money Kontoor CEO Scott Baxter on How VF Spin-off Set Lee and Wrangler Free
Fashion’s instant love of the next new thing — from the latest brand to the buzziest tech — comes with a big blindspot.
The tried and true is often forgotten or left behind.
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For Lee and Wrangler, it wasn’t so much a case of being left behind, instead they were dislodged from their longtime home at VF Corp. in a spin-off just over four years ago.
To listen to Scott Baxter, who navigated the two jeans businesses and their parent company Kontoor Brands Inc. through the spin-off and the pandemic, the split proved to be just what Lee and Wrangler needed.
“The brands had lost their ability to strike a chord with their consumer,” said Baxter, Kontoor’s chairman and chief executive officer, in an interview. “Everybody thought that we were being spun off because of that. And I think what we did, as an entire company is, we surprised everybody. We breathed new life into these brands globally. We brought these brands to new channels. We’ve brought in new categories — T-shirts, outdoor, workwear, women’s — and we’ve grown those categories under the Wrangler and Lee umbrellas.”
Baxter, who had overseen the businesses at VF, said that under the previous corporate structure, Lee and Wrangler were set up to be “cash cows” while newer additions Vans and The North Face were built up with investments.
“We were really far behind when we spun off,” Baxter said. “We hadn’t invested any money really in our e-commerce or DTC platforms.”
So the brands came into the pandemic in catch up mode and Baxter & Co. set about modernizing them — keeping the brands’ “authentic” Western vibes and heritage, but adding in snappier marketing, higher-end “halo” product and more digital savvy.
Those efforts are clear at Wrangler, the larger of the two brands with global revenues of $1.8 billion in 2022.
The Western-focused brand, which has skewed more male, has been reaching out in new ways. Last month, Wrangler signed on Lainey Wilson, the “Yellowstone” actress and Country Music Awards Female Vocalist of the Year, who will become the face of the brand for fall as part of a multiyear collaboration.
“Culturally, she might be the hottest artist in the world right now,” Baxter said. “Male, female, music, entertainment, it doesn’t matter. She’s on ‘Yellowstone,’ the number-one cable TV show. She’s got the number-one album.”
While Kontoor’s revenues between 2019 and 2022 rose just 3.2 percent to $2.6 billion, profitability has taken a turn for the better with the new approach. Adjusted earnings before interest, taxes, depreciation and amortization jumped 17.9 percent to $402 million as the debt load from the spin-off was also paid down.
Most of Kontoor’s business is wholesale through companies like Walmart, Kohl’s and Amazon, where customers are responding to new looks, such as jeans made of breathable stretch fabrics.
“We made the same product for so many years and put it into the same channel,” Baxter said. “We weren’t innovating. We were just making the same thing. We didn’t have budgets at the old company to innovate. We didn’t have budgets to advertise, but now we’ve got an innovation team that’s really doing some interesting things.
“We have a broader base of customers. We’re in more channels. We have a broader selection from a category standpoint. We have a more mature workforce. We’re expanding in digital and d-to-c,” he said.
It’s a transformation that Baxter said has created a kind of virtuous cycle.
“This takes cash,” the CEO said. “You have to be able to create and generate cash. Then you’ve got to start making those investments. So you’ve got to have a really solid plan and then you’ve got to hire the right people that can spend your cash and your shareholders’ cash in a really elegant way.”
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