PVH Corp.

Please stand by. Your program is about to begin. If you need assistance during the conference today, please press star zero. Good day and welcome to the PVH third quarter 2022 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Cheryl Freeman, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to the PVH Corp. Third Quarter 2022 Earnings Conference Call. Leading the call today will be Stephon Larson, 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 constitutes your consent, having anything you say appear in any transcript or replay of this call. The information to be discussed includes forward-looking statements that reflect PVH's view as of December 1, 2022, 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 include PVH's right to change its strategies, objectives, expectations, and intention, and the company's ability to realize anticipated benefits and savings from divestitures restructuring and similar plans such as the planned cost efficiency action announced in its second quarter earnings release and its 2021 sale of assets of and exit from its Heritage Brands business to focus on its Calvin Klein and Tommy Hilfiger businesses. Significantly, the COVID-19 pandemic, global inflationary pressures, the strength of the U.S. dollar against most of the foreign currencies in which PVH does business, and the war in Ukraine continue to have impacts on PVH's business, cash flow, and results of operations. there is significant uncertainty about the duration and extent of these impacts. As a result, 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. PVH 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. Reconciliation to GAAP amounts are included in PVH's third quarter 2022 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 this release. At this time, I am pleased to turn the conference over to Stefan Larson.

Thank you, Cheryl. Good morning, everyone, and thank you for joining our call today. We are pleased to share that we delivered financial performance in the third quarter ahead of the guidance we provided for both the top and bottom line on a non-GAAP basis. Top-line results exceeded our expectations on a reported and constant currency basis, and the underlying growth, excluding the impact of currency and the Russia-Ukraine exit, was plus 9% in the third quarter, driven by better than expected growth rates for both Tommy and Calvin. Delivering this strong performance in the face of ongoing macroeconomic challenges is a testament to our disciplined execution of the PVH Plus plan and the strength of our two global brands. We managed our business in a prudent and disciplined manner, and underlying revenue growth combined with an increased cost focus drove the outperformance of non-GAAP EPS. Our international businesses continue to execute very well across both brands, with increased product strength and strong consumer engagement driving performance, even in the face of a challenging macro backdrop in Europe and ongoing COVID restrictions in China. And with respect to North America, we are encouraged that our business is starting to show green shoots. although we recognize that we still have work to do to win more with the domestic consumer. We have doubled down on improving our own execution, and this quarter we delivered double-digit growth for Tommy & Calvin, led by our D2C stores, even against the soft consumer backdrop and intense promotional environment. Given that we're in the middle of the very important holiday season, I've been traveling extensively with our leaders around the world This past Thanksgiving week, I was with our North American leaders in several of our US markets. Before that, I spent a week in Asia with our leadership team visiting both Korea and Japan. In a week's time, I'm heading to Europe to spend time with our leaders there. Being out in the markets this holiday season, I feel very good about our performance and the hard work our teams put in to make the PVH Plus plan come to life with the consumer. There is a lot of progress being made, and I want to take the opportunity to say a big thank you to our leaders and teams. Your work is making a big difference. One market visit that stood out over the past few weeks was our visit to Korea. This was my first time returning to Korea after COVID. where I could in person experience the strong execution of the PVH Plus plan and our Calvin Klein brand in the market. Calvin in Korea is a great example for how executing the PVH Plus plan will drive strong impacts over time across all regions and markets. In Korea, we have taken the key growth drivers of the PVH Plus plan and made them come to life in a uniquely strong way, driving year-to-date revenue growth of plus 22% in local currency. We have accomplished this by leaning into our key product growth categories, like underwear, denim, outerwear, big categories where we have the right to play to win. Within each of these, we have then focused on winning with the best hero products in the market, one concrete example being the modern cotton underwear program. We've then connected this strong product focus with some of the strongest talent in the market, like Jenny Kim, Ho Yun Jung, Son Heung Min, to name a few. Finally, we make all these parts come to life on social media and in the consumer experience, both online and in stores. The results from executing this, both brand and financial, have been outstanding, generating increasing brand relevance double-digit growth in revenue with significant pricing power and gross margin expansion. Since the PVH Plus plan growth drivers are the same across our brands and all regions, this career example is so valuable because it shows how we deliver results through disciplined execution of the plan. As a reminder, our PVH Plus plan is about connecting our two global brands closer to where the consumer is going than any time before through five growth drivers. Winning with product, winning with consumer engagement, winning in the digitally led marketplace, developing a demand and data-driven operating model, and driving efficiencies while investing in growth. Let me share a brief update on where we are within each of these. In winning with product, our hero product strategy continues to be key to our plan, and we have seen a strong response to our product assortment from both Calvin and Tommy consumers. At Tommy, we're globalizing our strong product assortment developed by Tommy's global product engine based in Europe, building capabilities that deliver products that meet unique local demand across the world. For spring 23, Nearly 90% of the assortments as our stores in North America will be aligned with global bestsellers. At the same time for Calvin, we remain focused on doubling down on the key essential products the brand is known for and staying true to the brand's DNA. We are connecting our hero products through winning with consumer engagement. We're connecting our brands together with hero products with culturally relevant talent. For Tommy, we continue to build on our ongoing partnership with Shawn Mendes, who's a big fan of the Tommy brand and coupled that with brand heat driving moments such as Tommy's recent fashion show at New York Fashion Week. For Calvin, we're continuing to drive strong consumer engagement through clear product stories centered around hyper-relevant talent. We're executing our strategy to win in the digitally-led marketplace, by building direct-to-consumer connections, led by our own digital business to drive engagement. For example, CK.com in North America recently successfully launched its new platform with enhancements including faster site speed and strong product imagery. In addition, we are focused on fueling high-quality growth by working with best-in-class digital partners. With David Savman having just joined the PVH team as our Chief Supply Chain Officer, we are actively working to improve our supply chain and build a demand and data-driven operating model. We are investing in important building blocks to enhance our end-to-end planning capabilities to better match inventory to consumer demand. Lastly, we remain focused on driving efficiencies and investing in growth. As we continue to proactively managing what's within our control, we increase our focus on ensuring that our cost structure match the external demand environment. Through disciplined execution, we control our costs, which has translated into solid operating margin performance at the same time enabled us to invest in the PVH Plus gross drivers. The PVH Plus execution and investments we are making today of building the foundation for long-term growth. This is where we remain intensely focused. Over time, the macro challenges we are navigating today will abate, and we will then be in a strong position to further capitalize on improved external conditions. During the third quarter, despite the challenging consumer sentiment, which has become further challenged over the last few months, particularly in North America, we feel good about our team's execution and how well we delivered, a theme we expect to continue for the fourth quarter. So looking ahead, based on our underlying performance trends, we are reaffirming our revenue and EBIT margin guidance and increasing our EPS guidance for the full year, which incorporates our planning for a more promotional environment in the fourth quarter and continued focus on prudently managing our expenses. Our guidance is based on our current view on the macroeconomic environment, and we continue to carefully monitor developments and potential impacts on the consumer for each of the regions in which we operate. We also feel good about the start of the holiday. Through the Black Friday weekend, performance has been in line with our expectations and we are on plan. In Europe, where Black Friday has become increasingly relevant, we drove strong performance across all channels for both Tommy and Calvin, which included strong increases in traffic. More than ever, great brands such as ours stand out during this important shopping period. And for North America, against the backdrop of soft consumer sentiment and a highly promotional environment, we executed well. We have significantly better in-stock levels versus last year, and we saw better conversions in our stores, along with some improvement in international traffic. We expect that the strength of our product and better in-stock levels of Hero product will continue to support performance in Q4. With respect to leadership for our North America businesses and the Calvin Klein Global brand, we are making strong progress on the respective searches and look forward to sharing an update shortly. Now turning to our regional performance and how we are executing our PVH Plus plan across each region. Starting with Europe, both our brands remain strong and continue to resonate with the European consumers, with both Calvin and Tommy showing improvements in relevance and consideration compared to last year. Adjusting for the impact of our exit from the Russian market and FX, we generated mid-single digit growth on an underlying basis, consistent with our growth in the second quarter and achieved a record 1 billion euros in revenue for the third quarter. This is on top of very strong growth the prior year. Product elevation remains a key priority with a positive impact on ASPs for Tommy. And for Calvin, we remain focused on growing the CK lifestyle through elevated commercial collections connected to a strong consumer experience and marketing campaigns. Even as we build on our brand strength, we continue to closely monitor the headwinds in the macro environment and the related impacts to consumer spending, particularly in the UK and Germany, where the pressures of high inflation and energy costs are the greatest. Southern Europe continues to perform very well. Demand in our future order books across brands continue to hold with the spring 2023 season firming up to be high single digit growth on top of double digit growth in spring this past year. Moving on to Asia Pacific. This past quarter, we continue to see strong momentum with all markets demonstrating solid local currency growth, excluding China, The region demonstrated nearly 30% year-over-year growth, inclusive of a 15% headwind from foreign currency. Sales growth was driven by double-digit growth in Australia, Japan, Korea, and Southeast Asia. Despite restrictions, we drove mid-single-digit local currency growth in China. In addition, e-commerce delivered solid double-digit growth led by China, Korea, and Australia. as we continue to expand our presence on the most important digital growth platforms in the region. As I shared in my Korea example earlier, across the region, we are connecting our PBH Plus product and consumer engagement initiatives all the way to the stores where we meet the consumer. We saw strong performance for our fall collections, and we continue to build brand heat and strong engagement, particularly around key holidays. We're delivering strong hero products, coupled with ongoing locally relevant product collaborations. These efforts are driving strong growth in underwear, led by new silhouettes and functionality, outerwear driven by buy-now-wear-now transitional products, as well as denim fits that resonates with the Gen Z consumer. During the quarter, we drove strong e-commerce performance for key consumer moments, such as the Chinese Valentine's Day. And most recently, we delivered double-digit GMB and comp growth during China's 11.11 activation, outperforming the industry. Importantly, both Tommy and Calvin gained market share and moved up the rankings on Tmall. In addition, both brands' live streaming events achieved a record 10 million views, and each also delivered a record 100 million RMB GMB, which very few brands achieved. Our collaborations with Tmall, with product development led by our innovation center on the platform, continue to fuel our results. We are leveraging data and insights in these collaborations to quickly be able to read and react and replenish these products to maximize sales. We've also continued to rationalize our assortment to improve SKU productivity and inventory efficiency, while simultaneously enabling the region to activate near and onshore product supply chain for speed and margin expansion. We remain excited about the progress and underlying performance in the region and the future wide space opportunity, particularly digital, which remains underpenetrated. Lastly, for North America, we remain in the early phase of our multi-year journey to unlock the significant opportunity in the region we are doubling down on driving improved execution through our PVH Plus plan. Most importantly, we're seeing positive performance indicators, especially in our D2C stores, underscoring the effectiveness of the PVH Plus execution. As we have moved through the year, even with external challenges, we have driven sequentially improved domestic consumer comps, which returned to pre-pandemic levels in the third quarter. In the third quarter, D2C stores delivered double digit positive comps driven by higher traffic. We continue to make step by step progress, starting with product and our assortment. As we shared with you last quarter, we have been allocating more inventory to select doors to showcase the full assortment of our most important hero products. This past quarter, we further scaled our learnings to additional stores. We significantly improved inventory levels in these hero product programs and improved in-store experience to generate stronger results. This select group of stores continue to show a very strong sales lift against control doors with higher transactions and AUR. For Tommy, our number one category, men's polo, significantly improved to achieve 2019 levels during the third quarter. We are seeing a lift as traffic and inventory positioning improves. Our global bestseller initiative, which puts the best product from our global design center into North America, continued to grow its impact in the third quarter, up from 50% in the second quarter, and we're seeing strong performance from these products. In wholesale, we are deepening the work we do together with our key wholesale partners. We are re-merchandising doors, we'd improve stock levels, and we will intensify field team coverage and create clearer product presentation. In addition, we're seeing good improvement in on-time delivery. A significantly larger portion of spring orders are projected to be on time compared to the fall and holiday season. Lastly, as we just announced, we're extending our licensing agreement with G3 in North America, and we're doing that in a way that over a multi-year time period, Step by step, we will transition our business back in-house. We are grateful to G3 for their partnership and long-term commitment to Calvin Klein and Tommy Hilfiger. And they will continue to be a key partner as we work together over the next few years to internalize the direct operation of these businesses. This is an important long-term step to unlock the full potential of our brands in North America. By bringing these core product categories in-house over time, we will be able to draw on the power and expertise of our global brand teams and have them fully connected to the demand-driven supply chain we're developing. Next, I'll share a few key global brand highlights on how we are bringing both brands to life for the consumer, beginning with Calvin Klein. We have continued to drive strong brand relevance through our exciting brand campaigns featuring aspirational talent for the millennial and Gen Z consumer. In September, we launched Calvin or Nothing, a new underwear campaign starring actor Maya Hawke and Belgian professional footballer Romelu Lukaku. The campaign channels the brand's iconic, impactful aesthetic and featured the latest underwear offerings. On Instagram, where Calvin has over 22 million followers, the campaign exceeded our expectations and outperformed our engagement rate benchmarks. Most recently, ahead of the World Cup, Calvin Klein tapped soccer players Trent Alexander-Arnold, Anthony Robinson, Kai Havertz, Rich Arlisson, and Virgil van Dijk in the latest installment of the campaign, expanding on the strategy of working with culturally relevant, of-the-moment talent with global appeal. In addition, Calvin Klein Jeans launched a capsule collection and campaign in partnership with leading European online retailer Zalando. The campaign launched first for Zalando Plus members, a loyalty program that gives consumers early access to new releases. Before becoming available on Zalando, CalvinKlein.com and Calvin Klein retail stores in key European countries. In Asia, as I mentioned earlier, we leverage mega talent to drive brand relevance by featuring Jenny Kim, Jessica Jung, Ho-Yoon Jung, Park So-Jeon, and others in images that captures the versatile nature of this season's Calvin Klein offerings across the region and increasingly globally. Turning to a holiday, we recently launched our curated gift guide, which includes iconic styles of underwear and apparel, focused on elevated classics for going out and super soft layers for staying in. In addition to our brand-driven holiday campaign, through our brand ambassadors and collaborators, we will pulse out holiday content to drive relevance and engagement throughout this important shopping period. Moving on to Tommy Hilfiger. Our marketing initiatives in the third quarter delivered brand heat. brand campaigns, and immersive experiences, where the highlight was our return to New York Fashion Week, which kicked off with a multiverse Tommy Factory runway experience that launched our new Tommy Hilfiger monogram collection and included a star-studded guest list, generated global visibility and strong consumer engagement. We generated approximately 6.2 billion impressions from August to October, and approximately 27 million social engagements over the same period. The Tommy Factory runway show ranked the number two on the list of the most talked about shows in New York, generating significant media interest, with the most brand mentions around inclusivity, American, sustainable, compared to other top participating brands in the New York Fashion Week. The brand campaign this fall generated 1.1 billion social media impressions and 44 million in organic reach. The TikTok video featuring Tommy Hilfiger is our best performing video on the platform to date. In addition, we generated strong consumer engagement, reaching 14 million followers on Instagram and drove strong engagement on the platform. The brand has seen strong consumer demand following the launch of Tommy Hilfiger Monogram. In Europe, the campaign featuring celebrities such as Kate and Lila Moss, Travis Barker, John Batiste, and Anthony Ramos drove a higher sell-through rate, twice that of the rest of the fall collection range, with double-digit increases in ASP and very strong retail activations. We saw incredibly strong impressions and share of voice in Asia and North America as well. In addition, as part of the Tommy Hilfiger Monogram Collection, the brand collaborated with British designer Richard Quinn on a limited edition capsule which highlights the refreshed logo and received exclusive Tier 1 retail distribution globally, including French premium retailer Printemps. We're excited about our upcoming holiday campaign and collection featuring American iconic styles with distinctive modern aesthetic inspired by Andy Warhol's factory, paying tribute to Warhol's famous parties and the joy of gift-giving during the holiday. The collection is available at Tommy.com, Tommy Hilfiger stores globally, and key wholesale partners. And for Tommy Jeans, the label is collaborating with Martin Rose for an Americana-inspired capsule collection with modern wardrobe essentials fusing streetwear style with prep details. currently available on tommy.com and Tommy Hilfiger stores globally. For both brands, we're looking forward to an exciting holiday season. In closing, I feel very good about the strong underlying performance we delivered in the quarter that enabled us to beat both our top and bottom line expectations. And I'm confident in our ability to deliver our full year commitments. And we are delivering this despite the macro challenges and volatility we're all navigating through. Looking forward, I'm incredibly optimistic for how, in a very disciplined manner, through the PVH plan, every quarter we will unlock more and more of the full potential of our two iconic brands, Calvin Klein and Tommy Hilfiger, across all our regions, leveraged by PVH as a high-performing global growth platform. We will be relentless in our execution of this. Before I turn the call over to Zach, I would like to again thank all our associates around the world for your hard work, important contributions this year, and I wish everyone a happy, healthy, and safe holiday season. I'll now turn the call over to Zach to discuss the financials in more detail.