PVH Corp.

Good day and welcome to the PVH First Quarter 2020 Earnings Conference Call. At this time, I would like to turn the conference over to Ms. Dana Perlman to read the Faith Harbour Statement. Please go ahead, ma'am.

Thank you, operator. Good morning, everyone, and welcome to the PVH Corp. First Quarter 2020 Earnings Conference Call. This webcast and conference call is being recorded on behalf of PVH and consists of copyrighted material. It may not be recorded, rebroadcast, or otherwise transmitted without PVH's written permission. Your participation in the question and answer session 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's view as of April 1, 2020, 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 that is the subject of this call. These risks and uncertainties include PVH's right to change its strategies, objectives, expectations, and intentions and its need to use significant cash flow to service its debt obligations. Significantly, at this time, The COVID-19 pandemic continues to have a significant impact on the company's business, financial condition, cash flow, and results of operations. There is significant uncertainty about the duration and extent of the impact of the pandemic. The dynamic nature of the circumstances means what is said on this call could change materially at any time. Therefore, the operation of the company's business and its future results of operations could differ materially from historical practices and results or current descriptions, estimates, and suggestions. PBH does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimates or suggestions 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's first quarter 2020 earnings release, which can be found on www.pvh.com and in the company's current report on Form 8K, furnished to the SEC in connection with the release. At this time, I'm pleased to turn the conference over to Mr. Manny Tirico, Chairman and CEO of PVH.

Good morning. Everyone joining me on the call is Stefan Larsson, our president, Mike Schaefer, our chief operating and chief financial officer, and Dana Perlman, our treasurer and senior vice president of business development and investor relations. I'd like to take a moment and address all that is going on around us. Most recently, we have seen our country ripped apart by the lethal effects of systemic racism. This has caused too many instances of social injustice in our country. At PVH, we are guided by our purpose, which is to drive fashion forward for good. And one of the best ways we can do this is to fight for racial equality within the walls of our company, throughout our industry, and in society at large. We are creating forums for listening and learning. We are also updating our talent acquisition practices and training development programs to create new opportunities for growth so that we can increase the representation across all levels and support our black associates for success in attaining leadership positions across our company. Furthermore, the coronavirus pandemic has dramatically impacted our business over the past few months. The health and well-being of our associates, consumers, partners, and the communities where we operate remain our top priority. Throughout our almost 140-year history, we have been faced with many challenges, and I'm confident that we will successfully navigate this backdrop as well. We have strong financial discipline, A healthy, strong balance sheet with $1.8 billion of overall liquidity and a wide range of global growth opportunities driven by Calvin Klein and Tommy Hilfiger. Our brand and our people are our two greatest assets, and they were both on full display during the first quarter. Our associates and business leaders truly demonstrated their passion, dedication, and agility and I would like to thank each and every one of them for helping drive our business forward despite the challenges that COVID-19 pandemic presented. From working to first efficiently closed stores and then putting plans in place to successfully reopen stores around the world. to those in our warehouses that have kept our businesses moving forward and those working from home who reach truly a feat and I cannot thank everyone enough for their resilience and commitment. Our iconic Calvin Klein and Tommy Hilfiger brand has continued to experience excellent consumer response over this period, demonstrating strong brand health and loyalty during the crisis. Each brand attracted new consumers visiting our sites for the very first time with good conversion and strong purchasing behavior over this period. Operating a diversified portfolio of brands with strong geographic diversity has always been one of our strong suits. But now more than ever, we have benefited from the diversification of our business. For example, the foresight and expertise we gained from our Asia teams have been incredibly valuable as we navigated the coronavirus across other regions. This helped us get ahead of key decisions, such as adjusting our marketing campaigns, the ways to engage with consumers and drive our digital business during the temporary store closures, as well as how to safely and most effectively reopen our stores once restrictions were lifted. Additionally, we were able to reallocate resources to better support what was open during this period, focusing on how to best fuel our own and operating e-com sites and also working with our third-party digital partners. These competitive advantages Our people, our brand, and our diversified business model are what give me great confidence in the long-term health of our business. And now moving on to the first quarter financial results, we entered 2020 with strong brand health and increasing momentum across Tommy Hilfiger and Calvin Klein in the majority of regions where we operate. Unfortunately, COVID-19 had a significant impact on our business during the first quarter, as our stores and our wholesale partner stores were closed for over six weeks on average during the quarter. This resulted in revenue in our own stores being down 50% to 65%, depending on the region, while our wholesale revenues declined about 40%. and shipments to our wholesale partners were dramatically reduced across all markets. Our digital businesses, both our own and with our wholesale partners, had outstanding performance and became our number one most critical channel for business during the quarter, with our European digital businesses being the strongest outperformer of any of our markets. On the operating margin side, our gross margins and SG&A rates were under significant pressure as well. While we tackled every expense line, including marketing, and made difficult decisions relating to payroll expense, most of these measures didn't get enacted until the end of the quarter. In addition, we recorded about $100 million in reserves for future inventory markdowns and accounts receivable write-offs. Given this operating environment, we have also been addressing our inventory levels to reflect the current demand picture and are working closely with our suppliers in the event of any meaningful shipping disruptions or delays. Additionally, during the quarter, our licensing partners were significantly impacted with business disruptions as well. We will continue to work closely with our licensing partners throughout the year as we are planning for their businesses to experience similar pressure to what we are seeing in our business. With our long-term vision in mind, we took prudent and proactive measures to strengthen our balance sheet, preserve our liquidity, and improve our financial strength to come out of the COVID crisis as a stronger company. Overall, we ended the quarter with $1.8 billion of liquidity. Our CFO, Mike Schaefer, will discuss the specific steps we took to strengthen our financial position in his comments. As we navigate through the recovery phase, we will continue to evaluate how we can further strengthen our balance sheet, optimize our businesses, and identify efficiencies which will allow us to operate smarter, and ultimately enhance our operating margin profile, which we believe will drive enhanced long-term returns for our stockholders. I believe that these actions in totality will position us to successfully navigate the COVID-19 pandemic and emerge an overall stronger competitive position. Before I hand things over to Stefan to go through our region and brand initiatives, I would like to thank Dan DeGreta, who served as CEO of Tommy Hilfiger and PVH Europe for all his contributions to the company over his many years of service. I also want to congratulate Martijn Hegman on his promotion, and I am confident that Martijn will successfully lead Tommy Hilfiger and PVH Europe into the future as we capitalize on significant future growth opportunities for our business. And with that, I'd like to turn it over to Stan.