Kontoor Brands, the company behind Wrangler and Lee jeans, is making a big bet on its stronger horses. On Thursday, it announced it would sell its Lee business to Authentic Brands Group in a deal worth up to $1 billion. That includes an initial $750 million payment and a potential $250 million earnout if Lee hits certain performance targets.

The move is a clear signal that Kontoor wants to focus on its higher-growth brands, namely Wrangler and Helly Hansen. The company said the sale will sharpen its focus, improve capital flexibility, and support share repurchases and debt reduction. The transaction is expected to close in the second half of 2026, subject to regulatory approvals.

This isn't just about selling a brand—it's about reshaping the company's future. Kontoor reported first-quarter adjusted earnings of $1.06 per share earlier this month, missing analyst estimates of $1.12. Revenue came in at $613.3 million, below the $782 million Wall Street expected. But with the Lee divestiture, Kontoor is raising its full-year 2026 outlook.

Here's how the numbers shake out: Total 2026 revenue, including discontinued operations (i.e., Lee), is now expected to range from $3.41 billion to $3.46 billion, slightly above the prior forecast of $3.40 billion to $3.45 billion. Revenue from continuing operations (Wrangler, Helly Hansen, etc.) is projected at $2.66 billion to $2.71 billion. The Lee business itself is expected to contribute about $750 million in revenue.

On the earnings side, adjusted EPS including discontinued operations is now forecast between $6.60 and $6.70, up from $6.40 to $6.50. The Lee business is expected to contribute about 90 cents per share, or about $1.45 per share if you include overhead costs previously allocated to the segment. Adjusted EPS from continuing operations is expected in the range of $5.15 to $5.25, which reflects about 55 cents per share in unmitigated overhead and other expenses tied to Lee.

Kontoor says the divestiture should have an immaterial impact on EPS within 12 to 18 months, as it offsets lost earnings through capital deployment, restructuring, and cost cuts. And to show it's serious about returning cash to shareholders, the company also announced a new $750 million share repurchase authorization.

Analysts are generally bullish on the stock. It carries a Buy rating with an average price target of $100.33. Recent moves include Barclays raising its forecast to $96 (Overweight) on May 11, BTIG maintaining $100 (Buy) on May 1, and Goldman Sachs raising to $95 (Buy) on March 4.

Investors seemed to like the news. Kontoor Brands shares were up 7.97% at $70.28 at the time of publication on Thursday.