PVH Corp.

Good morning, everyone, and welcome to today's PVH first quarter 2024 earnings conference call. At this time, all 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 telephone keypad. Please note, this call may be recorded, and I'll be standing by should you need any assistance. It is now my pleasure to turn today's program 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 First Quarter 2024 Earnings Conference Call. Leading the call today will be Stefan 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 to 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 June 5, 2024, 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 intentions, and the company's ability to realize anticipated benefits and savings from divestitures, restructurings, and similar plans, such as the planned cost efficiency action announced in August 2022 and completed in 2023, the 2021 sales assets of and exit from its Heritage Brands menswear and retail businesses, and the November 2023 sale of the Heritage Brands women's intimate apparel business to focus on its Calvin Klein and Tommy Hilfiger businesses. PVH does not undertake any obligation to update publicly in a 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 first quarter 2024 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 am pleased to turn the conference over to Stefan Larson.

Thank you, Cheryl, and good morning, everyone, and thank you for joining our call today. I would like to start by thanking all our associates around the world for delivering another quarter of strong performance. Your passion, your creativity, and hard work makes all the difference. I feel very good about how we are delivering on our near-term commitments while steadily steering towards our long-term vision to build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world and make PVH one of the leading brand groups in our sector. We delivered our first quarter in line with our revenue expectations and achieved a stronger than expected double-digit EPS growth year over year. driven by our disciplined execution of the PVH Plus plan. We drove 3% growth in our direct-to-consumer business on a constant currency basis, which was offset by declines from a cautious wholesale channel, and our proactive strategic quality of sales initiative. Importantly, we drove 350 basis points of gross margin expansion and increased our EBIT margins by 80 basis points on a non-GAAP basis year over year, exceeding our guidance. Looking ahead, we are reaffirming our revenue outlook for the full year and raising our EPS guidance, reflecting the confidence we have to continue to execute with impact while being prudent given the continued macro headwinds. For the year, this translates directly into growth in Asia and North America, while in Europe, against the tough macro, our focus is on quality of sales to further strengthen our unique market position in the region for long-term brand accretive growth. In all that we do, building brand desirability for both Calvin and Tom is the most important. and it is the foundation to all five of our growth drivers. It's exciting to see how much traction our PBH Plus plan execution is already achieving in the consumer-facing parts of the plan. We now have multiple proof points showing how we consistently, in a systematic and repeatable way, drive some of the strongest engagements in the industry, all by going back to the unique brand DNA of each of our brands and connecting them to what's relevant today. Calvin is driving some of the highest consumer engagement in the history of the brand, fueled by cut-through campaigns with globally relevant mega-talent. We saw the impact of this work earlier this year with the launch of our spring campaign featuring Jeremy Allen White, and we're excited to build on this strong momentum as Calvin's global product engine takes hold. Tommy is also cutting through on a new level and increasingly participates in the most relevant cultural moments in the world, connecting back to the brand's classic American cool DNA and making it hyper-relevant for today. Tommy's return to New York Fashion Week was named one of the top 10 fashion shows of the season globally. And at the Met Gala, Tommy dressed all eight members of K-pop band Stray Kids for their first appearance on the Met steps, and generated more conversation online than any other brand at the event. The strong brand and consumer engagement across both Calvin and Tommy is a result of our discipline PBH Plus execution, where the lead times for consumer engagement impact are shorter than our product lead times. Even though we're already seeing early product traction, leading to double-digit growth in key categories with pricing power and gross margin improvement, most of our product improvements will come over time, starting with fall 2024 and then continue to strengthen season by season. A critical enable to our product strength is the development of our data and demand-driven operating model. where we continue to optimize inventory to better match demand, with inventory currently down 22% versus the same time last year. We are constantly improving how we plan, buy, and allocate our inventory, and taking concrete actions to move the needle here. One such action is during this year and next, we are rolling out source-tagged RFID in both brands across all of our channels globally, which will drive incremental revenues. Another area we are improving is allocation, where we have already reduced initial allocations from 90% to 70%, which means that 30% of our inventory is now directly allocated based on consumer demand signals in seasons. As I mentioned before, each of our five growth drivers is important on its own, and it's when we increasingly play them all together that the real power of PBH Plus comes through. Now, let me share some highlights from the first quarter on how we executed across our two iconic brands and three regions, starting with Calvin Klein. The global brand continues to gain strength across all consumer-facing parts of the PBH Plus plan. from product and marketing to how we show up in the marketplace. Calvin entered the quarter with unprecedented momentum following the highly successful launch of our spring campaign. We build on that momentum through the quarter with global talent like Kendall Jenner, John Cook, and Jenny Kim. Calvin also teamed up with actress Zendaya to tease the launch of its spring collection, creating a custom look for her Challengers movie premiere in Rome. We continue to elevate our direct-to-consumer experience with a new global store concept, which recently launched in Düsseldorf and Rome. Next week, we launch a global flagship store on the iconic Champs-Élysées in Paris. And on the product and brand side, I'm thrilled to welcome Veronica Leone as Creative Director for Calvin Klein Collections. and equally delighted to share that Calvin Klein plans to return to the runway in 2025. Calvin Klein has always had a unique positioning in the market with a strong consumer following from underwear, fragrance, jeans, to more refined dressing, all the way to the runway. The collection and the runway will create the aspirational halo for the brand, adding new dimensions of desirability to the already strong foundation in product and marketing. Turning to Tommy Hilfiger. After having kicked off the spring season with a historic return to the runway, Tommy followed up with a spring campaign featuring Kendall Jenner and friends wearing some of our best seasonal must-haves, including the iconic Tommy polo. In Europe alone, the campaign drove polo sales up by over 30% compared to last year, reinforcing the relevance of this hero product to the consumer's wardrobe. The highly anticipated Stray Kids campaign also launched during the quarter, first in Asia, then followed by a global release, which drove significant social engagement globally. Last month, we solidified our presence in the world of sports and entertainment at the Miami Grand Prix, headlined by Kendall Jenner, Lewis Hamilton, and George Russell. And looking ahead, we will continue to drive brand desire and consumer engagement, spotlighting the best of Tommy's summer lifestyle through a special event in Mykonos with global talent, all hosted by Tommy himself. It's early days for Leah in her role as Tommy Hilfiger Global President, and she's already making a big positive difference, and together with her team, leaning in to take the brand to the next level. Now, let me turn to our regional performance, starting with North America. I'm very proud of our team continued to drive strong PBH Plus execution in a tough macro, achieving high-quality revenue growth led by D2C, which increased mid-single digits and followed by growth in wholesale, which for Calvin and Tommy increased 2%. Our Tommy and Calvin businesses together deliver 3% revenue growth, which was fueled by strength in higher average order value and commercial, as well as lower promotions year over year. I'm pleased with how our Tommy and Calvin businesses combined achieved a 10.5% EBIT margin, marking another quarter of double-digit margin and making it the third consecutive quarter of delivering over 500 basis point margin improvement compared to the prior year. In D2C, both brands delivered positive comps, driven by strength in product category offense, hero products, and much improved shopping experience. It's exciting to see the elevation of our digital shopping experience, leading to double-digit demand growth in the channel. For wholesale, we also delivered high-quality positive comps for Calvin and Tommy through continuing to work very closely with our key partners to improve product, presentation, staffing, and inventory availability. Both brands are very well positioned to continue to win share with the North American consumer and drive significant EBIT margin expansion in a brand-accretive way. Let me now turn to our international business. In Europe, consistent with our plan, revenue was down low double digits year over year. Importantly, as a result of our actions, we're driving much higher gross margins and are further strengthening our unique brand position and pricing power in the market. Our quality of sales focus had an approximate 6% revenue impact in the quarter, which represented roughly half of the revenue decline. We continue to expect a four-year quality of sales revenue impact to be approximately 5%. As we shared previously, we have seen tough macro conditions, especially in our two biggest markets, the UK and Germany, where consumer sentiment is challenged and our wholesale partners are cautious. And in this tougher macro, our focus continues to be on quality of sales to set ourselves up for profitable brand accretive growth over the long term. As a reminder, the three main quality of sales actions we are taking in the region include from mid-year, we'll stop all third-party sales of our brands on digital platforms. We have also significantly reduced the number of digital platforms that we sell to, while at the same time strengthening our collaboration with our best partners. We're also improving inventory in relation to sales overall to avoid having too much inventory. While still early in the year, through these actions, we have already made significant progress. We have lowered clearance sales by nearly 50% as we began the year with much improved stock freshness. In D2C, where we have the most direct control over the consumer experience, in full price channels across both stores and e-commerce, we drove a double-digit increase in spring 24 product sales, while prior season clearance sales and inventory were down double digits. In wholesale, as we shared previously, our fall order book finalized at down high single digits versus the prior year, reflecting the cautiousness in the channel. However, we're seeing encouraging sequential improvements for pre-spring 2025 orders. And next week, we'll kick off the market launch of the main spring 2025 season. And I'm very encouraged by the product innovation and newness our teams are bringing across key categories for both Tommy and Calvin. Finally, as we shared yesterday, Martijn Hagman, CEO of Tommy Global and PBH Europe, will be leaving the business. And I want to thank Martijn for his 15 years of loyal service to PBH, helping to build our European region into the market-leading and highly profitable business we have today. I feel very good about Leah Ritz Goldman now officially on board as Tommy Hilfiger Global President, reporting directly to me, and David Sadman, our Chief Supply Chain Officer, becoming our interim CEO for Europe. Since David joined us, he has played a unique role in the company, being a key leader driving PBH Plus performance all the way from product creation to marketplace execution. He has already spent a lot of his time in Europe together with our regional leaders, so he will have a running start. In parallel, we have started a search for our permanent European leader. Moving on to Asia Pacific, the region delivered overall revenue growth of 3% in constant currency, led by high single-digit growth in D2C. China delivered high single-digit growth in local currency with double-digit growth in Japan and Korea also in local currency. We continue to drive high relevance with our consumers in Asia by connecting our strong product category and hero product defense with mega talent and rising stars. Our brand ambassadors, John Cook and Jenny Kim, continue to fuel Calvin's brand engagement across the region. And for Tommy, the Formula One Shanghai Grand Prix with Lewis Hamilton and Tommy himself, as well as local celebrities and influencers, boosted brand heat in the market. Revenue and market share for our business continues to set new records on Douyin as we further explore new ways to engage consumers. On Tmall, Tommy the man hosted his first livestream shopping experience for the brand, which ranked number one on the channel. Following a successful Lunar New Year this past quarter, we are now in the early days of the big consumer moment 618, which will be followed by Chinese Valentine's Day in July. Recently, I spent a week with our teams in China and Japan, walking stores across multiple cities, and firsthand was able to see how much untapped growth potential we still have in the region. In closing, for the first quarter, we again delivered on our plan. We drove high-quality growth in both Asia and North America, while we in Europe, given the tough macro, took the long-term view of increasing quality of sales, strengthening our market position for the long term. We continue to build out the PVH Plus execution momentum, led by significant strength in consumer engagement and brand desirability across both Calvin and Tommy, resulting in high-quality D2C growth with strong margin expansion. The build-out of our data and demand-driven supply chain continues to generate value, and we are investing in growth while driving increased cost discipline. Through our PBH Plus plan, we're moving PBH into a leading brand builder with two of the most desirable lifestyle brands in the world. What's making all this happen is our strong leaders and teams across the company. And I want to again thank you for the great work you do. And with that, I'll turn the call over to Zach to discuss the financials in more detail.