PVH Corp.

Good day and welcome to the PVH First Quarter 2022 Earnings Call. Today's conference is being recorded. At this time, I would like to hand the call over to Cheryl Freeman. Please go ahead, ma'am.

Thank you, Operator. Good morning, everyone, and welcome to the PVH Corp First Quarter 2022 Earnings Conference Call. Leading the call today will be Stephon Larson, PVH's Chief Executive Officer, and Zach Coghlan, Chief Financial Officer. 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 June 1, 2022 of future events and financial performance. These statements are subject to risks and uncertainties indicated in the company's SEC filing 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, global inflationary pressures, and the war in Ukraine continue to have impacts on the company's business, cash flow, and results of operations. There is significant uncertainty about the duration and extent of the impacts of these events. 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 for current descriptions, estimates, and suggestions. PVH 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 2022 earnings release which can be found on www.pbh.com and in the company's current report on Form 8K 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, Cheryl. Good morning, everyone, and thank you for joining our call today. We are pleased with our first quarter performance, where we beat our guidance for both the top and bottom line. and our business experience continued strength and delivered strong underlying double-digit top-line growth. Through the disciplined execution of the PVH Plus plan, we are confident in the sustained momentum of our overall underlying business trends, and we are reaffirming our annual guidance for constant currency revenue growth, EPS, and a 10% debit margin. which includes maintaining our strong gross margins and speaks to the strength of our overall business. For the full year 2022, we will drive underlying double-digit top and bottom line growth. While we are mindful of the volatile overall backdrop, including continued temporary lockdowns in certain markets and new supply chain disruptions in China, the war in Ukraine and inflationary headwinds, We are prudently managing our business in a way that positions us to drive sustainable, profitable growth and create long-term value. Having introduced our strategic growth plan, the PVH Plus plan, at our recent investor day, this quarter's performance is just the beginning of our multi-year journey to unlock the full potential of our company and our two globally iconic brands, Calvin Klein and Tommy Hilfiger. As a reminder, the PVH Plus plan is first and foremost a growth plan. It's a brand, digital, and direct-to-consumer-led plan underpinned by five growth drivers. One, we will win with product as we create the best hero products in the most important product categories. Two, we connect those hero products to the consumer and the biggest consumer moments. with our iconic brands as platforms for creative partnerships to win with consumer engagement. Three, we will win in the digitally-led marketplace through our direct-to-consumer, digital-first approach, which creates the pinnacle experience of our brands while supercharging our e-commerce business across regions. Four, we are developing a demand and data-driven operating model that connects the planning, buying, and selling of inventory closer to demand to increase speed and flexibility. And five, we are focused on driving efficiencies and further investing in initiatives to fuel our growth, and at the same time, improving our overall cost competitiveness. For both of our brands, these five growth drivers come to life in our region. where we will fuel the market-leading strength we have in Europe, accelerate our growth in Asia, and unlock significant opportunity in North America. Through the PVH Plus plan, we have the focus and the tools to position PVH and our brands to win with the consumer and drive profitable long-term growth in both challenging and favorable macro times. Zach will provide more detail on our financial commitments and our financial performance for the quarter. Let me now turn to our regional update and share how the PVH Plus plan comes to life across each region. Starting with Europe, the region delivered double-digit revenue growth on a constant currency basis, supported by solid gross margin expansion from strong full-price selling and a higher share of direct-to-consumer as we further build on and fuel the market-leading strength the region has delivered over the last few years. Europe continues to execute in a systematic, repeatable way, generating consistent, profitable growth on an underlying basis, high brand awareness, and a premium positioning through its strong consumer base and leadership in digital. Despite the macro challenges with the war in Ukraine, the underlying business performance in Europe remains very strong, with performance closely aligned to the PBH Plus plan growth drivers, driven by strong product execution across both Tommy and Calvin, combined with a market presence that allows us to very closely follow where and how the consumer wants to shop, both in stores and online. You might recall that in the first quarter last year, the region faced significant temporary store closures due to COVID. This led to unprecedented growth in demand in our digital channels. We have since seen stores open up and the consumer going back very strong to brick and mortar for both Calvin and Tommy and online shopping behavior returning to a more normalized rate. Although importantly, still significantly above pre-pandemic levels. This is an example of what we do better than most others, to have the seamless flexibility to follow the consumer when they shift from one channel to another. Overall, sellout at full price remains very strong and shows the strong consumer demand for both Tommy and Calvin. We have seen strength in elevated product categories such as denim, shirts, woven tops, as consumers shop for more refined styles, while also further expanding lifestyle categories, such as footwear. We continue to experience strength in our future order books for both brands, with fall holiday 2022 now finalized and up double digits versus the prior year. Moving on to Asia. During the quarter, the region was heavily impacted by significant COVID lockdowns in China, which caused stores as well as warehouse closures, negatively affecting our retail, wholesale, and e-commerce business there. However, in markets such as Korea and Australia, we have seen a very strong sales recovery. As we continue to navigate COVID resurgences, We remain excited about the significant long-term potential to accelerate growth in the region. Our brands have a clear premium brand and product positioning, with the opportunity to grow further in all markets. We continue to lean in to further increase overall brand awareness, especially in China, where both Calvin and Tommy are underpenetrated. Under the surface, we made important progress across each of the PVH Plus plan growth drivers. We drove strong performance of hero products aligned with marketing support and locally relevant talent across all channels. We continue to drive engagement through impactful brand campaigns focused on key consumer moments. We're now gearing up for 618, and Chinese Valentine's Day with each of these events supported by unique product capsules. We are creating a consistent and seamless consumer experience no matter where the consumer shops in the marketplace. We're innovating by accelerating new platforms for digital commerce, including social, digital gamification, and personalization. We see success in consumer engagement and sales traction across various live streaming formats, such as on Douyin, where our events are generating significant increases in GMV and new followers. Tommy's A-plus live streaming ranked number one. And for Calvin's new fashion event, Calvin Klein jeans ranked top three among international menswear brands. And Calvin Klein underwear ranked top five. Returning to North America, as we shared at our investor day, both Calvin and Tommy remain highly relevant with today's consumer in the region. However, we recognize that we're on a multi-year journey to unlock the significant opportunities we have in the market. We continue to intensify our focus on the domestic consumer while international tourist traffic still remains significantly below pre-pandemic levels. As we previously guided, we continue to work through significant COVID-related inventory delays during the first quarter, and we expect our inventory positions to gradually improve in the back half of this year. Despite these challenges, we see important progress in the region, including We are driving significantly lower promotions and are able to sell through our products at higher AURs. We are driving increased product strength through our hero product focus and the consumer is responding positively to newness for both Calvin and Tommy. For Calvin, we continue to see strength in underwear in addition to the launch of new hero products such as the smooth cotton polo and tee, which have been highly successful. We also see great strength in refined categories like dress shirts, which are up significantly versus last year. For Tommy, we're increasingly leveraging our global bestsellers and essential styles with strong brand DNA and driving strong increases in AUR. We are highly focused on meeting our consumer where they want to shop our brands. For us, This starts with digital, where our target consumer is increasing their shopping the most, and direct-to-consumer, where we are in control of the whole brand experience. As we increasingly grow these channels, which we previously had underinvested in, this will over time rebalance our distribution footprint in a healthy and disciplined way to drive higher quality sales and long-term sustainable growth. Looking ahead, both in D2C and together with our key wholesale partners, we will better leverage the strength of our brands by building increased product strength, driving consumer engagement, and taking a segmented approach to each channel to position the region for more sustainable, profitable growth over time. An important specific driver for this already in place for the back half of this year will be our improved inventory position, which will enable stronger in-stock levels with our key hero products. Next, I'll share a few key global brand highlights and how we are bringing each brand to life for the consumer, beginning with Calvin Klein. Global brand awareness remains high with a continued increase in consideration to purchase. The brand's product strategy is rooted in creating the best hero product for our target consumers through high-quality modern essentials designed with purpose. Through this approach, we are creating newness while maintaining the iconic strength of our product and brand. We continue to focus on social platforms relevant to the younger Gen Z consumer. Last month, we introduced a global hashtag challenge on TikTok across 10 countries. generating significant viewership of the Only in My Calvins hashtag, while we continue to drive engagement through Instagram, which hit 22 million followers in May. In April, we launched CK1 Palace, a collaboration with London-based streetwear brand Palace, with record sellouts and high consumer engagement across the globe. Following a strategic marketing campaign, including short films, social media posts with key talent, at launch there were lines around the block at Palace stores in London, Tokyo, LA, and New York, emphasizing our global reach. Our approach generated high global influencer earned media value, and we sold through almost everything in the first week of the campaign. with 85% of the purchases by either new to our site or reactivated consumers. And these particular consumers drove greater value, spending over 60% more on average than our current consumer. The underlying drivers of this campaign are important proof points for the PVH Plus approach to driving consumer engagement. We connected our iconic brand to culture We created energy in key product categories and a halo around our most important hero products. And we attracted a young, digitally native consumer, supercharged e-commerce, and cut through the noise in medium. Lastly, I'm excited that Jonathan Bottomley will be joining the brand as Global Chief Marketing Officer. Jonathan is a transformational marketing leader with a proven track record, who has deep expertise across all aspects of marketing. He brings over 20 years of global experience from both best-in-class agencies and in-house, having been the global CMO for Ralph Lauren. Jonathan's leadership will help us win with the consumer and increase our brand relevance even further by leaning into the many strengths of the Calvin Klein brand. Moving on to Tommy Hilfiger. Similar to Calvin, brand awareness remains strong, and we have seen recent increases in relevance. Tommy's product strategy is rooted in his classic American-style essentials, always with a twist to make them current, generating a global and timeless appeal. From a consumer engagement perspective, our brand campaigns are focused on driving global relevance while also considering the regional differences today of consumers to always be relevant for local audiences. For example, in Europe, our Tommy Hilfiger Make Your Move and Tommy Jeans Play to Progress spring brand campaigns successfully drove consumer demand in key markets. In addition, to celebrate the Tommy Jeans pop-drop capsule and the Tommy Jeans TikTok account launch, we activated a number of global influencer partnerships with very strong results. Lastly, I'm excited to share our new Play It Forward long-term partnership with Canadian singer-songwriter Shawn Mendes, which builds on our iconic style and shared vision for a better future. The collaboration launched last month with Sean fronting the Classic Reborn campaign features a collection fully made from more sustainable materials from our iconic 1985 program. For Tommy, this collaboration also connects to the underlying drivers of the PVH Plus plan. This campaign stays true to our successful history of brand collaborations with people who shape culture. It amplifies our iconic hero products. It highlights our sustainability efforts and drives heat and relevance for the brand. Early consumer reads are very strong, with the highest positive sentiment score ever for a brand campaign, strong social engagement, and a direct positive impact on traffic to e-commerce and stores. In closing, for both Calvin Klein and Tommy Hilfiger, despite the volatile macro backdrop, we see our brands, business, and consumer remaining strong. As I shared at our recent Investor Day, having two, not one, but two of the most globally iconic brands in our sector is an incredible strength to build on, and I couldn't be more excited about the growth opportunities ahead. Through the PVH Plus plan, we are connecting our brands closer to where the consumer is going in a very strategic and disciplined way across all our three regions. Having the strength of these brands and a clear plan in volatile times is a big advantage. And what you will see from myself, Zach, and the full management team going forward is how we are leaning into the execution of the plan and continuously learn and improve to keep delivering on our commitments. And with that, let me now turn the call over to Zach to discuss the financials in more detail.