Good morning, everyone, and welcome to today's PVH Corp. First Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one keys on your touch-tone phone. Please note this call may be recorded, and I will be standing by should you require any assistance. It is now my pleasure to turn today's program over to Sheryl Freeman, Senior Vice President of Investor Relations. Please go ahead, ma'am.

Thank you, operator. Good morning, everyone, and welcome to the PVH Corp. First Quarter 2025 Earnings Conference Call. Leading the call today will be Stefan Larsson, Chief Executive Officer, and Zac Coughlin, Chief Financial Officer. This webcast and conference call is being recorded on behalf of PVH Corp. and consists of copyrighted material. It may not be recorded, rebroadcast, or otherwise transmitted without PVH Corp.'s written permission. Your participation constitutes your consent to having anything you say appear on any transcript or replay of this call. The information to be discussed includes forward-looking statements that reflect PVH Corp.'s view as of June 4, 2025, of future events and financial performance. These statements are subject to risks and uncertainties indicated in the company's SEC filings and the Safe Harbor statement included in the press release, which is the subject of this call. These include PVH Corp.'s right to change its strategies, objectives, expectations, and intentions and the company's ability to realize anticipated benefits and savings from divestitures, restructurings, and similar plans such as the headcount cost reduction initiative announced in August 2022, the 2021 sale of assets of and exit from its Heritage Brands menswear and retail businesses, the November 2023 sale of the Heritage Brands women's intimate apparel business to focus on its Calvin Klein and Tommy Hilfiger businesses, and its current multiyear initiative to simplify its operating model. PVH Corp. does not undertake any obligation to update publicly any forward-looking statement, including without limitation, any estimates regarding revenue or earnings. Generally, the financial information and projections to be discussed will be on a non-GAAP basis as defined under SEC rules. Reconciliations to GAAP amounts are included in PVH Corp.'s first quarter 2025 earnings release, which can be found on www.pvh.com and in the company's current report on Form 8-K furnished to the SEC in connection with the release. At this time, I am pleased to turn the conference over to Stefan Larsson.

Thank you, Sheryl, and good morning, everyone. Thank you for joining our call today. I want to start by thanking our Calvin, Tommy, and PVH teams around the world for their hard work this quarter as we delivered on our plan. Driven by our disciplined execution of the PVH+ plan, we grew revenue 2% above our guidance, and we delivered stronger than expected non-GAAP EPS, also above our guidance. We remain on track to drive revenue growth for the full year in line with guidance. Total direct-to-consumer revenue was down approximately 3%, with e-commerce up 3%. We grew wholesale revenue mid-single digits and benefited from earlier shipments, as well as the intake and relaunch of the Calvin Klein women's sportswear and jeans businesses in North America. Since we last spoke, we have seen an increasingly tough environment. While we have to recognize this evolved backdrop, all our focus is on what's within our control to strengthen and expand the impact of our own PVH+ actions. In moments like this, when the external factors get worse, it's time to sharpen our focus, get even closer to the consumers, and expand our execution. Based on this, I'll directly go into sharing the concrete examples of what actions we took that drove our performance in Q1 and then briefly cover our outlook. I'll then finish with covering the specific actions we will drive in the back half that are fully in our control and are geared to move the needle. For Q1 drivers, I'll start with Calvin Klein. The world of underwear and jeans is a significant portion of Calvin's global revenues. When we spoke last, we had just launched our most innovative product franchise so far, the Icon Cotton Stretch Underwear for Men, with a viral cut-through campaign featuring Bad Bunny. It…

Thanks, Stefan, and good morning. My comments are based on non-GAAP results and are reconciled in our press release. As Stefan discussed, we were able to deliver our first-quarter results within the backdrop of a highly dynamic and uncertain macro environment, driven by the strength of our two iconic global brands and disciplined execution of the PVH+ plan. For the first quarter, we delivered revenue above our guidance largely due to the timing of wholesale shipments in The Americas, with an operating margin of 8.1% within our guidance range as we navigated an increasingly promotional environment. EPS came in slightly ahead of guidance driven by lower tax and interest expense. Additionally, we returned over $550 million to shareholders with the repurchase of 5.4 million shares of our common stock through previously announced accelerated share repurchase agreements and open market purchases. I will now discuss our first-quarter results in more detail and then move on to our outlook. As a reminder, as I mentioned during our Q4 2024 earnings call, beginning this quarter, we have evolved our reportable segments to be one, EMEA, two, The Americas, three, Asia Pacific, and four, a new standalone licensing segment. We filed an 8-K yesterday with the recast quarterly and annual segment data for 2023 and 2024. Revenue for the first quarter was up 2% on both the reported and constant currency basis. Starting from a regional perspective, our EMEA business returned to growth during the quarter with revenue up 4% in constant currency, including mid-single-digit growth in the wholesale business and a low single-digit increase in the direct-to-consumer business. Wholesale growth for the quarter was impacted by a shift in timing of shipments with Q2. Revenue for our European business was up 5% on a reported basis. In our Americas business, revenue was up…

Certainly. Thank you, Mr. Coughlin. Ladies and gentlemen, at this time, if you do have any questions or comments, please press 1. You can always remove yourself from the queue if your question has been addressed by pressing 2. Additionally, to get to as many questions as time permits, we do ask that you please limit yourself to one question. We'll go first this morning to Jay Sole of UBS. Jay, please go ahead.

Great. Thank you so much. Stefan, you mentioned that you've seen decreased traffic across many regions in the world and increased promotional levels. You also mentioned that your brands have strong product assortments and exciting commercial plans, but what gives you confidence that both brands, both Calvin and Tommy, still have good momentum with consumers, that they haven't lost momentum? That part of what maybe is explaining the change in the guide isn't something of that nature. Thank you.

Yes. Thanks, Jay, and good morning. What is so clear to us, and especially when the consumer backdrop and the macro gets worse, is everywhere where we lean in and tap into the consumer love for Calvin Klein and Tommy Hilfiger, and then we line up through the PVH+ focus, increase newness and innovation in product, cut-through marketing, stronger wholesale and in-store execution, we really win, and we win big despite that macro. So take the biggest product innovation in Q1 in Calvin Klein, one of the most promising proof points is the new product innovation in underwear. So if you look at what we did there, we leaned into the biggest category in Calvin Klein, men's underwear. We leaned into one of the biggest product franchises, and then we put unprecedented newness and innovation into it. Innovation that's not in the markets, we were first. Then we amplify that with one of the most streamed artists on Spotify, Bad Bunny, and yes, it becomes viral. But what's really interesting is in this backdrop, it drove 25% growth within that big franchise. So in one move, we moved one of the top three product franchises for the biggest category and drove 25% growth. Then what might be missed by some, but not by the consumer, is we also increasingly start to introduce denim next to underwear because that's a really big iconic category for Calvin Klein as well. The improved and innovated fashion denim in Q1 drove growth of 14%. So what you see in the back half, what you see us doing, what our focus is 100%, is expanding and scaling this across bigger and bigger parts of the business. We are moving from this investor call to an all-hands call with our 20,000 associates, and my focus there…

Got it. Thank you so much.

Thank you. We go next now to Michael Binetti of Evercore.

Hey, guys. Thanks for taking our questions here. Nice job with the relaunch of the Formula One business this week. I was wondering, Zac, can you just reorient us a little bit around the buckets and the cost-out efforts that we talked about last quarter? What were they? I think the size of them, if any timing has moved around. Just remind us, I think many of those stretch beyond 2025 into 2026. To help us calibrate the models here. Then just backing up, are there any concerns as you look at some of the unevenness in the operations or around Calvin Klein here recently that some of these cost saves are cutting into the muscle or contributing to operating volatility in the past few quarters?

Yes. So let's start. Hi, Michael. Good morning. So let's start with the Calvin Klein operational challenges that we experienced from bringing the Calvin Klein global product capabilities together, which is an absolutely critical needed move to unlock the full value of the brand going forward and win with this kind of product newness and innovation we just talked about. What's exciting to see is that the team has worked through it in a way that the biggest effect is soon behind us. We are improving for fall 2025 already in the back half of this year, which starts now basically. We are improving it significantly. For spring, another really big step up. Then very soon, we start the product season from scratch for fall 2026. Then we start from strength. So, very clear, and the way we see that we are making this progress is that we see that for spring 2026, we see that we are on time on both brands. We see that the go-in margin is improved versus last year significantly. So see the KPIs, we see that yes, they had to take too much time in the first season to sort out the go-to-market process, but now I'm very much encouraged by also amplified by David coming in with deep operational and brand experience to connect both the creative strength that we already have to scale that, but also secure a systematic repeatable operating model.

Yes. Good morning, Michael. Yes, I think maybe on the cost piece, maybe I'll try to put that into the context of the bigger financial picture first. So in the first half, as we take a look at the financial outlook, as we said, it's really a gross margin story. I say that because in the first half, we are growing revenue, which is a big commitment for us this year. We are seeing SG&A percent of revenue coming down. So that's a good strong foundation. I described in the prepared remarks what's happening around gross margins. So we have that picture. The second quarter is largely going to be consistent with that. So that sets up the baseline. I think for us, and this is where the cost actions come in and what's important is the bridge to the double-digit operating margins in Q4. That's actually pretty simple and very much in our control. The first and most obvious is the general seasonality of our business. Due to holiday sales, last year, for example, Q4 revenue was 14% higher than February. With that, we get really powerful leverage. Beyond that, though, it comes to the value driver five, our cost actions that we've been talking about for a couple of quarters now. We've made very good progress. No slides on timing. I think to remind everybody the pillars, a couple of them that are directly in our control and we're already seeing significant progress on. So a decentralized technology mapping into a single global tech stack, taking advantage of both our scale, getting cost out, and coming out with significantly better outcomes. Also around the global logistics network with a big focus on increasing capacity utilization in The U.S. We're already seeing some progress on those in the first half. That is why you're seeing the SG&A deleverage even in the first half. As we move into the back end of the year, the totality of all of the actions we're still on track to deliver between 200 and 300 basis points of SG&A leverage reductions out of that. 200 basis points of that delivered by the fourth quarter of this year compared to the fourth quarter of last year. So the combination of those two leaves us feeling very good about the work we're doing around cost and where that points us to from a trajectory for the second half and leaving the year with double-digit operating margin again.

Okay. Thanks for the detail, guys. Appreciate it.

Thanks.

Thank you. We go next now to Dana Telsey of The Telsey Group.

Hi. Good morning, everyone. I wanted to dial in on tariffs and how you're thinking about tariff impact as we go through the year. On the mitigation strategies, believing in that $65 million of unmitigated impact, how are you thinking about it? What are you seeing in terms of price increases for each brand in The U.S.? And impact on margins? Thank you.

Thank you, Dana. Good morning. Let me start by creating some context around what the tariff situation means for PVH Corp. It's important to just note that 30% of our business is in The U.S., 70% of our business is international. We have a much higher international share than most of our competitors. As Zac mentioned, we have identified $65 million in unmitigated tariff effects for the rest of the year. Just like everyone else, we are working through our mitigating actions in this fluid environment. We have the strength of having Calvin and Tommy, which are two of the strongest and most beloved brands. That is strength when it comes to all the different parts of the value chain, the partnership with our sourcing to the partnership with our retail partners. Zac, do you mind giving a little bit more detail on what that means?

Yes. Stefan mentioned our two biggest mitigation advantages are the globally diversified revenue base and our strong global supply base. Beyond that, we are working through several other specific strategies. First, we're leveraging these deep long-standing supply chain relationships to identify ways we can further optimize sourcing and production costs, sharing the impact of tariffs with partners where possible. Beyond that, Stefan mentioned, we remain laser-focused on perceived value for our consumers. We will evaluate strategic discount reductions to mitigate potential tariff impact. Lastly, consistent with our normal course of business, we're also ready to take calibrated and targeted pricing actions where we have particular pricing power.

Thank you. We'll go next now to Brooke Roach of Goldman Sachs.

Good morning, and thank you for taking our question. Stefan, you've talked about the acceleration of some of the innovative and creative product into the back half and also the opportunity to take some strategic pricing reductions, pricing increases, whether that's a reduction of discounting or otherwise. Can you help us square that with the outsized levels of promotions that you're expecting in the near term? What do you have to do to make the brand more resilient from a pricing perspective as macro impacts start to weigh on the consumer? Thank you.

Yeah. Thanks, Brooke. It comes back to doing more and scaling the impact of the PVH+ execution in how we build strength in the product in the key growth categories, in putting innovation into the hero products. If you look at Tommy, I took a Calvin example before, which is quite powerful with the biggest product introduction in a decade with plus 25%. That's a great example, plus the 14% increase in denim. We're strategically sharpening our focus to do more and more of that, which has a bigger and bigger impact on the total business. But also for Tommy, we see it in key categories like sweaters, where we lean into our iconic cable knits. We expand that, and we put new better fabrication. We innovate in colors. We connect that then to the lifestyle of Tommy, and as Formula One is a great lifestyle, a great anchoring point for the lifestyle, because then we take the Tommy love for the brand and we connect it to those innovations in key product categories, and then we connect it to the sport of Formula One. Then we follow-up, and that's something that's worth saying as well. For the back half, we are putting more marketing spend in a more focused way to drive traffic to do what you just asked, Brooke, which is to mitigate more and more of those tougher headwinds, because it's the way we operate the business is that it's 100% almost fully in our control and expanding that impact.

Thanks so much.

Thank you. We'll go next now to Matthew Boss of JPMorgan.

Great. Thanks for all the color. So, Stefan, maybe to break down the step down in top-line trends that I know you cited to start the year? And then the leg lower that you cited here in May in The Americas, or the need for additional promotional activity to hold the trend line. I guess, how much of this do you attribute to the macro backdrop relative to execution? What's the pace of improvement that you see as reasonable? And then, Zac, could you just walk through the progression or maybe dig a leg deeper into the embedded gross margin for the second quarter versus the back half of the year and just drivers of gross margin recapture if we think about next year?

Yes. Thank you, Matt. What we have seen over the past three months, as we mentioned, is a tougher consumer and macro backdrop, especially in North America. We see the consumer sentiment coming down, translating into tougher traffic trends to the sector, and then impacting us and impacting us in-store traffic more than e-commerce. What we also see is that the China backdrop from a consumer sentiment perspective is continuing to be tough and coming down. Even though we are able to execute with strength in the big consumer moments. When we look at today, how much the North America consumer sentiment and the tariff effect plus China, we are not yet in a place where we can fully offset that. But why I say not yet is because one, the actions we're taking in the back half are stronger and are expanding the PVH+ impact. It also connects to what Zac said, that in the back half, we will have most of the 200 basis points of cost savings from the cost initiatives that we have been on now for quite some time, but it's really kicking in, in the back half. We have good visibility to seeing that that is coming into place. Then we also see that we are resolving Calvin's operational challenges significantly improved in the back half. When I look at the 2026 product season, both brands are on time, both brands have a positive gross margin, going margin starting 26%. So that's how we see that we are able to keep the revenue growth because we said we were going to drive back to growth this year. We're able to keep the revenue growth going for this year. We are taking a margin hit that we are in the beginning of this not able to fully compensate. Then coming out of the year, we are back out.

Alright. Thank you, Matt, to the second part of your question. Maybe I'll answer it looking at our gross margin percent for the full year. So the original plan for the full year gross margin is down around 100 basis points. Half of that was tied to the G3 business model transition, and about half of that original decrease was tied to the mandatory Calvin Klein issues we've talked about here. Now as we look to the full year being approximately 250 basis points down, that extra 150 basis points has two main drivers. 50 basis points is due to the mitigated impact of tariffs. The other 100 basis points is an increase in the promotionality that we were just talking about. Just to put that in context, that 100 basis points includes all three of those components Stefan's mentioned here. So there is an increase tied to The U.S. declining macro consumer sentiment and lower traffic. There is a tougher consumer backdrop in Asia, in our particular situation in China. Then third is the sort of a bigger impact than we were planning initially around the CK operational challenges. So I think that as we take a look there in the second half, the progression, we do expect to see sequential improvement in the CK operational issues. So that's carrying longer than the second half and will improve significantly, especially in 2026. But we do expect in the second half. We are planning for that promotional activity to maintain through the rest of 2025. So no sequential opportunity there.

Then exiting '25 into '26, we do expect to be putting the Calvin Klein challenges fully behind us during 2026. So that's another step forward that we'll see. Beyond that, with tariffs, over time, we do expect that we'll be able to work towards full mitigation of the unmitigated impact. So that will be improving over time as well. Then we'll adjust to whatever the broader macro environment is just like we've done this year.

Great color. Best of luck.

Thank you, Matt. We have time for one more question.

Yes, sir. We'll take that question now from John Kernan of TD Cowen.

Great. Thanks for taking my question. Zac, what are you planning in terms of the promotional impact on gross margin for the back half of the year? Looks like the 60 basis point impact on gross margin from tariffs in Q2 implies a pretty steep impact from promotions and maybe a few other impacts. But I guess how have you reserved room for a higher promotional environment in the back half of the year within current gross margin guidance?

Yeah. Thank you for the question. I would say consistent with what we talked about a little bit. We've got the impact for the full year we've put in is around 100 basis points tied to the increased promotional environment. That impact is sort of what we saw through the first quarter. We planned through into the second quarter, and we've assumed that level remains for the rest of this year. We have overall over the last couple of years been quite consistent with the uncertainty of potential outcomes. We maintained where we are, call the broader macros there, and that includes assumptions around the promotional environment. So I think we are planning for that to continue the trend that we've seen so far this year through the rest of the year.

Understood. Thank you.

Alright. With that, we want to thank you for following along on the multiyear journey that we are on to tap into the full potential of Calvin Klein and Tommy Hilfiger. We want you to know that we are responding to the moment, we're leaning in to sharpen and expand our very strong PVH+ impact, because when we tap into that iconic brand love for Calvin and Tommy, and then we do it super focused with connecting innovation in product, cut-through marketing campaign, investing behind it, driving efficiencies behind the scenes, but then letting the consumer feel that we really cut through, and that's what we are continuing to do. Thank you.

Thank you. Again, ladies and gentlemen, that will conclude today's PVH Corp. First Quarter 2025 Earnings Call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.