Dive Brief:
- Lee — the iconic denim brand made famous by James Dean — is up for sale, and owner Kontoor Brands has already received significant interest, the company announced Thursday.
- The divestment will allow Kontoor to focus on what it calls its growth businesses – the Wrangler denim brand and Helly Hansen, the Norwegian outdoor apparel maker acquired last year for $957.5 million.
- Wrangler is poised to become a $5 billion brand by the 2030s, Kontoor CEO Scott Baxter told analysts, who were surprised by the move in part because of notable progress in Lee’s turnaround.
Dive Insight:
Kontoor has had multiple offers for Lee and is confident a deal will happen this year. In fact the company already designated Lee and its $195 million in Q1 revenue as discontinued operations in its earnings report, released Thursday.
Without Lee, the company’s Q1 revenue rose 45% year over year to $613 million, which includes the addition of Helly Hansen in Q2 last year. Wrangler’s revenue rose 4% to $436 million. Overall gross margin from continuing operations expanded by 810 basis points to 53.7%.
Proceeds from the sale will go mostly toward a share buyback and to pay down some debt, executives said. But the decision to offload the denim label came out of an extensive consumer study, Baxter said.
“Our learnings confirmed the Lee brand sits outside of our strategic bullseye,” he said. “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.”
The move is a further whittling down of a denim portfolio that was spun off by VF Corp. in 2018. VF went on to acquire cult brand Supreme for over $2 billion in 2020, only to sell it less than four years later for $1.5 billion.
Kontoor’s work to overhaul Lee has begun to bear fruit, and the announcement caught some analysts off guard.
“We are curious to understand this divesture considering that 1) [Kontoor] said Lee will return to growth in 2H26, and 2) they initiated a very expensive restructuring program called Project Jeanius,” BNP Paribas Equity Research senior analyst Laurent Vasilescu said in a Thursday client note.
Executives said the progress at Lee only makes the brand more attractive to potential suitors.
“This decision will allow us to sharpen our focus on the opportunities with the greatest potential to generate returns for our shareholders,” Baxter said. “We believe this will be a great outcome for Kontoor and the Lee business.”
UBS analysts led by Mauricio Serna believe momentum at Helly Hansen could accelerate thanks to planned distribution via Dick’s House of Sport stores. And resources freed up by the Lee divestment could boost “underpenetrated segments like women's and DTC” at Wrangler, which in turn could become a middle-single-digit growth business, they also said.
Without Lee, Kontoor “owns two powerful brands with significant [long-term] potential across several categories, channels, and geographies,” Serna said.
But in a follow-up note Friday, BNP Paribas’ Vasilescu quibbled with that, at least in terms of Helly Hansen’s potential, calculating that the brand declined in fiscal year 2024, grew in the low-single-digits in 2025 and failed to meet expectations for Q1 this year.
“In our view, HH was a no growth brand for the last few years and it is materializing again in 2026,” Vasilescu said. Kontoor “called out a path to double HH's EBIT margin overtime upon acquisition, but it seems increasingly implausible with a no growth brand.”
