This struggling denim stock is bound to bounce back, Jefferies says
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Kontoor Brands is poised to stage a comeback by capitalizing on renewed interest in denim, according to Jefferies. The bank upgraded the Wrangler jeans parent to buy from neutral. It also hiked its price target on shares to $89 from $82, suggesting about 30% upside from Tuesday's close. "KTB presents a compelling multi-yr accel. growth story within apparel that relies on co-specific actions," analyst Blake Anderson said in a note to clients. "While still early innings, we see the [company] as well positioned to capitalize with a favorable [risk-reward] setup." Shares of Kontoor have fallen roughly 15% over the past year as concerns over sustained demand for specialty retailers' products swirl. KTB 1Y mountain Shares are down about 16% over the past 12 months. The stock trades at roughly 10 times price to equity, according to Jefferies. However, that valuation is "overly pessimistic" given Kontoor's opportunities to grow across its denim brand Wrangler and outdoor brand Helly Hansen, which was acquired last year, per Anderson. He also noted that Helly Hansen is expanding in the U.S., which he expects will support Kontoor's growth. "The acquisition of HH in May of '25 adds an important growth layer to the KTB portfolio," Anderson wrote. "Workwear, a more durable [revenue] stream, has significant [opportunity] for growth behind new investment." Jefferies analyst Corey Tarlowe added that consumer demand for denim is undergoing a revival, driven by multiple trends — a fact that could boost shares of Kontoor. "After largely lagging broader apparel over the last 15 years, denim growth has recently accelerated and is now meeting or exceeding apparel growth rates, an uncommon occurrence historically," Tarlowe said in a separate note. "Denim today appears less reliant on any single trend than at prior points in the cycle, while past pressures from athleisure have largely subsided, leading to an improved setup." Jefferies' call falls in line with consensus on the Street. Of the 10 analysts covering Kontoor Brands, eight have a buy or strong buy rating on the stock, LSEG data shows.