PVH Corp.

Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero. Good morning, everyone, and welcome to today's PVH fourth quarter and full year 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 key on your touchtone phone Please note this call may be recorded and that I will be standing by should you need any assistance. It is now my pleasure to turn the program over to Cheryl Freeman, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to the PBH Corp. Fourth Quarter and Full Year 2024 Earnings Conference Call. Leading the call today will be Stefan Larson, Chief Executive Officer, and Zach Hoglin, 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 March 31, 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 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, restructures, and similar plans, such as the Headcount Cost Reduction Initiative announced in August 2022 and the 2021 sale of assets and exits 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 multi-year initiative to simplify its operating model. 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. Reconciliations to GAAP amounts are included in PVH's fourth 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 Stephon Larson.

Thank you, Cheryl. Good morning, everyone, and thank you for joining our call today. I want to start by thanking our teams around the world for delivering a strong fourth quarter and finish to the year. Through the strength of our two iconic global brands, Calvin Klein and Tommy Hilfiger, and the disciplined execution of our multi-year brand building growth plan, the PVH Plus plan, we over-delivered on both the top and bottom line versus our initial fiscal 2024 guidance, with stronger than expected revenue on a constant currency basis and higher than expected non-GAAP EPS. In addition, we increased our gross margin by 120 basis points to a new record, And even with a fixed cost deleveraging from our Europe business, we maintained our double-digit EBIT margins at 10%, as we focused on driving cost efficiencies across the company. For the fourth quarter, we delivered a strong holiday performance that beat our expectations. On a constant currency basis, we drove low single-digit revenue growth with growth in both our D2C and wholesale channels, excluding the sale of our heritage business and the 53rd week in 2023, which supports our planned return to growth during 2025. 2024 marked a major step towards our vision to build Calvin and Tommy into the most desirable lifestyle brands in the world and make PVH one of the highest performing brand groups in our sector. We connected both Calvin and Tommy to the site guys through our marketing, driving a record consumer engagement. We improved the relevance and sell-through of our Fall 24 product assortment across both brands. We're turning Europe back to growth with improved performance in both D2C and wholesale, where we drove two consecutive quarters of growth in our stores, as well as moving our European wholesale order books back to growth. Despite the tough macro, we kept Asia growing on a constant currency basis, on top of two consecutive years of double-digit constant currency growth. And we significantly increased our profitability in North America, including a double-digit EBIT margin rate for our combined Calvin and Tommy business in the region. We are working more closely than ever with our wholesale partners, And in January, we brought together more than 300 key partners for one of our largest ever global partner days to kick off fall 25 market launch. Their feedback was very positive around the improved product, marketing, and marketplace execution. And we'll build on this momentum together in 2025. We've stood up our global product kitchen for Calvin. and created the strongest product assortment so far for Tommy, which launches this fall. And it was a big part of helping to return our European order books back to growth for 2025. We drove significant cost efficiencies while simplifying our organization and shifting our culture to become brand builders with a strong consumer focus. We put in place our technology roadmap taking important steps to becoming a data and demand-driven company. We have a strong management team in place with experience and capabilities to bring our vision to life. For all this progress, there is no question that 2024 was a challenging environment, and I'm especially proud of our team for executing so well despite the macro issues at hand. Now, let me share a bit more of what drove our performance in the fourth quarter, full year, both from a global brand and regional perspective. And then I'll move into how we will drive growth during 2025. Starting with Calvin Klein, we started 2024 with Calvin's explosive spring campaign featuring Jeremy Allen White, driving record visibility and engagement, which we continue to build on through the year. In the fourth quarter, we continued to tap into Calvin's iconic DNA to drive global brand heat, chatting through with mega talent Kendall Jenner, Idris Elba, Minju, Alexander Skarsgård, and for fall, Greta Lee and Jeremy Ellen White headlined global campaigns for our iconic underwear and denim. And we elevated the brand in the marketplace. including an opening of a flagship store on the iconic Champs-Élysées in Paris. These impactful moments resonated with consumers, driving strong engagement and growth in key product categories such as underwear, denim, outerwear, and knits. Turning to Tommy Hilfiger, Tommy had a very strong brand building year. and continued to tap into the cultural conversation by leaning into its classic American cool DNA, amplified by global talent, including Stray Kids, Sofia Richie Grange, Damson Idris, Patrick Schwarzenegger, Lewis Hamilton, and George Russell, to name a few. Tommy cut through major cultural moments, from the Met Gala to Formula One, driving new levels of consumer engagement with a continued focus on fames, fashion, art, music, entertainment, and sports. We started the year with a return to New York Fashion Week, built on that momentum with our Staten Island Ferry runway show in the fall, and we ended the year with a capsule collection starring global brand ambassador Jisoo, followed by the launch of our Denim Focus Spring 25 campaign with Damson and supermodel Abby Champion. Turning to our regional performance, starting with North America, the team continued to lean into the next-level execution of the PVH Plus plan, driving a double-digit EBIT margin each quarter, a significant step change in trajectories. our Calvin and Tommy businesses together delivered EBIT dollars up 40% to an 11.9% EBIT margin for the year, up more than 350 basis points year over year on flat revenues, demonstrating the progress we are making in building the foundation for long-term brand accretive growth in the region. In the fourth quarter, Tommy and Calvin together achieved low single-digit revenue growth on a reported basis and mid single-digit growth excluding the 53rd week, and again delivered significant improvement in profitability to 12.1%. For both Calvin and Tommy, we drove double-digit growth in our full product collection in D2C. We also had strong growth in e-commerce with higher traffic higher average order value, and higher conversion supported by the investments we made to elevate the online shopping experience. And for both brands, we continue to partner closely with our key wholesale partners in developing joint growth targets based on elevated product assortments, better floor space, and improved in-stock rates to drive out performance. Turning to our international business, Europe was a strong proof point of our improved next level PVH plus plan execution for both the fourth quarter and the full year. For 2024, in the face of a tougher macro, we made the proactive decision to drive higher quality of sales to build our brands for the long term and position us for sustainable brand accretive growth in the region. Now, one year later, I feel very good about how we delivered. having solidified the very strong brand position we have in Europe, built for high-quality growth with our key partners. From our quality of sales actions, which had a planned 5% negative impact, 2024 sales in the region declined mid-single digits, which was better than what we had initially projected. And importantly, we delivered it with higher gross margins. In the fourth quarter, excluding the 53rd week comparison, overall revenue was flat in euros, which included a 3% impact from our quality of sales actions. For the second consecutive quarter, we drove growth in our retail stores, reflecting our enhanced in-store experience. Building on the significant product improvements over the past year, we continue to drive higher sell-through trends from our successful fall season product, supported by stronger core product inventory. This combined with quality of sales directly translated into stronger business with our key partners, leading to the sequentially improved wholesale order books. Moving to Asia-Pacific. Our team's disciplined PBH Plus plan execution across both Calvin and Tommy drove growth for the quarter and the full year in constant currency. For the year, the region delivered low single-digit revenue growth in constant currency, including 3% growth in the fourth quarter, excluding the 53rd week last year. Growth was led by China, which increased 3% in constant currency, excluding the 53rd week. benefiting from an earlier Lunar New Year from both a calendar and an overall shopping behavior perspective. And we grew in Japan and Korea. The region's ability to ignite and amplify global talent continue to be a key growth driver through powerful brand ambassadors, including MinYu for Calvin and Jisoo for Tommy. We captured key local consumer moments through activations that continuously fuel brand heat in the region. Now, let's switch gears and turn to our overall outlook for 2025. For all the progress of 2024, we're starting 2025 with some obvious headwinds. Our industry is facing uncertainty around the U.S. consumer demand, and with macro pressures in mind, we have already taken proactive cost and efficiency actions to reflect the current environment. In addition, as you know, PVH has been added to Moffcom's unreliable entity list, which is unprecedented for a global consumer company. We remain fully committed to serving our Chinese consumers, as we have for the last 20 years, and we are investing in our growth in China for the long term. We continue to engage with Moffcom, and we work towards a positive resolution. Our team is, of course, fully focused on responding to the moment, while at the same time not losing sight of our longer-term commitments. We have two of the most globally iconic and beloved brands, and from the eye of the consumer, both have the right to play as part of the most desirable brands in the market, and through the PVH Plus plan, that's where we are taking them. As we look at the 2025 outlook for Calvin Klein, we kicked off the year with a historic return to runway at New York Fashion Week, which dominated the conversation. Calvin Klein himself, for the first time in 20 years, sat front row, alongside with his original muses, Kate Moss and Christy Turlington, who wore a custom Calvin Klein collection. And global talent who joined us wore shockable fall and spring styles. We're excited for Creative Director Veronica Leone's Fall 25 collection to come to life this year in our flagship stores and as select premium wholesale partners such as Harvey Nichols, Mytheresa, Prantong, Browns, and Net-a-Porter. We have leaned into Calvin's product strength as the number one men's premium underwear brand globally. and took one of our biggest and best-selling product franchises, the cotton stretch underwear, and brought unprecedented innovation in it, building it into the new Icon cotton stretch with an industry-leading infinity waistband and improved fit and fabric. We launched this product innovation in our biggest category globally, in D2C and in close collaboration with our key wholesale partners, together with multi-platinum recording artist Bad Bunny, one of the most popular artists of our time. And in the first 48 hours, we reached over 29 million users on Calvin's Instagram page alone and added nearly 100,000 followers within the first week of launch, bringing our brand and our iconic underwear to the consumer with unprecedented excitement and newness, and with direct commercial impact. In 2025, you'll also see Calvin relaunch its women's sportswear business at U.S. wholesale, following the take-back of this license from G3. We kicked this off tapping into the zeitgeist with a campaign featuring actress Lily Collins that will span the full marketing funnel. We continue to make important progress to align Calvin Klein to one global brand vision to win in all markets. Spring 25 was the first season where we centralized Calvin's global product capabilities, bringing product creation across Europe, Asia, and North America to our team in New York. This was a significant undertaking given the highly fragmented and decentralized legacy model we had before. As we brought this first season to life, the team had to work through a number of complexities, including centralizing disparate systems and processes that existed around the world. This initial transition took longer than we expected and led to extended product development timelines, constrained sourcing and shipping options, and pressure production costs for the season, which we decided not to pass on to partners or the consumer. As soon as we experienced these challenges, we took action. And go forward, we now have a simplified and improved go-to-market process in place with a standard global buy approach, and we are upgrading our technology capabilities to support it. While the compounding effect of these factors created a temporary margin headwind that will be most pronounced in the first half of this year, importantly, we see the improvements already for the fall 25 seasons. And we'll be fully through this transition for the spring 26 product season that we are working on right now. Even though the work to set up Calvin's engine for global product creation initially was tougher than expected, it was absolutely the right thing to do. And we can already see the strength and benefits coming out of it. And finally, we will continue to elevate the Calvin brand in the marketplace. and we are excited for this year's launch of our Soho flagship store here in New York, as well as other store enhancements and key openings as we expand our own and operated footprint of Calvin around the world. For Tommy in 2025, the brand continues to generate strong consumer relevance, launching its Spring 2025 campaigns featuring Sophia Ritchie Grange, global K-pop sensation Stray Kids, and brand ambassador Patrick Schwarzenegger, who wore Tommy to the highly anticipated global premiere of the White Lotus in Bangkok. Together with Sophia, we also launched Sophia for Tommy, a women's capsule collection that introduces a new elevated brand expression designed to create the halo for our women's mainline. This campaign drove strong engagement among our core demographic, and new consumers through a full funnel storytelling approach. It's also been very well received by our key partners globally. Tommy is also preparing a very special appearance at the Met Gala. And this summer, we'll play an exciting role in the highly anticipated F1 movie, starring Tommy Hilfiger brand ambassador, Damson Idris, alongside Brad Pitt. The film, where Tommy is a key partner, brings the adrenaline-fueled world of Formula One to the big screen. Finally, to amplify our summer lifestyle shops in both D2C and with our wholesale partners, Tommy gathered key talent from around the world at a Hilfiger Resort-themed event in the Caribbean. This event will be captured as a campaign, launching in May across our talent's own channels, our brand channels, on tommy.com and with our partners. The organic social media impact from this event has already pre-launch generated 160 million impressions with high engagement rates. Turning to our regions, in Europe, as I mentioned earlier, following our successful quality of sales initiative, we have driven two consecutive quarters of growth in our stores and I'm so pleased to share that our Fall 25 order books have returned to growth. Our Spring 25 order book finalized down low single digits as we expected, an important sequential improvement from Fall 24, and our Fall 25 order book took another big step forward and is now up low single digits with growth across both Tommy and Calvin. This return to growth for Fall 25 is a testament to the strong execution from our global and regional teams to improve the overall assortment and drive higher quality of sales across the marketplace. In 2025, we'll build on this momentum through continued execution of our PBH Plus plan. In product, you will see us further strengthening key product categories infusing more innovation and elevation of our hero products, and together with even stronger product segmentation between channels. Our strong seasonal campaigns would cut through the full marketing funnel, led by aspirational talent, amplified by mid-funnel product storytelling, and cut through all the way into our wholesale doors and our elevated D2C execution in stores and online. In North America this year, we expect to continue to drive a double-digit EBIT margin through our PBH Plus execution, further unlocking our business across channels. Just like in Europe, our key business drivers in the region will come from continued improvements in product, marketing, and the marketplace execution. And Asia will continue to be a growth engine for us long-term. We have a diversified business across the region where we will continue to build strength this year. As we look at the year ahead, like others in our industry, we are navigating global macro volatility, particularly in North America. Following a strong holiday in January, in February, retail traffic trends took a step down, a dynamic affecting the entire sector. And despite this lower traffic, we're driving higher conversion, a reflection of our execution improvements in the region. Also, starting in February, we began to face incrementally tougher headwinds in China, including a post-New Year holiday slowdown that led to a step down in revenue. The trend has since stabilized at these new lower levels. Importantly, we remain fully committed to serving our Chinese consumers and partners for the long term. turning to our licensing business. Across both Calvin and Tommy, we have a large and diversified global licensing business, which is a key competitive advantage. Our licensing partners help bring our vision to life across multiple lifestyle categories, from watches and fragrances to eyewear, and are important to how we drive sustainable, profitable growth. Before I give you an update on the multi-year transition away from G3, I would like to share some important context on our licensing business overall. 80% of PBH's licensing revenues this year are from strong, long-term brand building partnerships where we have full alignment on where we are taking the brands and where our partners bring unique expertise. A concrete example of this includes how we work with Kodi, where Kodi's CEO Tsunabe and I have engaged both our teams on something big that's in the works for Calvin Klein Fragrance in 2026. There are many more examples like this, and these go-forward licensing partnerships will drive high-quality growth for 2025 and for many years to come. When it comes to the G3 transition, the overall contribution to our total global licensing business is relatively small, at only 20% of our expected licensing revenues for 2025. This is following the take-back of the North America women's sportswear categories for the wholesale channel, which represented approximately 20% of the G3 business previously. While still early, our new product is driving significant increase in AURs with consumers describing it as fresh, modern, and elevated. And we are looking forward to building long-term sustainable growth of our women's business in North America wholesale, just as we already do in the rest of the world. Shifting to our guidance. Building on the momentum of 2024 and the benefits arising from our ongoing discipline execution of our PBH Plus plan, we are positive on our prospects for 2025, while recognizing the challenges of the moment. We expect revenue to be flat to up slightly on both the reported and constant currency basis. We expect EBIT margins to also be flat to up slightly, with a stronger second half of the year having the benefit of both the strength in the European order books, as well as more of our structural cost efficiencies having full impact. We will also make meaningful increases in our capital return to shareholders with accelerated stock buybacks in 2025. These actions will help us take advantage of the current valuations while accelerating our EPS growth, even in a weaker macro backdrop. And in 2025, we will be well-positioned to deliver another year of record non-gap EPS, In conclusion, our vision and our long-term commitment are to build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world and make PVH one of the highest performing brand groups in our sector. This is the heart of the PVH Plus plan. 2024 was a year of significant progress in both brands across all regions. In 2025, it's all about executing at pace, building on this momentum, and I'm so proud of our teams and partners, and we are full steam ahead. And with that, I'll turn the call over to Zach.