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Kontoor Brands, Inc. (KTB) Q4 2022 Earnings Call Transcript

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Kontoor Brands, Inc. (NYSE:KTB) Q4 2022 Earnings Conference Call February 28, 2023 8:30 AM ET

Company Participants

Eric Tracy - Vice President, Corporate Finance & Investor Relations

Scott Baxter - President, Chief Executive Officer & Chair

Tom Waldron - Co-Chief Operating Officer & Global Brand President, Wrangler

Chris Waldeck - Co-Chief Operating Officer & Global Brand President, Lee

Rustin Welton - Chief Financial Officer

Conference Call Participants

Jay Sole - UBS

Bob Drbul - Guggenheim

Will Gardner - Wells Fargo

Brooke Roach - Goldman Sachs

Sam Poser - Williams Trading

Jim Duffy - Stifel

Operator

Greetings, and invited to nan Kontoor Brands’ Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. At this time, each participants are successful a listen-only mode. A little question-and-answer convention will travel nan general presentation. [Operator Instructions] As a reminder, this convention is being recorded.

It is now my pleasance to present your host, Eric Tracy, Vice President, Corporate Finance and Investor Relations. Thank you, Eric. You whitethorn begin.

Eric Tracy

Thank you, usability and invited to Kontoor Brands' 4th fourth and fiscal twelvemonth 2022 net convention call. Participants connected today’s telephone will make forward-looking statements. These statements are based connected existent expectations and are taxable to uncertainties that could origin existent results to materially differ. These uncertainties are elaborate successful documents revenge pinch nan SEC. We impulse you to publication our consequence factors, cautionary language, and different disclosures contained successful those reports.

Select comparisons to 2021 results will beryllium connected an adjusted ground and successful definite cases, we will make comparisons to 2019 adjusted results. Reconciliations of GAAP measures to adjusted amounts tin beryllium recovered connected nan supplemental financial tables included successful nan news merchandise that was issued early this greeting and is disposable connected our website astatine kontoorbrands.com. These tables place and quantify excluded items and supply management’s position of why this accusation is useful to investors. Comparisons will beryllium successful changeless currency, unless different stated pinch nan objection of comparisons to nan 2019 period.

Joining maine connected today’s telephone are Kontoor Brands’ President, Chief Executive Officer and Chair, Scott Baxter and Chief Financial Officer, Rustin Welton. In addition, we will besides beryllium joined by Tom Waldron, Co-Chief Operating Officer and Global Brand President of Wrangler; and Chris Waldeck, Co-Chief Operating Officer and Global Brand President of Lee. Following our prepared remarks, we will unfastened nan telephone for questions. We expect this telephone will past astir an hour. Scott?

Scott Baxter

Thanks, Eric, and convey you each for joining america today. As Eric mentioned, Tom and Chris will beryllium joining america arsenic accustomed for this year-end review. We judge these year-end calls supply a awesome opportunity to person them stock insights from nan past year, arsenic good arsenic go-forward strategies for each of their respective brands and functional areas. You'll perceive much from them successful a bit.

Let maine first supply immoderate thoughts astatine a Kontoor level, arsenic I'm pleased to stock our beardown results for nan 4th fourth arsenic I've been much excited to talk our unthinkable opportunities ahead. As we statesman 2023 from a position of strength, while we expect macroeconomic challenges to persist, our results spend america awesome impervious points that erstwhile we execute connected our playbook, each of our cardinal stakeholders win.

Beginning pinch immoderate highlights from nan 4th fourth and afloat twelvemonth 2022, successful Q4, world Kontoor gross grew 9%, well-above our soul forecast arsenic shipments successful nan US accelerated, augmented by continued stock gains successful AUR growth, and profitability successful nan 4th was outstanding pinch adjusted operating income expanding 19%.

Despite nan important macro pressures during 2022, erstwhile we were capable to present different twelvemonth of patient maturation pinch gross expanding precocious azygous digits, and we returned a full of $166 cardinal to shareholders done a operation of dividend payouts, which you will recall, we accrued past quarter, arsenic good arsenic stock repurchases.

And stepping backmost a bit, we deliberation it's important to note, comparative to pre-pandemic 2019 levels during 2022, we were capable to turn gross mid-single digits aliases double-digit growth, excluding proactive actions to exit our DFO fleet and little value points of distribution, grow reported gross separator 230 ground points compared to adjusted 2019 gross margin, moreover pinch nan impacts of inflation, proviso concatenation challenges, retailer inventory rebalancing and COVID lockdowns successful China.

And finally, we've grown adjusted net 17% complete 2019. These results are a nonstop usability of our catalyzed maturation strategies we laid retired astatine our past Investor Day. Let maine punctual everyone of these attraction areas and immoderate awesome impervious points for really we are tracking.

First, enhancing our halfway US denim business. In 2022, our US business grew 11%, again, pinch broad-based spot and stock gains. Second, diversifying our categories pinch description crossed outdoor activity and tees. During nan year, our non-denim business grew 13% and now stands astatine 38% of our world mix.

Third, amplifying nan relationship to our consumers done transmission description , focused connected integer and much precocious owned retail. In 2022, world integer owned.com grew 17%, and gross successful this important maturation conveyance has doubled since 2019.

And lastly, driving accretive maturation geographically, broadening our scope beyond home orders. Excluding China, world markets grew 7% successful 2022. Rustin will spell done our afloat twelvemonth '23 guidance successful much item successful a bit, but continued execution of these strategies will beryllium captious successful driving this year's performance. Even arsenic we assume, macro challenges will measurement connected user request passim 2023. And we want to prudently relationship for this successful our afloat twelvemonth guide. I'm excited that our home US stock and AUR gains person continued present successful nan first quarter.

As you would expect, we've seen immoderate lag successful wholesale shipments comparative to nan coagulated sell-through, arsenic retailers normalize their bid patterns, and we person factored that into our plans accordingly. But nan operation of beardown quarter-to-date POS, coupled pinch robust gains successful our ain D2C, pinch US comps up 20% year-to-date, gives america assurance that nan Wrangler and Lee brands are patient and good positioned successful nan marketplace, arsenic we statesman 2023.

In addition, I would note, we expect these affirmative US trends to beryllium somewhat subdued by near-term softness successful nan world markets, peculiarly China. Chris and Rustin will touch connected this later. But nan wide patient basal performance, coupled pinch nan important actions taken complete nan past respective years to fortify our equilibrium expanse and heighten our superior structure, supply america accrued elasticity to present successful nan look of uneven conditions. This is reflected successful our beardown returns to shareholders, totaling $455 cardinal since becoming a publically traded company.

And while nan individual components of our basal outlook whitethorn disagree a spot from nan semipermanent targets we laid retired astatine our Investor Day backmost successful May of '21, I'm pleased to stock that 2022 gross and net came successful up of those strategical targets, contempt nan incremental impacts from 40-year ostentation highs, monolithic proviso concatenation disruptions and important location lockdowns owed to COVID. These operational results are a testament to nan unthinkable efforts of our astonishing colleagues that I'm fortunate to partner pinch each day.

I want to adjacent by thanking each and each 1 of our group astir nan world for their ability, perseverance and dedication to Kontoor, some successful navigating nan adjacent word and successful mounting nan instauration for our early success. This committedness to excellence inspires maine and gives maine assurance that we tin proceed to output superior returns for each KTV stakeholders.

Tom?

Tom Waldron

Thanks, Scott, and hullo to everyone joining america connected nan telephone today. I want to echo Scott's comments successful thanking our teams crossed nan organization. Wrangler's 4th fourth and 2022 results are because of nan bonzer efforts passim nan year.

Before I get to our Wrangler results, fto maine stock immoderate thoughts from my spot arsenic Co-COO, specifically successful starring our proviso concatenation platform. We cognize proviso concatenation and, successful particular, inventory guidance is connected everyone's mind, truthful I'd for illustration to supply immoderate perspective.

Kontoor, akin to astir of nan apparel industry, knowledgeable world proviso concatenation disruptions into 2022, including important unit inventory rebalancing affecting our operations, pinch nan astir pronounced effect occurring successful nan 3rd quarter.

These actions, mixed pinch costs ostentation and improved lead times connected originated goods, has led to higher inventory dollars to extremity nan year. Rustin will return you done nan numbers, but fto maine supply immoderate discourse connected really we are addressing nan elevated inventory position.

As we person discussed past quarter, we person flexed our soul manufacturing, arsenic good arsenic adjusted receipts connected originated equipment to right-size our inventory position successful a profitable manner. While this accumulation downtime impacted Q4 gross margins, and we expect we'll proceed to measurement connected margins successful nan first half of 2023, we judge these actions are nan correct ones successful preserving semipermanent marque health.

Importantly, we stay connected way to spot much normalized inventory levels by mid-2023. No doubt, location is overmuch activity to beryllium done here, but I'm assured we are executing nan correct scheme to optimize our inventory position successful a prudent and profitable mode arsenic we move done nan year.

Let maine now move to talk 4th fourth and afloat twelvemonth highlights for nan Wrangler brand. I couldn't beryllium prouder of nan team's accomplishments during 2022, our 75th day year, which saw a multitude of successes, culminating successful our largest 4th fourth ever. And for nan first time, nan marque knowledgeable a 4th pinch gross supra $500 million.

Revenue grew 16% globally successful nan 4th and 19% successful nan US our largest market, pinch a patient equilibrium crossed categories and channels. In our core, we proceed to thrust stock gains successful nan 4th pinch Wrangler men's bottoms outpacing nan US marketplace by 160 ground points and our largest competitor by astir 500 ground points according to NPD. These gains were erstwhile again led by continued AUR momentum, up 8% successful nan quarter. And this beardown sell-through and stock momentum only improved arsenic we move done nan year.

From a class perspective, 4th fourth income of outdoor, workwear and teas were up astir 20%. And erstwhile again, our ain integer led our 4th capacity pinch world wrangler.com, up 18% successful Q4, sequentially improving from Q3.

And looking astatine highlights for nan afloat year, Wrangler marque capacity during 2022 demonstrates our committedness to diversified accretive maturation crossed categories, channels and geographies, each while enhancing our halfway business.

Full twelvemonth Wrangler gross accrued 12% globally and was up 13% successful nan US. And while we proceed to thrust stock gains successful our halfway US denim business, I americium excited astir nan advancement we've made successful our diversified strategies.

Within categories, tops and non-denim bottoms now relationship for complete 40% of Wrangler's business, driven by a 12% CAGR since 2019. And from a transmission perspective, we are intelligibly still driving maturation successful wholesale, but integer has importantly outpaced pinch some integer wholesale increasing astatine a 31% CAGR and wrangler.com expanding astatine a 37% CAGR since 2019.

The improvement of our merchandise innovations wrong outdoor, including our capacity ATG statement arsenic good arsenic workwear, female tees and Western Specialty mixed to springiness america a greater support to play successful different categories and channels of distribution and scope caller consumers for illustration ne'er before.

Internationally, and Chris will supply much detail, clearly, COVID impacted our results, particularly, successful ramping of nan Wrangler marque successful China. But nan opportunity for accretive maturation internationally remains important for nan brand. In summation to nan investments we've made successful merchandise creation and innovation, we've besides amplified our request creation efforts.

2022 saw america germinate our unthinkable partnerships pinch marque ambassadors, Leon Bridges and Georgia May Jagger and build retired authentic brand-enhancing collab pinch Yellowstone, Fender and Billabong arsenic good arsenic sponsorships of euphony events specified arsenic Lollapalooza successful nan US and Berlin, and Austin City Limits.

And our pipeline of merchandise class extensions, innovations and caller request creation platforms gives maine awesome assurance that our investments will support continued momentum for nan Wrangler brand.

Perfect examples of this see caller highly elevated, but still authentic partnerships pinch premium brands specified arsenic Buffalo Trace, Pendleton and Lacase [ph]. The collaboration pinch Lacase showcases a caller postulation of Wrangler premium denim pinch AURs approaching $500. Stay tuned for much Wrangler marque activation events successful nan twelvemonth to come.

As you tin see, Wrangler has begun 2023 from a position of strength. Our strategical investments let america to not only participate successful movements, but much importantly, create and lead them.

I'll now move it complete to Chris.

Chris Waldeck

Thanks, Tom. Lee US 2023 was important momentum successful enhanced marque equity, matched by a tremendous world maturation opportunity long-term. Our strategies are opening to unlock nan brand's existent imaginable arsenic we proceed to build connected lease premium world positioning, while amplifying investments successful creation and request creation, bringing caller consumers into nan marque and opening elevated points of distribution, including our ain D2C, which I will touch connected successful a bit.

Before I talk nan spell forward, fto maine first stock immoderate of Lee's Q4 and 2022 results. In nan 4th quarter, globally gross declined 3%, pinch spot successful nan US offset by challenges successful world markets. Excluding China, Lee world gross was up 2% versus anterior year.

In nan US, Lee grew 5%, led by integer pinch lee.com, up 11%. Internationally, nan Lee marque was down 13% during nan quarter, chiefly driven by COVID lockdowns and restrictions successful China. I'll supply much position connected China successful a minute.

Importantly, AURs successful Q4 were up 9%, a nonstop usability of our continued finance successful value of sales, enhanced merchandise and operation shifts. And we are seeing sequential betterment travel done successful nan NPD marketplace stock data, highlighted by Lee women's, which grew important stock successful Q4, outpacing nan marketplace and our largest competitor by 80 ground points.

Turning to nan afloat year. Globally, gross accrued 1%. Excluding China, we grew 7% for nan twelvemonth pinch EMEA increasing 8%. Again, nan US halfway was strong, expanding 7% complete 2021, pinch a operation of stock gains and improving AURs driving a patient balanced maturation profile. And while geographic operation owing to China lockdowns weighed connected 2022 gross margin, nan lead marque repositioning and attraction connected much accretive maturation drove complete 400 ground points of adjusted gross separator description since 2019.

Similar to Wrangler, Lee maximize investments successful marque building crossed talent, design, invention and request creation. We continued our business pinch Creative Director, Mark Seliger, and launched our 2nd world marque equity campaign, Lee Originals.

From nan Lee Originals run to sponsoring nan 22 Bonnaroo Festival aliases up-and-coming euphony duo, Tiger Lilly, and manner collaborations for illustration Forbidden City successful China and nan Brooklyn aboveground present successful nan US, we connected pinch caller younger consumers successful 2022, and that momentum continues into 2023. A awesome illustration of this, a fewer weeks agone successful kicking disconnected our ceremony of Black History Month, Lee had nan grant of sponsoring nan 50 years of HipHop style grounds astatine nan Fashion Institute of Technology successful New York City.

We are proud to person been woven into nan history of this influential taste movement, and we look guardant to further expressing these effect pinch marque activation events planned successful nan coming months.

Again, we are conscionable opening to unlock nan afloat imaginable pinch this brand, and I couldn't beryllium much excited pinch nan opportunity up and to stock early developments pinch you arsenic we move done 2023.

Speaking of potential, I'd for illustration to stock immoderate position from my domiciled arsenic co-COO overseeing Kontoor's world and D2C businesses. As you each know, nan opportunity for maturation successful these areas, importantly, highly accretive maturation remains important for some brands.

First, rubbing connected world markets, erstwhile we talk geographic description arsenic a cardinal maturation catalyst astatine our past Investor Day, we knew nan way wouldn't needfully beryllium linear. We did not, however, contemplate a warfare successful Europe aliases prolonged COVID lockdowns and restrictions successful China. And location is nary uncertainty these macro factors person impacted and altered our trajectory of growth.

In nan near-term, you will spot america proceed to navigate done challenging conditions, but pinch an oculus to nan future, focusing connected nan wellness of our brands and positioning each for semipermanent profitable growth.

In China, we are seeing 2 things. First, user request for nan lead marque continues to beryllium strong, and that is champion represented done nan integer marketplaces that person not been impacted by COVID restrictions.

Like others successful nan market, we are seeing important fluctuations successful comps astir nan state pinch nan China New Year timing shifts, show recreation and group now getting backmost to work. We exited 2022 cleanable successful our ain inventories, but inventories astatine unit stay elevated. Given these dynamics, we expect nan China business will beryllium challenged during nan first half, pinch nan astir pronounced headwinds successful nan first quarter. We do spot this stabilizing successful nan coming quarters arsenic consumers get backmost to normal people of regular life and pent-up request is released.

I would for illustration to emphasize, we are taking a measured approach, including nan ramp-up of Wrangler successful China. But nan China marketplace and much broadly, Asia and Europe represents important achromatic abstraction for Kontoor. There is nary logic why our brands shouldn't run astatine a akin level to our peers, which suggests an opportunity to double our world business complete time, not only a affirmative to nan apical line, but again materially accretive to nan gross separator fixed our brand's premium positioning, higher AURs and greater D2C operation extracurricular of nan US.

And arsenic we thrust person connections pinch our consumer, location is nary much important transmission than nan continued improvement of our ain unit and integer platforms.

As you each know, we stay successful nan early days here, good beneath our title successful position of penetration. Within digital, Kontoor world own.com accrued 17% complete 2021. While our US-owned com knowledgeable 23% maturation complete past year. Great impervious points that our investments, including integer request creation successful this highly accretive maturation transmission are paying off.

Last quarter, you heard america statesman to talk nan improvement of our ain ceramic and mortar unit strategy. First, successful Europe, during nan 4th quarter, we opened 3 caller Lee Wrangler premium unit stores pinch plans to grow our footprint successful nan region during 2023. These brand-enhancing unit destinations connection consumers a unsocial immersive acquisition pinch a afloat manner assortment for some brands.

We besides precocious launched our unit excellence initiative, a broad programme crossed unit operations, talent and training, mixed pinch merchandising and readying aimed astatine transforming Kontoor into a world-class retailer.

Based connected nan occurrence of nan early testing, we are now rolling retired nan unit excellence inaugural crossed nan Asia region now. And complete nan adjacent 12 to 18 months, we will do truthful globally. The opportunities to leverage our learnings successful Asia arsenic we afloat create our ceramic and mortar strategy globally are significant.

As you would expect from us, we will beryllium deliberate successful evolving our unit footprint. We will trial and study building successful performance pinch our branded integer sites to create a seamless omnichannel acquisition arsenic we build an ever person relationship to our consumers.

Before I move it complete to Rustin, I excessively want to sincerely convey each of our teams for each their tremendous activity and collaboration done 2022, delivering awesome results for nan year, but besides mounting Kontoor up for unthinkable things to come. Rustin?

Rustin Welton

Thank you, Chris, and convey you each for joining america today. As nan squad stated, we are very pleased pinch nan beardown decorativeness to nan twelvemonth pinch gross and net coming successful good supra expectations. For further item connected nan 4th and afloat twelvemonth results, I will mention you to today's release. For nan equilibrium of nan call, I'm going to screen cardinal highlights for nan 4th earlier discussing our guidance for 2023.

Beginning pinch revenue. Global gross accrued 9% compared to nan anterior year. Growth successful world integer and US wholesale was partially offset by softness successful world markets, driven by lockdowns and restrictions successful China arsenic good arsenic heightened inflationary and macro pressures.

On a location basis, US revenues accrued 16%, driven by gains crossed some Wrangler and Lee. As Scott, Tom and Chris discussed, we are seeing awesome sell-through astatine wholesale fueled by marque investments and diversification into strategical maturation categories. In ain digital, we are seeing akin momentum pinch gross expanding 19% successful nan quarter.

International revenues decreased 12%. COVID-related restrictions and lockdowns successful China had a important effect successful nan quarter. In EMEA, revenues decreased 4% driven by maturation successful D2C, offset by wholesale unit arsenic retailers navigate macro and inflationary headwinds while normalizing inventories. Despite nan Q4 decline, EMEA revenues accrued 7% for nan year.

Turning to our brands. Global gross of our Wrangler marque accrued 16%. In nan US, revenues accrued 19%, driven by broad-based strength, including double-digit gains successful western, outdoor activity and tees. Female besides closed retired nan twelvemonth delivering affirmative maturation successful each quarter. Wrangler International gross decreased 9%, driven chiefly by softness successful EMEA wholesale, much than offsetting gains successful D2C.

Turning to Lee. Global gross decreased 3%. Lee US gross accrued 5%, driven by double-digit maturation successful digital, while Lee world gross decreased 13%. COVID-related restrictions and lockdowns successful China had a important effect connected nan 4th and region pinch APAC decreasing 26% and EMEA, revenues decreased somewhat and were flat, excluding nan Russia exit. And finally, from a transmission perspective, US wholesale accrued 17%, non-US wholesale decreased 14% and world owned dot com accrued 11%.

Now connected to gross margin. Reported gross separator decreased 180 ground points compared to adjusted gross separator past year. As expected, inflationary pressures, downtime and overseas rate weighed connected separator rates successful summation to inventory provisions. Somewhat offsetting these headwinds were ongoing structural operation benefits to accretive channels and strategical pricing.

In addition, we person seen alleviation successful transitory headwinds specified arsenic airfreight arsenic nan world logistics situation has improved. Adjusted SG&A disbursal was $213 cardinal aliases a $5 cardinal alteration versus 4th fourth 2021 adjusted SG&A. Tight discretionary disbursal controls, little compensation costs and a alteration successful in installments nonaccomplishment provisions were somewhat offset by higher distribution expenses arsenic good arsenic continued strategical investments successful IT. As a percent of revenue, adjusted SG&A leveraged by 290 ground points successful nan quarter. Adjusted net per stock was $0.88 compared to $0.88 successful nan aforesaid play successful nan anterior year.

Now turning to our equilibrium sheet. Fourth 4th inventories accrued 64% compared to past twelvemonth and accrued 30% compared to 2019. On a dollar basis, inventory levels decreased $81 cardinal from nan 3rd quarter. A fewer further points connected inventory. First, nan value of our inventory is good, pinch astir 90% successful halfway styles. In fact, nan mostly of it is successful North America, wherever we are presently seeing nan strongest marque power and point-of-sale momentum.

Second, we will beryllium leveraging our expertise to return downtime successful our accommodation while balancing nan request to work our largest and increasing US business, arsenic we did successful nan 4th quarter. And arsenic I will talk successful our outlook, we expect to much meaningfully utilize downtime successful nan first half of nan year. We expect this to consequence successful sequential year-over-year betterment successful our inventory maturation complaint arsenic nan twelvemonth progresses.

As we person discussed, this is an important lever we are uniquely positioned to propulsion to rightsize successful a mode that is much marque appropriate. The operation of these factors gives america assurance we person nan due strategy to execute normalized inventory levels by mid-2023. We vanished nan 4th fourth pinch nett indebtedness aliases semipermanent indebtedness little rate of $733 cardinal and $59 cardinal successful rate and equivalents. Our nett leverage ratio aliases nett indebtedness divided by trailing 12-month adjusted EBITDA astatine nan extremity of nan 4th fourth was 1.8 times, wrong our targeted scope of 1 to 2 times.

And arsenic antecedently announced, our Board of Directors declared a regular quarterly rate dividend of $0.48 per share. We returned a full of $166 cardinal to shareholders during 2022 and done our dividend and stock repurchase program. Finally, astatine nan extremity of nan 4th quarter, we had $62 cardinal remaining nether our stock repurchase authorization.

Now connected to our outlook. Revenue is expected to summation by a debased single-digit percent connected an yearly ground pinch maturation being comparatively balanced betwixt nan beforehand and backmost halves. I want to item a fewer further points arsenic you deliberation astir nan cadence that will impact some gross and gross margin.

During nan first half, we expect maturation to beryllium driven by nan US and tempered by international. In nan US, we expect nan momentum from beardown POS stock gains and D2C maturation to continue. As Scott mentioned, while US shipments person somewhat lagged sell-through successful early 2023 arsenic retailers normalize their bid patterns, we are seeing awesome spot successful our owned channels arsenic evidenced by nan 20% year-to-date US D2C comp maturation mentioned earlier.

We expect world to beryllium softer successful nan first half owed mostly to China. As Chris discussed, nan region continues to retrieve from COVID-related restrictions, lockdowns and elevated inventory levels astatine retail. We are taking a thoughtful attack for some brands and moving intimately pinch our partners to trim inventory levels successful nan first quarter, while ensuring nan semipermanent marque health.

Accordingly, we expect our year-on-year declines successful China to accelerate from Q4 levels successful Q1 earlier returning to maturation successful Q2. These proactive actions successful China are expected to offset home maturation pinch world gross level to modestly beneath 2022 successful Q1 earlier returning to maturation successful Q2.

During nan 2nd half of nan year, we expect maturation to beryllium driven by world arsenic China becomes much afloat reopened and tempered domestically arsenic macro conditions are expected to spot expanding unit connected US user demand. Gross separator is anticipated to summation 40 to 90 ground points to 43.5% to 44% and annually compared to reported gross separator of 43.1% achieved successful 2022.

For nan year, we expect structural operation shifts to accretive channels specified arsenic integer and world moderating inflationary pressures connected input costs and higher AURs to offset downtime and thrust improved separator rates. However, arsenic nan separator components are expected to travel done nan P&L astatine varying points nan year, I want to supply a spot much context.

First, nan impacts from China operation will person nan astir pronounced effect connected nan first half, peculiarly successful nan first quarter. Second, we expect taking nan mostly of manufacturing downtime successful nan first half. And finally, arsenic you would expect, nan lag from moderating input costs will much meaningfully travel done nan P&L starting successful nan 2nd half.

Based connected these factors, we expect humble year-on-year gross separator unit successful nan first half of nan year, pinch nan first 4th astir impacted earlier sequentially improving arsenic we move done nan twelvemonth pinch 2nd half separator up connected a year-over-year basis.

SG&A is expected to summation astatine a mid-single-digit complaint compared to adjusted SG&A successful 2022. As Scott mentioned, we are entering 2023 pinch beardown POS momentum and will proceed to support some brands done investments that connection nan top TSR potential. This will see investments successful areas specified arsenic integer and IT that support nan semipermanent information translator of nan business, request creation, arsenic good arsenic nan normalization of compensation expenses.

From a cadence perspective, we expect investments to ramp done nan twelvemonth pinch 2nd half stronger than nan first half.

EPS is expected to beryllium successful nan scope of $4.55 to $4.75 a share. Due to nan operation of nan factors conscionable discussed, we expect EPS connected a dollar ground to beryllium much weighted to nan 2nd half of nan twelvemonth pinch nan first 4th being nan astir challenged connected a year-on-year basis.

Finally, to thief you build retired your models, different disbursal is expected to beryllium successful nan scope of $5 cardinal to $10 million. The effective taxation complaint is expected to beryllium astir 20% to 21% annually pinch quarter-to-quarter volatility driven by discrete items.

Interest disbursal successful nan $33 cardinal to $38 cardinal scope and mean shares outstanding to beryllium astir $57 cardinal earlier immoderate further stock repurchases.

Lastly, arsenic we participate nan 3rd twelvemonth of nan catalyzing maturation strategy we outlined astatine our Investor Day successful 2021, I want to return a infinitesimal to bespeak connected nan important advancement we person made contempt galore macro and manufacture headwinds complete nan past mates of years.

First, revenues person grown astatine a debased double-digit CAGR complete nan past 2 years versus nan precocious single-digit maturation implied successful our original algorithm. While macro events person had an impact, peculiarly successful world markets, this comparative outperformance is reflected successful guidance approaching nan $2.7 cardinal target contempt these headwinds.

Margin rates person been impacted by inflationary pressures, including fabric astatine nan highest level since 2011. But nan structural drivers, including operation shifts to accretive channels and geographies stay very overmuch intact and we proceed to spot important opportunity for gross separator description complete clip arsenic conditions normalize.

Furthermore, arsenic evidenced successful today's net results and guidance for nan year, we person sizeable levers astatine our disposal to support continued net maturation and our semipermanent TSR algorithm.

And finally, we discussed our superior allocation strategy evolving. -- to bespeak important optionality, including introducing an opportunistic stock repurchase programme and expanding our dividend payout past quarter.

The powerfulness of this optionality has allowed america to prosecute and strategy, backing investments successful some brands, including a caller world ERP system, supporting our dividend, and buying backmost stock. Over nan past 2 years, we person returned $337 cardinal to shareholders.

To close, I want to convey our unthinkable colleagues astir nan world. As I stated astatine nan onset, I americium very pleased pinch nan measurement we vanished nan year, which is simply a nonstop reflection of their bonzer efforts. The marketplace and macro situation remains highly dynamic, which we person reflected successful our expectations for 2023. But arsenic Scott mentioned, we are entering nan twelvemonth from a position of strength.

This concludes our prepared remarks, and I will now move nan telephone backmost to our operator.

Question-and-Answer Session

Operator

Thank you. We will now beryllium conducting a question-and-answer session. [Operator Instructions] Our first mobility is from Jay Sole pinch UBS. Please proceed pinch your question.

Jay Sole

Great. Thank you truthful much. I person a two-part question. The first portion is, tin you talk a small spot much astir your fiscal 2023 gross guidance and benignant of nan assurance that you person successful that guidance wherever it gives you assurance successful nan guidance? And past secondly, it sounds for illustration that Q1 has started retired beardown arsenic well. Could you grow a small spot connected that and springiness america a small spot much colour connected what's driving nan beardown maturation successful Q1? Thank you.

Scott Baxter

Jay, I'll spell up and start, and past Rustin will jump in. Coming retired of Q4, we had existent spot successful some of nan businesses and hence strengthened nan breadth of nan portfolio truthful nan geographies and nan channels. And that gave america assurance coming into nan twelvemonth comparative to really we group our scheme for nan year. But if you deliberation astir it, really we look astatine nan business midway done nan quarter, we've had really bully POS. We talked astir that. Our owned D2C, which is simply a bully indication, has been very beardown and besides successful its infancy. So it puts america successful a really bully place.

Naturally, you cognize from a business standpoint that there's a small spot of a lag betwixt nan POS and nan shipments and group are a small cautious retired location correct now and really we're reasoning astir nan first twelvemonth excuse me, nan afloat twelvemonth successful nan first half is that it will beryllium beardown successful nan first half domestically because we tin spot that correct now mightiness taper disconnected a small spot really we group up nan scheme going forward. But we deliberation China will proceed to get stronger passim nan twelvemonth arsenic nan Chinese user comes backmost into nan marketplace and China opens up.

But I would show you, this is simply a testament to nan activity that nan teams person been doing to authorities really adjacent to nan consumer, enactment really focused connected nan initiatives that we've laid out, and we are dialed in, we're humble and we're conscionable moving really difficult to make judge that we're delivering for each of our consumers and shareholders astir nan globe. Rustin?

Rustin Welton

Yeah. Thanks, Scott. Good morning, Jay. So conscionable to adhd connected to a mates of pieces, arsenic Scott mentioned, obviously, a beardown 4th fourth successful nan US, Jay, up mid-teens. And surely seeing that continued momentum of POS, and Scott talked astir nan assurance we've had successful nan D2C, nan US D2C comps up 20% year-to-date. Certainly, China will put a unit connected that first 4th arsenic we activity proactively pinch our unit partners to really amended their inventory levels. As Chris indicated, we are elevated astatine unit levels successful China, and we want to make judge that we're moving pinch nan partners to sphere nan semipermanent marque health. So that China maturation will -- is expected to return to maturation successful Q2.

So arsenic you deliberation astir benignant of nan cadence of that first quarter, Jay, we've sewage benignant of nan POS lag, arsenic Scott mentioned, benignant of tempering nan Q1 shipments pinch nan beardown maturation we're seeing surely arsenic we activity to get China into nan correct position. We'll put immoderate unit connected it. Globally, we expect revs to beryllium level to modestly down successful Q1 earlier returning to maturation successful Q2. So hopefully, that gives you a small much consciousness of nan cadence of nan quarters successful that first half.

Jay Sole

It does. That's helpful. And maybe, Rustin, conscionable if I tin inquire 1 more, conscionable pursuing up connected your inventory comment. If you could conscionable talk done nan inventory positioning a small spot more? I mean, obviously, you mentioned inventory is up 64%. Can you conscionable talk astir really nan downtime impacts your scheme to reside nan inventory and really that downtime impacts possibly gross separator a small spot much specifically? Thank you.

Rustin Welton

Yes. Thanks, Jay. I'll spell up and start, and past I'll flip it complete to Tom to adhd a small spot much colour connected benignant of really we're addressing nan inventory situation. So arsenic you indicated, we did decorativeness nan 4th up 64% versus nan anterior year, that's up 30% versus 2019 conscionable to dimensionalize that and down $81 cardinal from wherever we ended Q3.

Again, we consciousness bully astir nan value of nan inventory, Jay, which I deliberation is important pinch astir 90% successful halfway styles, and arsenic I indicated successful my prepared remarks, nan mostly is successful North America, wherever we're really seeing nan strongest marque power and POS strength.

As we deliberation astir really this plays out, it does create immoderate near-term gross separator unit arsenic we return downtime successful nan plants, but it besides reduces nan markdown successful marque equity risks that are retired location comparative to liquidation and off-price channels. And I deliberation that's a really meaningful and unsocial position we're in, fixed our soul manufacturing.

We do expect that to sequentially year-over-year amended arsenic we move done 2023 and successful our inventory maturation complaint arsenic nan twelvemonth progresses and to beryllium much normalized by mid-2023 successful our inventory levels. Tom, you want to adhd immoderate colour connected precisely what we're doing to reside nan inventory.

Tom Waldron

Yes. Absolutely. Hey, Jay, acknowledgment for nan question. As you saw, we had immoderate really bully request successful nan 4th quarter, and it's important for america to equilibrium work and bringing inventory down. As you mentioned, downtime is simply a awesome strategical lever we have, fixed our soul manufacturing, and we'll beryllium utilizing much of that successful nan first half than we did successful nan 2nd half of 2022. And additionally, we do have, arsenic different strategical lever, our 30-plus outlets. So we're capable to move done our inventory successful a very marque correct way. And arsenic Rustin mentioned, we'll beryllium much normalized by nan 2nd half of 2023. Thanks, Jay.

Operator

Thank you. Our adjacent mobility is from Bob Drbul pinch Guggenheim. Please proceed pinch your question.

Bob Drbul

Hi and bully morning. Just a mates of questions. On nan DTC business, I guess, for Chris, tin you talk a small spot much benignant of wherever nan maturation is coming from for illustration nan customer base, essentially, I mean, those numbers are beautiful impressive. I'm conscionable wondering if you could grow a small spot much successful position of what you're seeing there?

And past nan 2nd mobility really, if we spell backmost a small bit, I deliberation to Jay's question. But Scott, connected nan request side, erstwhile you deliberation astir nan category, I guess, some connected nan denim now, nan non-denim is really getting to beryllium beautiful important arsenic low. If you could talk astir nan request expectations either conscionable successful those halfway categories that you're seeing and really you deliberation astir that? Thanks.

Chris Waldeck

So I'll lead off, Bob, it's Chris. Thanks for nan question. As we deliberation astir DTC, building an ever person relationship pinch our consumers really important to nan semipermanent maturation for our brands. And we led our strategy pinch our investments successful digital. And those investments, arsenic you said, are showing immoderate really coagulated returns. We're seeing our wide penetration doubling since 2019.

And -- but an important portion of that really is connecting nan unit acquisition for that existent omnichannel user experience. And that's really ever been portion of our strategy. And looking astatine doing that done full-price stores, for illustration nan 3 caller stores we conscionable opened up successful Europe pinch much to follow. And -- arsenic I spell astir nan world and deliberation astir this successful APAC, we really already person a really awesome unit strategy already. As I talked about, we're now rolling retired our unit excellence inaugural passim nan region. And we're going to beryllium leveraging those learnings globally, taking those to our European stores and past besides bringing that complete present to nan US. So, it's really a measurement for america to link experientially pinch our consumers successful each of our markets and show nan communicative we want to show astir our brands. So, convey you for nan question. I look guardant to giving you much connected that successful nan coming year.

Scott Baxter

Hey Bob, really are you. It's Scott. The 2nd mobility from a request standpoint successful our core, truthful we've done a really bully job, arsenic acold arsenic focusing connected our core. We've brought a batch of caller group into nan category, which I deliberation is really important. But for us, we brought caller group into nan class successful our integer platform, successful our D2C platform, successful our world platform. And past we were very, very thoughtful, Bob, arsenic we laid retired our strategy going guardant astir wherever we could play and really we could win. And we picked tees, outdoor and workwear arsenic 3 categories that would beryllium important going guardant that play into nan practice of our businesses that we person expertise wrong our institution and that we cognize nan channels and nan geographies really well, and that has been a really bully decision.

And I deliberation nan azygous astir important point comparative to that for america is nan opportunity to move guardant pinch those, because they're each still successful really mini categories for us, but very ample macro categories. So we person a chance to really make and return a large position successful those categories going forward. But I do want to emphasize, Bob, earlier I decorativeness here, that we haven't taken our oculus disconnected nan shot from a halfway class standpoint, still it's highly important. As you tin see, nan numbers look really good. We still attraction a batch of our request creation successful our user platforms astir our denim categories, and we will enactment laser-focused connected that going forward. Thanks, Bob.

Bob Drbul

Thanks, Scott.

Operator

Thank you. Our adjacent mobility is from Will Gardner pinch Wells Fargo. Please proceed pinch your question.

Will Gardner

Hey guys, bully morning. Thanks for taking my question. The Wrangler 4Q results were -- I mean they were really impressive, peculiarly successful nan US wholesale. Maybe conscionable speak to what drove that maturation successful 4Q, nan sustainability of that maturation and really you're readying revs for nan US -- for nan US and internationally successful '23?

Tom Waldron

Yes. Thanks truthful overmuch for nan question. This is Tom. We're really, really happy pinch nan balanced maturation that we had successful nan Wrangler brand. Certainly, what we've been doing from a marque standpoint successful position of executing what we see a very precocious playbook, investing down nan brand, bringing beautiful merchandise to life and past really conscionable from a request creation standpoint, inviting successful caller consumers, utilizing Georgia May Jagger, Leon Bridges, but besides connecting pinch our halfway consumer. I'm really proud of nan measurement we're capable to do this arsenic an extremity strategy, pinch collaborations specified arsenic Yellowstone, Lukasi [ph] and Buffalo Trace. We will proceed to do that. More to travel connected that successful position of collaborations into 2023, but we're really excited astir nan marque momentum arsenic we move forward.

Will Gardner

And possibly conscionable really are you readying nan business into '23 from a apical statement perspective?

Rustin Welton

Yes. So, Will, it's Rustin. I'll conscionable jump successful there. As we benignant of indicated, Scott talked astir it a small spot successful his opening remarks, arsenic you deliberation astir that nan halves, really nan beforehand half is driven by US maturation and tempered by world and past benignant of almost flipping arsenic you get to nan backmost half, surely arsenic China reopens, much afloat expect world to thrust much of that backmost half maturation and past partially offset by macro conditions, which we're taking a prudently blimpish attack arsenic we're reasoning astir expanding unit connected user request successful nan US. So hopefully, that gives you a small spot of a consciousness of nan halves.

Will Gardner

Great. I’ll walk it on. Thank you.

Scott Baxter

Thanks, Will.

Operator

Thank you. Our adjacent mobility is from Brooke Roach pinch Goldman Sachs. Please proceed pinch your question.

Brooke Roach

Good greeting and convey you truthful overmuch for taking our question. I was wondering if you could unpack your expectations from China reopening and what you've embedded successful nan guide. What proportionality of income successful 2022 were from China and what's nan reopening opportunity for Kontoor Brands possibly from for illustration a dollar and separator ground arsenic you get backmost to normalized operating levels successful nan country?

Chris Waldeck

Hey Brooke, it's Chris. I'll footwear this off. Clearly, location was mandatory COVID restrictions successful Q4 and that was a headwind for us, specifically nan Lee brand. What I'm encouraged by is that we exited 2022 pinch our inventories cleanable and user request for our marque is strong, and we're seeing that travel done successful nan integer channels wherever location wasn't nan restrictions for illustration we had successful nan brick-and-mortar stores.

The rumor we're dealing was conscionable our unit inventories stay elevated. That's why we deliberation nan first half could beryllium a spot much challenged, but we expect astir of that really to beryllium successful nan first quarter. As Rustin said earlier, we're playing nan agelong crippled here. We're moving really intimately pinch our partners. Our squad was pinch them, conscionable this past week going done business plans and really laying retired nan assortment for nan backmost half of nan year. And we're going to proceed to put successful nan marque and really show nan geopolitical conditions that are retired there. But we judge nan semipermanent maturation successful this really highly accretive region is location for us. So we're excited astir nan opportunities ahead. Thanks.

Brooke Roach

Thanks truthful much. And if I could conscionable inquire 1 follow-up connected nan US business. Given nan spot of marketplace stock seizure that you're realizing successful nan US correct now, peculiarly successful Wrangler, tin you quadrate that maturation pinch nan deceleration that you person embedded successful nan backmost half of nan year? How does that fresh pinch your semipermanent targets that underpin your Investor Day outlook? Thank you.

Tom Waldron

Well, from a macro standpoint, Brooke, we did our business and nan spot successful Wrangler has continued from nan 4th fourth into nan first quarter. And past you deliberation astir what we're doing to spell up and make judge that that continues. Incremental investments successful marque advertising, incremental investments successful immoderate of nan things that we've done from a Wrangler co-lab standpoint, you deliberation astir our 75th anniversary, Yellowstone, Buffalo Trace, Luke KC [ph].

And past you deliberation astir nan worth that our brands bring to nan marketplace. So successful times of uncertain times, Wrangler is simply a trusted brand, unthinkable worth labor successful aggregate channels and aggregate geographies, and it's astatine a value constituent that our consumers still tin spend very easily. So we deliberation we've positioned ourselves very well, but we are being and looking astatine nan wide marketplace and nan macro conditions successful a really circumstantial measurement to make judge that we group our plans accordingly.

Brooke Roach

Thank you very much. I'll walk it on.

Operator

Thank you. Our adjacent mobility is from Sam Poser pinch Williams Trading. Please proceed pinch your question.

Sam Poser

Good morning. Thanks for taking my question. I person handful. The guidance that you're providing is simply a non-GAAP guidance, conscionable to confirm?

Scott Baxter

No, it is connected a GAAP basis, Sam.

Sam Poser

So are location adjustments that you're foreseeing into nan numbers correct now?

Scott Baxter

No. That's why we're guiding connected a GAAP basis.

Sam Poser

Okay. With nan inventory levels, what would beryllium your normalized guardant weeks of supply? You were moving astir 15% astatine nan extremity of 2018, which is astir apt nan champion – nan champion point to look at, fixed – sorry – sorry astir that. It's astir apt nan champion point to look fixed nan – fixed what happened successful 2020. So -- what would beryllium that normalized guardant weeks of proviso for illustration astir 15% because correct now, connected my numbers, it's astir 18%, which is an betterment from nan past quarter?

Rustin Welton

Yeah, I'm not going to get into guiding nan circumstantial weeks of supply, but I deliberation you're hitting connected nan correct point, Sam, which is, arsenic Tom benignant of indicated, we're trying to make judge that we're balancing servicing nan – nan needs successful nan US market. Again, that's wherever nan bulk of nan inventory sits, pinch besides reducing from these elevated inventory levels wherever we're presently sitting at. So we intend to proceed to spot that sequential betterment connected that year-on-year maturation arsenic we move guardant passim 2023.

Sam Poser

And nan inventory – and nan wholesale, nan unwillingness of retailers to, I guess, constitute fill-in orders based connected nan demand. Is that a consequence of their wide inventory, not needfully yours, aliases are they dense pinch you, right, pinch Lee Wrangler successful nan US? Are they dense there, aliases is this – were overstocked successful premier pants and we can't capable successful denim.

Rustin Welton

Yes. I won't remark connected nan circumstantial retailers' inventories. But I deliberation Scott deed it good earlier, Sam, successful his prepared remarks, wherever you benignant of talked a small spot astir location are times wherever you get disconnects betwixt POS and shipments. But really, nan brands present are really focused connected nan POS. And arsenic Tom indicated, and Chris indicated successful their remarks, really making judge that we're focused connected delivering that compelling merchandise and that awesome user worth that we're known for and making judge that we're trading done a POS. And complete time, arsenic you person that beardown POS certainly, nan shipments drawback up and travel amended successful balance, but that's what we're seeing astatine nan moment.

Scott Baxter

Thanks, Sam.

Operator

Thank you. Our adjacent mobility is from Jim Duffy pinch Stifel. Please proceed pinch your question.

Jim Duffy

Thank you. I'm going to start, pinch a follow-up to Sam's question. Just look astatine POS trends astatine retail, certainly, that's nan astir important thing. But for america arsenic investors, we're very funny wherever inventory stands successful nan transmission circumstantial to nan US market, tin you correspond wherever your inventory position and possibly it'd beryllium anemic inventory connected manus comparative to much emblematic levels aliases thing for illustration that to springiness america a view?

Scott Baxter

Well, I would say, Jim, that we haven't really gone up and published that aliases talked astir that successful specifics. But what I would show you, Jim, is that we are very contentious. We're moving really difficult connected our inventory. I deliberation we've been upfront astir nan truth that we weren't happy pinch it nan past mates of quarters, and we've been very superior astir getting that down. It's been a afloat onslaught present from a company-wide standpoint, and we're going to proceed to do that.

One of nan things that I'm reasonably happy pinch is, arsenic you know, our inventory is beautiful good, right? So our inventory sells and owning our ain manufacturing accommodation allows america to spell up and make and proceed to make bully inventory. But we person a really bully scheme successful spot – from a retailer perspective, we conscionable can't comment. I don't know, what they're going to do aliases really they're going to behave and react. But we're going to proceed to spell up and put bully request creation platforms together, proceed to make judge that we're doing each nan things that we tin to power our business successful some nan integer and our owned unit standpoint, and pinch our wholesale customers and making judge that we put ourselves successful a position to win.

Rustin Welton

And Jim, it's Rustin. I would adhd a small spot conscionable – certainly, nan US retailer inventory rebalancing that took spot successful Q2 and Q3 has been good chronicled. And certainly, again, we're focusing connected sell-through, not shipments. But I do deliberation there's a mates of important points to benignant of telephone out. So successful position of shipments aliases sell-in, location was quarter-to-quarter volatility successful 2022 based connected nan retailer actions, peculiarly successful Q2 and Q3 again, but I deliberation focusing connected nan afloat twelvemonth is really important.

So successful 2022, our US wholesale business was up 11% complete 2021 pinch some Wrangler and Lee posting double-digit growth. So again, you whitethorn person immoderate near-term fluctuations betwixt POS and shipments. But clearly, we're assured successful our strategies and nan investments successful nan brands are working. And I deliberation you've seen that unit inventories person travel down from wherever they peaked earlier successful nan year.

Jim Duffy

Okay. Thanks Rustin. And past I wanted to inquire astir investments successful retail. How does unit fresh pinch superior allocation priorities? As I deliberation backmost to your caller history, you've made a number of investments successful infrastructure. With those presumably down you, will unit correspond a greater information of CapEx fund going forward?

Rustin Welton

Yes. So we talked a small bit, Jim, successful benignant of nan assumptions for CapEx of $35 cardinal to $40 cardinal for 2023 and our afloat twelvemonth guide. And I deliberation you're hitting upon immoderate really important elements there. Chris talked a small spot successful his prepared remarks astir nan 3 Lee Wrangler dual branded stores that we opened up successful Europe and nan truth that we intend to proceed to thoughtfully rotation retired further unit stores moving forward, on pinch further CapEx arsenic we deliberation astir investing successful areas for illustration digital, for illustration IT to proceed that improvement of our data-driven company.

So, I deliberation that's wherever nan CapEx surely is coming out. But if you tie it backmost to a broader much superior allocation, and Jim, you've heard america talk astir this galore times, I deliberation nan optionality we person is really important and really benignant of captious successful this uncertain environment. Scott talked a small spot astir nan dividend summation that we approved. The 4% summation we approved past quarter.

And certainly, successful 2022, you saw america activate nan stock repurchase programme successful a meaningful measurement pinch $62 cardinal successful shares repurchased past twelvemonth and returning $166 cardinal to shareholders successful 2022 again. And a mates of different information points there. We returned $337 cardinal complete nan past 2 years and $455 cardinal since nan spin.

So I deliberation it really talks to nan rate procreation aspects of this model, which we've talked astir galore times and really nan options that it gives america for nan superior allocation to proceed to put successful nan brands via superior again, whether that's stores, aliases integer aliases IT, but besides proceed to look astatine nan optionalities we've sewage astir superior allocation pinch nan dividend and stock repurchase.

Scott Baxter

Thanks, Jim.

Operator

Thank you. Our adjacent mobility is from Will Gardner pinch Wells Fargo. Please proceed pinch your questions.

Will Gardner

Hey guys. Just 1 follow-up and this is benignant of piggybacking disconnected of Jim's question. Can you conscionable talk aliases springiness america immoderate much colour astir nan CapEx jump from past twelvemonth to 23%. It conscionable looks for illustration it's a large jump successful comparative to history arsenic well. Thanks.

Scott Baxter

Yeah. A mates of things, Will, erstwhile you mentioned comparative to history, fto maine benignant of spell backmost connected that because, certainly, this business pre-spend we were astir 1% of emergence successful CapEx and mostly astir benignant of nan manufacturing broadside of nan business pinch our plants and our distribution.

You heard america talk from nan spin-on about, really we're going to proceed to put successful nan brands and nan capabilities. Certainly, early days pinch Kontoor important superior investments arsenic we implemented nan caller world ERP system.

But arsenic we commencement to displacement into Horizon 2, nan CapEx number, again, moving from 35% to 40% expected successful 2023. It is really driven by those items and nan investments we talked about, arsenic Chris said, starting to build retired much of those unit capabilities. So deliberation astir nan maturation of caller stores opening globally arsenic good arsenic building retired immoderate of nan omnichannel capabilities pinch those stores connected nan integer and nan IT broadside of nan business.

And again, we're conscionable going to -- we're going to proceed to make those CapEx investments that are correct for nan semipermanent wellness of nan business. So hopefully, that gives you a small spot of a consciousness of immoderate of nan drivers arsenic our Horizon 2 continues to unfold present arsenic we move into 2023. Thanks Will.

Will Gardner

Thank you.

Operator

Thank you. There are nary further questions astatine this time. I'd for illustration to move nan level backmost complete to Scott Baxter, for immoderate closing comments.

Scott Baxter

I conscionable wanted to opportunity acknowledgment to each of our Kontoor labor astir nan world. And acknowledgment for everybody for joining america today. I really admit your support of our company. And we look guardant to talking to you successful a short 60 -- I think, 60 days from now arsenic nan almanac useful retired that way, but I wanted to wish you each a awesome time and a awesome week. And we look guardant to talking to you soon. Thanks, everyone. Take care.

Operator

This concludes today's conference. You whitethorn disconnect your lines astatine this time. Thank you for your participation.

Editor: Naga



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