The Ratings Game: Wrangler is selling its jeans from the rodeo to Nordstrom to drive price and demand

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Kontoor Brands is being selective about distribution in an effort to grow its denim brands

Wrangler/Kontoor

The Wrangler brand of denim is heading to the Wrangler National Rodeo Finals in Arlington, TX in December and can also be found at Nordstrom Inc. JWN, +9.68% through the recent launch of the Wrangler by Fred Segal Collection.

Selling in this wide variety of venues is part of a business development strategy focused on innovation and driving higher pricing.

Kontoor Brands Inc. KTB, +2.23% is using a number of strategic initiatives to drive sales of both the Wrangler and Lee brands. Part of that is getting out of unsuccessful wholesale channels while maximizing on what the company calls “best-in-class retailers” like Walmart Inc. WMT, +1.69%, Amazon.com Inc. AMZN, +1.46% and Target Corp. TGT, +1.51% that have remained open during the coronavirus pandemic and demonstrate strong performance.

But the company is also investing in innovations like better fit and more durable materials in order to create product that Chief Executive Scott Baxter says has “a greater emphasis on value and premium specialty.”

See: Walmart will spread Black Friday over multiple days as retailers try new ways to drive holiday traffic

“And across channels we know that innovation can support elevated pricing as we’ve seen in the recent Wrangler by Fred Segal collection at Nordstrom; the emerging Wrangler ATG line in outdoor specialty; and the launch of our Lee MVP and legendary programs with Kohl’s,” Baxter said on the company’s recent earnings call, according to a FactSet transcript.

Kontoor, the denim-focused spinoff of VF Corp. VFC, +2.87%, reported third-quarter earnings that beat expectations and gave upbeat guidance for the most recent quarter.  Moreover, Kontoor declared a quarterly dividend of 40 cents per shares payable on Dec. 18 to shareholders of record as of the close of business on Dec. 10.

Kontoor shares have rallied, up more than 79% over the past three months, though the stock is down 14.9% for the year to date. The SPDR S&P Retail ETF XRT, +3.53% is up 14% for 2020 to date, and the benchmark S&P 500 index SPX, +1.78% has gained 4.3% for the period.

For the rodeo event, Kontoor has launched a full-price pop-up store at the Fort Worth Stockyards that includes laser customization onsite. Specialty retailers focused on the Western lifestyle are also a target.

The company is also launching Wrangler collaborations with the Adult Swim channel show “Rick and Morty,” part of an effort to reach younger and more diverse consumers, Baxter said.

“[B]etter-than-expected recovery trends, as a result of general casualization of the marketplace as well as Lee and Wrangler’s strong positioning with key retailers that are deemed essential (including Walmart, Target, and Boot Barn) position the company well,” wrote Susquehanna Financial Group.

Analysts also applaud Kontoor’s emphasis on digital, with U.S. digital sales through the company’s e-commerce channels up 43% during the quarter. Susquehanna says it is confident that the company will “improve through next year.”

Susquehanna rates Kontoor stock as positive with a $44 price target.

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