Lee sale discussions are gaining momentum as Kontoor Brands moves closer to reshaping its business around Wrangler and Helly Hansen after reporting stronger first-quarter results.
The apparel company confirmed that several interested parties are exploring a possible acquisition of Lee. Executives now expect a deal to happen before the end of the year. Kontoor has already listed Lee as a discontinued operation in its latest earnings report, a clear signal that the company sees the divestment as highly likely.
Lee generated $195 million in revenue during the first quarter. Still, Kontoor believes the denim brand no longer fits neatly within its long-term growth strategy. The move marks another major change for the portfolio that VF Corp. spun off in 2018.
Lee sale reflects Kontoor’s new direction
Kontoor’s first-quarter numbers showed stronger momentum without Lee included in continuing operations. Revenue from continuing operations climbed 45% year over year to $613 million. The figures also reflected the impact of Helly Hansen, which joined the company last year.
Wrangler remained the company’s strongest performer. Revenue at the denim label rose 4% to $436 million, reinforcing its importance to Kontoor’s future plans.
At the same time, profitability improved sharply. Gross margin from continuing operations expanded by 810 basis points to 53.7%, giving management more confidence as it simplifies the company’s structure.
Chief Executive Scott Baxter said the decision followed a detailed consumer study. According to Baxter, the company concluded that Lee sits outside Kontoor’s “strategic bullseye,” despite the progress made in improving the brand.
He added that Kontoor still has the operational strength to continue turning Lee around. However, management believes its resources can create stronger returns when focused on Wrangler and Helly Hansen.
Analysts surprised by timing of Lee sale
The announcement caught some analysts off guard because Kontoor had previously suggested Lee could return to growth later in 2026.
The company has also invested heavily in restructuring efforts, including its Project Jeanius initiative aimed at improving efficiency and profitability across the business.
BNP Paribas Equity Research analyst Laurent Vasilescu questioned why Kontoor would consider selling the brand after spending heavily on the turnaround effort.
Executives argued that Lee’s recent progress actually makes the brand more attractive to potential buyers. They believe the company can now secure stronger value from a sale because operational improvements are beginning to show results.
Kontoor also said proceeds from the deal would mainly support share buybacks and debt reduction. That approach suggests management wants to reward shareholders while also improving financial flexibility.
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Wrangler growth becomes central focus
As Kontoor prepares for a future without Lee, Wrangler is expected to play an even bigger role in the business.
UBS analysts led by Mauricio Serna said resources freed from the Lee sale could help expand Wrangler in areas where the brand remains underdeveloped. Those opportunities include women’s apparel and direct-to-consumer sales.
The analysts believe Wrangler could eventually become a middle-single-digit growth business if the company invests more aggressively behind the brand.
That possibility matters because Wrangler already holds a strong position in denim and Western-inspired fashion. Greater investment in digital channels and product expansion could help the label reach a broader audience.
Meanwhile, Kontoor continues to see long-term opportunity in Helly Hansen. The outdoor brand could benefit from wider distribution through Dick’s House of Sport stores, potentially increasing its visibility in the U.S. market.
Helly Hansen faces mixed expectations
Despite management’s optimism, not all analysts are convinced about Helly Hansen’s growth outlook.
In a follow-up note, Vasilescu argued that the brand has struggled to generate meaningful momentum in recent years. According to his estimates, Helly Hansen declined in fiscal 2024, recorded only low-single-digit growth in 2025 and failed to meet expectations during the latest quarter.
He also questioned whether Kontoor can realistically double Helly Hansen’s EBIT margin over time if revenue growth remains weak.
Even so, Kontoor believes a leaner portfolio will position the company more effectively for the future. By focusing on fewer brands, management hopes to sharpen execution, improve profitability and direct investment toward businesses with stronger long-term potential.
The strategy reflects a broader shift across the apparel sector. Many companies are reevaluating brand portfolios as consumer preferences change and competition intensifies.
VF Corp.’s decision to buy Supreme for more than $2 billion in 2020 before selling it less than four years later for $1.5 billion highlighted how quickly priorities can shift in the fashion industry.
Kontoor now faces a similar moment. Investors will closely watch whether the company can successfully complete the Lee sale while turning Wrangler and Helly Hansen into stronger long-term growth engines.
