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Wrangler Jeans Are Headed to China

Wrangler Jeans Are Headed to China

(Bloomberg) -- Kontoor Brands Inc., whose Lee line is already the biggest denim brand in China, plans to bring its other big American jeans name to the world’s largest consumer market within a year.

“In January 2020, we are introducing Wrangler to the Chinese market because there’s an appetite,” Chief Executive Officer Scott Baxter said in an interview on Bloomberg Television. “The global consumer now shops all around the globe and wants to bring that product back into the marketplace, but they also want to have that product available for them” at home.

Kontoor, which officially started trading Thursday on the New York Stock Exchange after splitting off from VF Corp., is expanding in China at a precarious moment in U.S.-China relations as the trade war between the two countries escalates. However, Baxter says he’s not worried and has seen no pushback as Chinese consumers continue to embrace the American brand.

It helps that essentially all of the Lee jeans now sold in China are produced in factories there, keeping them free of rising duties. That will also be the case with Wrangler, according to Scott Deitz, vice president of public affairs at Kontoor. Only about 2% of what the company makes in China is shipped to other countries, he said.

“When we talk about China generally speaking, and the tariff debate that’s going on right now, we really have very little exposure,” Deitz said. “We strategically have intentionally chosen to produce in China for China because we think that’s the right thing to do.”

The company moved most of its output for non-Chinese consumption to other parts of the world years ago to places including Bangladesh and Latin America. Deitz said between 38% and 40% of the company’s products are made in factories in the Western Hemisphere including Mexico and Nicaragua. Components for much of the Mexican assembly come from the U.S., he said.

Kontoor Split

The jeanswear spinoff was intended to help Vans and North Face owner VF pivot away from denim to focus on faster-growing trends such as athleisure and outdoor apparel. U.S. imports of elastic knit pants surpassed those of denim for the first time in 2017. Still, Kontoor’s jeans brands have been leaning into the trend by adding things like athletic waistbands to some of its men’s denim and casual pants to compete with the soaring athleisure sector, Baxter said.

Shares of Kontoor rose 3.9% Thursday on a day when the wider S&P 500 index dropped 1.2%. VF fell 1.1%.

Kontoor joins an increasingly crowded jeans market: Rival Levi Strauss & Co. went public earlier this year, and both Old Navy and J. Crew’s Madewell -- two denim-centric chains -- are planning IPOs. Meanwhile, Diesel USA Inc., known for its popular five-pocket jeans, filed for Chapter 11 in March.

Wrangler Jeans Are Headed to China

In addition to letting Kontoor focus on growing globally, the separation will give the company room to expand in digital sales and mull other apparel acquisitions beyond the denim space, Baxter said.

“We don’t want to be over the long term just a denim company going forward,” he said. “Now we have the ability with the Kontoor name to be anything in the apparel space as we consider acquisitions in the future.”

To contact the reporters on this story: Taylor Riggs in New York at triggs2@bloomberg.net;Anne Riley Moffat in New York at ariley17@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Lisa Wolfson

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