Project Jeanius and $0.9 million related to streamlining and transferring select production within our internal manufacturing network. Project Jeanius is a comprehensive end-to-end business model transformation with the goal of creating significant investment capacity through gross and operating margin expansion, and we anticipate continued transformation costs associated with Project Jeanius as we execute on this multi-year initiative, which is expected to drive benefits in cost of goods sold and selling, general and administrative expenses.

FIRST QUARTER OF FISCAL 2025 SUMMARY

• Net revenues decreased 1% to $622.9 million compared to the three months ended March 2024.
• U.S. Wholesale revenues decreased 1% compared to the three months ended March 2024, and represented 72% of total revenues in the current period.
• Non-U.S. Wholesale revenues decreased 8% compared to the three months ended March 2024, and represented 16% of total revenues in the current period.
• Direct-to-Consumer revenues increased 5% compared to the three months ended March 2024, and represented 12% of total revenues in the current period.
• Gross margin increased 230 basis points to 47.5% compared to the three months ended March 2024.
• Selling, general and administrative expenses as a percentage of net revenues increased to 35.7% compared to 31.8% for the three months ended March 2024, and included $21.5 million of acquisition-related, restructuring and transformation charges.
• Operating income decreased 13% to $73.3 million compared to the three months ended March 2024.
• Other expense, net was $11.0 million in the first quarter, compared to $2.9 million in the same period last year, and included $8.9 million of losses related to the purchase price hedge for the Helly Hansen Acquisition.
• Net income decreased 28% to $42.9 million compared to the three months ended March 2024.
• Diluted earnings per share was $0.76 in the first quarter, compared to $1.05 in the same period last year.
• Cash provided by operating activities was $77.6 million as compared to $56.5 million in the same period last year.

ANALYSIS OF RESULTS OF OPERATIONS

Consolidated Statements of Operations

The following table presents components of the Company's statements of operations:

(Dollars in thousands)

Additionally, the following table presents a summary of the changes in net revenues for the three months ended March 2025 as compared to March 2024:

(In millions)

Three Months Ended March 2025 Compared to the Three Months Ended March 2024

Net revenues decreased 1%, driven by an 8% decrease in Non-U.S. Wholesale revenues including a 4% unfavorable impact from foreign currency and lower sales in Mexico and EMEA. U.S. Wholesale revenues decreased 1%, driven predominantly by a timing shift in revenue from seasonal product, partially offset by category growth and an increase in our digital wholesale business. Global Direct-to-Consumer revenues increased 5% due to growth in e-commerce sales in the U.S.

Additional details on changes in net revenues for the three months ended March 2025 as compared to March 2024 are provided in the section titled “Information by Business Segment.”

Gross margin increased 230 basis points, primarily related to 150 basis points from lower product costs and favorable product and channel mix, 80 basis points of favorability due to the benefits of Project Jeanius and 30 basis points of favorability from a decrease in restructuring and transformation charges. These benefits were partially offset by 30 basis points from lower pricing.

Selling, general and administrative expenses increased $21.6 million, from 31.8% to 35.7% of net revenues, driven by $10.3 million of acquisition-related costs, an $8.7 million increase in incentive compensation expense, a $6.1 million increase in restructuring and transformation charges and a $2.2 million increase in demand creation investments.

Other expense, net increased $8.1 million, driven by $8.9 million of losses related to foreign currency exchange contracts to hedge the purchase price of the Helly Hansen Acquisition.

The effective income tax rate for the three months ended March 2025 was 23.3% compared to 20.3% in the 2024 period. The three months ended March 2025 included a net discrete tax expense primarily related to an increase in valuation allowances in a foreign jurisdiction, partially offset by a discrete tax benefit related to stock-based compensation, the net impact of which increased the effective income tax rate by 1.9%. The three months ended March 2024 included a net discrete tax benefit primarily related to stock-based compensation which decreased the effective income tax rate by 1.0%. The effective tax rate without discrete items for the three months ended March 2025 was 21.4% compared to 21.3% in the 2024 period. The increase was primarily due to changes in our jurisdictional mix of earnings.

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Information by Business Segment

The Company's two reportable segments are Wrangler® and Lee®. Refer to Note 4 to the Company's financial statements in this Form 10-Q for additional information.

The following tables present a summary of the changes in segment revenues and segment profit for the three months ended March 2025 as compared to the three months ended March 2024:

Segment Revenues:

(In millions)

Segment Profit:

(In millions)

The following sections discuss the changes in segment revenues and segment profit.

Wrangler

(Dollars in millions)

Three Months Ended March 2025 Compared to the Three Months Ended March 2024

Global revenues for the Wrangler® brand increased 3%, due to growth in all channels.

• Revenues in the Americas region increased 3%, primarily due to growth in the U.S. Wholesale channel and our U.S. direct-to-consumer business, partially offset by lower sales in Mexico. Growth in U.S. Wholesale was driven by category growth and an increase in our digital wholesale business, partially offset by a decrease in wholesale shipments. Growth in our U.S. direct-to-consumer business was primarily driven by higher e-commerce sales.
• Revenues in the EMEA region were flat, with growth in our wholesale business offset by a 2% unfavorable impact from foreign currency and a decline in our direct-to-consumer business.
• Revenues in the APAC region increased slightly.

Operating margin increased to 20.7%, compared to 18.2% for the 2024 period, driven by lower product costs, favorable product and channel mix, benefits from Project Jeanius and a decrease in restructuring and transformation charges, partially offset by higher investments in demand creation and lower pricing.

Lee

(Dollars in millions)

Three Months Ended March 2025 Compared to the Three Months Ended March 2024

Global revenues for the Lee® brand decreased 9%, due to declines in the U.S. Wholesale and Non-U.S. Wholesale channels, partially offset by growth in the Direct-to-Consumer channel.

• Revenues in the Americas region decreased 10%, driven by a decline in the U.S. Wholesale channel and our non-U.S. wholesale business. The decrease in the U.S. Wholesale channel was due to lower wholesale shipments, partially offset by an increase in our digital wholesale business. The decline in our non-U.S. wholesale business was due to lower sales in Mexico.
• Revenues in the APAC region decreased 5%, due to a decrease in wholesale revenues in China.
• Revenues in the EMEA region decreased 7%, attributable to a decline in our wholesale business and a 2% unfavorable impact from foreign currency.

Operating margin increased to 16.2%, compared to 16.0% for the 2024 period, primarily attributable to lower product costs and benefits from Project Jeanius, partially offset by deleverage of fixed expenses on lower revenues.

Other

In addition, we report an "Other" category to reconcile the Company's segment revenues to total revenues and segment profit to income before income taxes, but the Other category does not meet the criteria to be considered a reportable segment. Other includes sales and licensing of Chic®, Rock & Republic®, other company-owned brands and private label apparel, and the associated costs.

(Dollars in millions)

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Reconciliation of Segment Profit to Income Before Income Taxes

The costs below are necessary to reconcile segment profit to income before income taxes. Corporate and other expenses, including certain acquisition-related costs, restructuring and transformation costs and interest income and expense are not controlled by segment management and therefore are excluded from the measurement of segment profit.

(Dollars in millions)

Three Months Ended March 2025 Compared to the Three Months Ended March 2024

Corporate and other expenses increased $28.7 million, primarily due to acquisition-related costs during the three months ended March 2025 and increases in incentive compensation expense and restructuring and transformation charges compared to the prior period.

Interest expense increased $0.5 million during the three months ended March 2025 compared to the three months ended March 2024, driven by higher effective interest rates due to lower notional amounts of swap agreements, partially offset by the effect of lower average borrowing rates and lower debt outstanding.

ANALYSIS OF FINANCIAL CONDITION

Liquidity and Capital Resources

The Company's ability to fund our operating needs is dependent upon our ability to generate positive long-term cash flows from operations and maintain our debt financing on acceptable terms. The Company has historically generated strong positive cash flows from operations and continues to take proactive measures to manage working capital. We believe cash flows from operations will support our short-term liquidity needs as well as any future liquidity and capital requirements, in combination with available cash balances and borrowing capacity from our revolving credit facility.

Credit Availability

At March 2025, the Company had $19.3 million of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either the Company or the banks. There were no outstanding balances under these arrangements at March 2025.

At March 2025, the Company was party to a senior secured Credit Agreement, as amended and restated on November 18, 2021 (the “Credit Agreement”), which provided for (i) a five-year $400.0 million term loan A facility (“Term Loan A”) and (ii) a five-year $500.0 million revolving credit facility (the “Revolving Credit Facility”), collectively referred to as “Credit Facilities,” with the lenders and agents party thereto.

The Revolving Credit Facility could be used to borrow funds in both U.S. dollar and certain non-U.S. dollar currencies, and had a maximum borrowing capacity of $500.0 million with a $75.0 million letter of credit sublimit. There were no outstanding borrowings under the Revolving Credit Facility as of March 2025.

The following table presents outstanding borrowings and available borrowing capacity under the Revolving Credit Facility and our cash and cash equivalents balances as of March 2025:

(In millions)

(1) Available borrowing capacity under the Revolving Credit Facility is net of $6.5 million of outstanding standby letters of credit issued on behalf of the Company under this facility.

Refinancing of Credit Facilities Subsequent to Quarter-End

On April 8, 2025, the Company completed a refinancing pursuant to which it amended and restated its Credit Agreement to provide for (i) a five-year $700.0 million term loan A facility (the "2025 Term Loan A-1") consisting of a $340.0 million initial term loan (the "2025 Initial Term Loan") and a $360.0 million delayed draw term loan (the "Delayed Draw Term Loan"), (ii) a three-year $300.0 million delayed draw term loan A facility (the "2025 Term Loan A-2") and (iii) a five-year $500.0 million revolving credit facility (the "2025 Revolving Credit Facility"), collectively referred to as the "2025 Credit Facilities," with the lenders and agents party thereto. Upon closing, the net proceeds from the 2025 Initial Term Loan were used to repay all of the $340.0 million principal amount outstanding under Term Loan A. The Delayed Draw Term Loan and the 2025 Term Loan A-2 may be drawn on or before September 18, 2025, to fund the Helly Hansen Acquisition.

The 2025 Term Loan A-1 is scheduled to be repaid in quarterly installments beginning in September 2026 at a rate of 0.625% of the total loan amount and increasing to a rate of 1.25% of the total loan amount beginning in September 2027, with the remaining principal due at maturity. The 2025 Term Loan A-2 is scheduled to be repaid in full at maturity.

As of March 2025, the Company was in compliance with all applicable covenants under the Credit Agreement and expects to maintain compliance with the applicable 2025 Credit Agreement covenants for at least one year from the issuance of these financial statements. If economic conditions significantly deteriorate for a prolonged period, or the Company experiences long-term challenges integrating and operating the Helly Hansen Acquisition, or meeting the resulting incremental debt service requirements, this could impact the Company’s operating results and cash flows and thus our ability to maintain compliance with the applicable covenants. As a result, the Company could be required to seek new amendments to the Credit Agreement or secure other sources of liquidity, such as refinancing of existing borrowings, the issuance of debt or equity securities, or sales of assets. However, there can be no assurance that the Company would be able to obtain such additional financing on commercially reasonable terms or at all.

Senior Notes

Additionally, the Company has outstanding $400.0 million of unsecured 4.125% senior notes due 2029.

Refer to Note 10 to the Company's financial statements in this Form 10-Q for additional information related to the Company's "floating to fixed" interest rate swap agreements. Refer to Note 11 in the Company's 2024 Annual Report on Form 10-K and Note 8 to the Company's financial statements in this Form 10-Q for additional information regarding the Company’s debt obligations.

Other Liquidity Considerations

During the three months ended March 2025, the Company did not repurchase any shares of Common Stock under its share repurchase program authorized by the Company's Board of Directors. Of the $300.0 million authorized for repurchase under the share repurchase program, $215.0 million remained available for repurchase as of March 2025.

During the three months ended March 2025, the Company paid $28.8 million of dividends to its shareholders. On April 16, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.52 per share of the Company's Common Stock. The cash dividend will be payable on June 20, 2025, to shareholders of record at the close of business on June 10, 2025.

The Company intends to continue to pay cash dividends in future periods. The declaration and amount of any future dividends will be dependent upon multiple factors including our financial condition, earnings, cash flows, capital requirements, covenants associated with our debt obligations, legal requirements, regulatory constraints, industry practice and any other factors or considerations that our Board of Directors deems relevant.

The Company expects to complete the Helly Hansen Acquisition in the second quarter of 2025. The Company anticipates funding the $1.276 billion CAD purchase price using excess cash on hand and borrowings under the Company's Credit Facility, and will also settle the associated purchase price hedge at closing.

As discussed above, the Company refinanced its Credit Facility on April 8, 2025, in anticipation of the Helly Hansen Acquisition.

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We anticipate that we will have sufficient cash flows from operations, along with existing borrowing capacity, to support continued investments in our brands, infrastructure, talent and capabilities, dividend payments to shareholders, repayment of our debt obligations when due and repurchases of Common Stock. In addition, we would use current liquidity as well as access to capital markets to fund any additional strategic acquisition opportunities that may arise.

We currently expect capital expenditures to be approximately $30.0 million in 2025, primarily to support manufacturing, distribution, facility improvement, information technology and owned retail store investments.

The following table presents our cash flows during the periods:

(In millions)

Operating Activities

During the three months ended March 2025, cash provided by operating activities was $77.6 million as compared to $56.5 million in the prior year period. The increase was primarily due to favorable changes in accounts receivable and accounts payable, partially offset by unfavorable changes in inventories, net income and accrued and other current liabilities.

Investing Activities

During the three months ended March 2025, cash used by investing activities was $4.8 million as compared to $6.4 million in the prior year period, primarily due to decreases in property, plant and equipment expenditures in the current year period.

Financing Activities

During the three months ended March 2025, cash used by financing activities was $37.9 million as compared to $54.6 million in the prior year period. The decrease was primarily due to $20.0 million of Common Stock repurchases made by the Company during the three months ended March 2024 compared to no Common Stock repurchases during the three months ended March 2025.

Contractual Obligations and Other Commercial Commitments

The section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations" included in the Company's 2024 Annual Report on Form 10-K provided a summary of our contractual obligations and commercial commitments at the end of 2024 that would require the use of funds. As of March 2025, there have been no material changes in the amounts disclosed in the 2024 Annual Report on Form 10-K, except as noted below:

• Definitive agreement related to the Helly Hansen Acquisition for $1.276 billion CAD or approximately $900 million as of the agreement date.

Critical Accounting Policies and Estimates

We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with GAAP. We apply these accounting policies in a consistent manner. Significant accounting policies are summarized in Note 1 to the consolidated financial statements included in the 2024 Annual Report on Form 10-K.

The application of these accounting policies requires that we make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, net revenues, expenses, contingent assets and liabilities and related disclosures. These estimates, assumptions and judgments are based on historical experience, current trends and other factors believed to be reasonable under the circumstances. Management evaluates these estimates and assumptions on an ongoing basis. Because our business cycle is relatively short (i.e., from the date that inventory is received until that inventory is sold and the trade accounts receivable is collected), actual results related to most estimates are known within a few months after any balance sheet date. Several of the estimates and assumptions we are required to make relate to future events and are therefore inherently uncertain, especially as it relates to events outside of our control. If actual results ultimately differ from previous estimates, the revisions are included in results of operations when the actual amounts become known. Refer to Note 1 to the Company's financial statements in this Form 10-Q for considerations related to the macroeconomic environment and other recent developments.

The accounting policies that involve the most significant estimates, assumptions and management judgments used in preparation of the financial statements, or are the most sensitive to change from outside factors, are discussed within "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in the 2024 Annual Report on Form 10-K. There have been no material changes in these policies disclosed in the 2024 Annual Report on Form 10-K.

Recently Issued and Adopted Accounting Standards

Refer to Note 1 to the Company's financial statements in this Form 10-Q for additional information regarding recently issued and adopted accounting standards.

Cautionary Statement on Forward-looking Statements

From time to time, the Company may make oral or written statements, including statements in this quarterly report, that constitute “forward-looking statements” within the meaning of the federal securities laws. These include statements concerning plans, objectives, projections and expectations relating to the Company’s operations or economic performance and assumptions related thereto. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. Forward-looking statements are not guarantees, and actual results could differ materially from those expressed or implied in the forward-looking statements. In addition, the forward-looking statements in this report are made as of the date of this filing, and the Company does not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.

Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this report include, but are not limited to: macroeconomic conditions, including elevated interest rates, moderating inflation, fluctuating foreign currency exchange rates, global supply chain issues and inconsistent consumer demand, continue to adversely impact global economic conditions and have had, and may continue to have, a negative impact on the Company’s business, results of operations, financial condition and cash flows (including future uncertain impacts); the level of consumer demand for apparel; reliance on a small number of large customers; potential difficulty in completing the acquisition of Helly Hansen, in successfully integrating it and/or in achieving the expected growth, cost savings and/or synergies from such acquisition; supply chain and shipping disruptions, which could continue to result in shipping delays, an increase in transportation costs and increased product costs or lost sales; intense industry competition; the ability to accurately forecast demand for products; the Company’s ability to gauge consumer preferences and product trends, and to respond to constantly changing markets; the Company’s ability to maintain the images of its brands; changes to trade policy, including tariffs, reciprocal tariffs and import/export regulations; disruption and volatility in the global capital and credit markets and its impact on the Company's ability to obtain short-term or long-term financing on favorable terms; the Company maintaining satisfactory credit ratings; restrictions on the Company’s business relating to its debt obligations; increasing pressure on margins; e-commerce operations through the Company’s direct-to-consumer business; the financial difficulty experienced by the retail industry; possible goodwill and other asset impairment; the ability to implement the Company’s business strategy; the stability of manufacturing facilities and foreign suppliers; fluctuations in wage rates and the price, availability and quality of raw materials and contracted products, including as a result of tariffs and reciprocal tariffs; the reliance on a limited number of suppliers for raw material sourcing and the ability to obtain raw materials on a timely basis or in sufficient quantity or quality; disruption to distribution systems; seasonality; unseasonal or severe weather conditions; potential challenges with the Company's implementation of Project Jeanius; the Company's and its vendors’ ability to maintain the strength and security of information technology systems; the risk that facilities and systems and those of third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss or maintain operational performance; ability to properly collect, use, manage and secure consumer and employee data; legal, regulatory, political and economic risks; the impact of climate change and related legislative and regulatory responses; stakeholder response to sustainability issues, including those related to climate change; compliance with anti-bribery, anti-corruption and anti-money laundering laws by the Company and third-party suppliers and manufacturers; changes in tax laws and liabilities; the costs of compliance with or the violation of national, state and local laws and regulations for environmental, consumer protection, employment, privacy, safety and other matters; continuity of members of management; labor relations; the ability to protect trademarks and other intellectual property rights; the ability of the Company’s licensees to generate expected sales and maintain the value of the Company’s brands; volatility in the price and trading volume of the Company’s common stock; anti-takeover provisions in the Company’s organizational documents; and fluctuations in the amount and frequency of our share repurchases. Many of the foregoing risks and uncertainties will be exacerbated by any worsening of the global business and economic environment.

More information on potential factors that could affect the Company's financial results are described in detail in the Company’s 2024 Annual Report on Form 10-K and in other reports and statements that the Company files with the Securities and Exchange Commission ("SEC").

There have been no material changes in the Company's market risk exposures set forth under Item 7A in our 2024 Annual Report on Form 10-K.

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(a) Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")). Based on such evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

(b) Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 29, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Careful consideration of the risk factors set forth under Part I, Item 1A, “Risk Factors,” of our 2024 Annual Report on Form 10-K should be made. There have been no material changes to the risk factors from those disclosed in Part I, Item 1A of our 2024 Annual Report on Form 10-K.