PVH Corp.

Please stand by, we're about to begin. Good morning everyone and welcome to today's PVH first quarter 2025 earnings conference call. At this time all participants are in the 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 touch tone phone. Please note this call may be recorded and that I will be standing by should you require 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, ma'am.

Thank you, Operator. Good morning, everyone, and welcome to the PBH Corp. First Quarter 2025 Earnings Conference Call. Leading the call today will be Stefan Larson, Chief Executive Officer, and Zach Coslin, Chief Financial Officer. This webcast and conference call is being recorded on behalf of PBH and consists of copyrighted materials. 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 4, 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 intention, and the company's ability to realize anticipated benefits and savings from divestitures, restructurings, and similar plans, such as the headcount cost reduction initiative announced in August 2022, the 2021 sale of assets of, an exit 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. PDH 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 first quarter 2025 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 Stephan Larson.

Thank you, Cheryl, and good morning, everyone, and thank you for joining our call today. I want to start by thanking our Calvin, Tommy, and PVH teams around the world for their hard work this quarter as we delivered on our plan. Driven by our disciplined execution of the PVH Plus plan, we grew revenue 2% above our guidance, and we delivered stronger than expected non-GAAP EPS, also above our guidance. and we remain on track to drive revenue growth for the full year. In line with guidance, total direct-to-consumer revenue was down approximately 3%, with e-commerce up 3%. We grew wholesale revenue mid-single digits and benefited from earlier shipments, as well as the intake and relaunch of the Calvin Klein women's sportswear and jeans businesses in North America. Since we last spoke, we have seen an increasingly tough macro environment. While we have to recognize this evolved backdrop, all our focus is on what's within our control to strengthen and expand the impact of our own PVH plus actions. And in moments like this, when the external factors gets worse, it's the time to sharpen our focus, get even closer to the consumers, and expand our execution. Based on this, I'll directly go into sharing the concrete examples of what actions we took that drove our performance in Q1, and then briefly cover our outlook. I'll then finish with covering the specific actions we will drive in the back half that are fully in our control and are geared to move the needle. For Q1 drivers, I'll start with Calvin Klein. The world of underwear and jeans is a significant portion of Calvin's global revenues. And when we spoke last, we had just launched our most innovative product franchise so far, the icon cotton stretch underwear for men, with a viral cut-through campaign featuring Bad Bunny. It was built on a unique product innovation, rooted in our biggest product category, and was complemented by very strong product marketing activations, that drove traffic to stores and boosted conversion. This full funnel approach drove a 25% increase in combined sales of icon cotton stretch and cotton stretch styles globally. It's one very powerful example of where we are leaning into our core strength, aligning all the pieces of the PBH Plus plan from brand, product, and marketing, all the way to marketplace execution, then we really cut through. Another key product category for Calvin is denim. In Q1, we put a lot of innovation into our iconic fashion denim offering, expanding fits, washes, and designs to be hyper relevant. And through these actions, we grew that part of the assortment 14% in the quarter. Today, we see a big difference in performance between where we have strategically leaned in to innovate and where we have yet to do so. And in the back half of this year, we will accelerate the impact of these kind of initiatives to cover a bigger part of the total assortment. In addition to the strategic growth initiatives in the main lines, we kicked off the year with Calvin Klein's Return to Runway, which dominated the New York Fashion Week conversations and plays an important role in creating a strong halo for the brand. Top-tier talent, including Dua Lipa, Alexander Skarsgård, and Pedro Pascal, were styling collection looks at cultural defining moments in the season, like most recently at the Cannes Film Festival. Turning to Tommy. Similar to Calvin, what we see in Tommy from a product perspective is that where we innovate and put fashion into our iconic styles, whether it's garment-dyed linen shirts or an evolution of our monogram t-shirts, But when we add seasonal relevance to our iconic cable knit sweaters for men's and women's, we drive much stronger performance. We built our most recent summer lifestyle campaign, Hilfiger Resort, on this learning, where the product is iconic Tommy made current through an infusion of seasonal relevance, amplified by some of our best performing talent, including Patrick Schwarzenegger and Madeline Klein. Earlier this spring, Tommy also launched two new collections, a women's collection with Sophia Ritchie Grange and the Hilfiger Sailing Collection as part of our partnership with SailGP. Both collections were showcased across all key platforms and channels. And going forward, you will continue to see these kind of seasonal collections and new takes on Tommy's iconic style always playing back to our biggest businesses and biggest categories. and activated in our key wholesale doors and stores globally. Finally, on the brand side, Tommy delivered breakthrough fashion attainment at the Met Gala. Actor Damson Idris drove up to the Met steps in the race car from the highly anticipated film F1, wearing a custom Tommy Hilfiger race suit before dramatically revealing a red Tommy tuxedo to walk the red carpet. It became one of the most talked about entrances, both in global headlines and in social media, and it captured Tommy's iconic style and cultural relevance. Now, let me turn to our regional performance, starting with Europe. We kept strengthening our strong brand position in the region, with overall revenue increasing mid-single digits, in line with our plan, and driven by growth in both D2C and wholesale. Importantly, as planned, total D2C turned to growth in the quarter, increasing low single digits, and we delivered our third consecutive quarter of store growth. Despite the continued muted consumer backdrop, we drove better conversion across the region with particular strength in the big consumer moments. At wholesale, we delivered mid-single-digit growth driven by the sequential improvements in order books for the spring 25 season compared to fall 24. We also benefited from earlier spring and summer product shipments compared to the same quarter last year. And as we shared previously, our fall order book in Europe finalized up low single digits versus the prior year, reflecting the strong execution from our teams to improve the overall assortment and the successful quality of sales initiatives we took last year. In the Americas, our team continued to lean into the next level execution of the PVH Plus plan as we worked to unlock the full growth potential of both brands and once again delivered a double-digit EBIT margin. This is a big improvement from when we first launched the PVH Plus plan. Overall revenue increased high single digits above our plan driven by earlier wholesale shipments and supported by the relaunch of the women's sportswear and jeans business at U.S. wholesale, following the take back of this license. D2C store revenue in the quarter declined on lower traffic, although conversion continued to improve, and we grew e-commerce mid-teens. Where we delivered strong spring fashion newness, we drove strong growth, which for Tommy was led by newness in sweaters, linen fabrications, and fashion tees, and in Calvin, the men's new icon cotton stretch underwear and fashion denim. Across both brands, we continue to drive strong performance in e-commerce with higher traffic and higher average order value. Within wholesale, we launched Calvin Klein Women's Sportswear in Macy's in over 150 doors, supported by a special marketing campaign and we invested in building out a new shopping experience. Moving on to Asia Pacific, revenues declined low teens on a reported basis and low double digits in constant currency due to weaker consumer confidence and the earlier timing shift of Lunar New Year into the last quarter. While we delivered e-commerce growth in constant currency, overall performance was more than offset by declines in stores and wholesales. As we shared last quarter, starting in February, we began to face incrementally tougher headwinds in China, which have since continued. While we're optimistic about the opportunities to grow our brands in the regions, we are realistic about the continued headwinds from a challenge backdrop, particularly in China. In this backdrop, we continue to drive product elevation across outerwear, sweaters, polos, and denim. And our strong brand ambassadors, including MinYu, Jisoo, Stray Kids, demonstrated our continued ability to amplify with global talent to excite consumers and remain strong in key consumer shopping moments. Turning to inventory and the build-out of our demand-driven supply chain, For the start of the year, we built up and evolved our never-out-of-stock program of core essentials. We did this as a deliberate effort after multiple seasons of being too low in these products and often missing sales. At the same time, Q1 started with lower than expected demand for basics and essentials. This has led to us leaving the first quarter with higher levels of inventory, and as part of our demand-driven supply chain, we have adjusted future buys, which will align inventory levels to current demand trends in the back half of the year. This is high-quality, fresh inventory of core essentials that we will keep adjusting over time based on demand. On the licensing front, as we discussed last quarter, we have a large and diversified global licensing business, which is a key competitive advantage for us. Our licensing partners help bring our vision to life across multiple complementary categories where they are experts, from watches and fragrance to eyewear, and they're critically important to how we drive sustainable, profitable growth through the PBH Plus plan. In the first quarter for Women's North America Wholesale, as planned, we took back the Calvin Klein sportswear and jeans licenses, which are key to our lifestyle expression. And for spring 26, we will take back our Tommy sportswear license. Included in the licenses we're taking back are specialized wholesale category businesses like outerwear, which are presented outside of our brand-specific lifestyle pads, often on a dedicated section of the store. And this week, for one of these specialized categories, we've entered into a new licensing agreement for men's and women's outerwear with an expected launch in spring 26. As I mentioned, any new licensing partner, we complement our assortment with their specific expertise and be fully aligned with our brand directions. As a reminder, the overall contribution to our total global licensing business from the G3 license take back is only 20% of our expected licensing revenues for 2025. And 80% of our licensing revenues are from long-term brand building partnerships that we are growing together. Now, let me switch gears and talk about our overall outlook. Across the industry, as I mentioned earlier, We're navigating a very uncertain consumer and macro environment that has become increasingly challenged over the past three months. The tougher retail trends we saw in February continued, with consumer sentiment further weakening to some of its lowest recorded levels since the 1950s. This has translated into traffic trends coming down in the U.S. and around the world, and this backdrop has led to increased promotional levels. We're also navigating the impact of tariffs. Based on our latest assessment, we estimate that the unmitigated impact of tariffs creates a headwind of approximately 65 million to our full year EBIT, weighted predominantly in the second half of the year. We're taking a variety of steps to mitigate this impact, which Zach will discuss in more detail. Our business in China also continues to face a dynamic situation. While we remain on Mothcom's unreliable entity list, we continue to engage directly with Mothcom as we work towards a positive resolution. We remain fully committed to serving our Chinese consumers as we have for the past 20 years, and we are investing in our growth in China for the long term. As we navigate these external factors, And as we shared last quarter, we're also working through the Calvin Klein global brand operational challenges that we experienced as we, for the first season, built up the global product creation capability for Calvin Klein in New York. This work was a significant undertaking and absolutely critical to unlock the brand's full potential. With the first globally created product season now in the markets with Spring 25, we now have our arms around the full impact of these challenges. And they all come from the same root cause, in that the team had to spend too much effort getting the new go-to-market process stood up, which constrained product development timelines and forced sourcing delays. Combined, this led to a margin headwind predominantly weighted to the first half, with some carryover into the second half of this year. We have been laser focused on addressing these transitory operational challenges. Last month, we announced new leadership with the appointment of David Sabman as the global brand president for Calvin Klein. David is already fully in with the team, bringing his deep experience driving PVH Plus performance across operations, regions, and our brands. and I'm encouraged by the level of clarity and rigor at which he and the team are working to resolve these challenges and get our execution to where it needs to be. As we shared last quarter, we are seeing sequential improvements already for the fall 25 season, which will further strengthen for spring 26, and we'll be able to start creating the fall 26 product season from a very strong place. Through our PBH Plus execution, We are quarter by quarter building the capabilities we need to build these brands for the long term. This is a process. It takes time. We will continuously learn and improve to become stronger and stronger over time. From a financial perspective, as we look ahead to 2025, although we are reaffirming our revenue guidance of flat to up slightly, we are not yet in a place to fully compensate for the effects of these strong macro forces. And that's why we have to adjust our full year non-GAAP guidance down for both EBIT margin and EPS. Important to note is that we are targeting to exit the year in a stronger margin position, which Zach will share more details about. This will be supported by the business driving actions I just outlined to drive the back half of the year. Our delivery of 200 basis points of cost savings from our previously announced initiative and by having resolved most of Calvin's operational challenges. And with spring 2026 product seasons in both brands on time and with strong gross margins, that positions us for a strong profit start of 2026. Let me just say that this guidance is not what we set out to deliver when we started the year. And as a leadership team, we are leaning into where we have the strength in the PVH Plus execution, and we will expand its impact already for the back half of this year. Globally for Calvin Klein, this means that we will continue to build our iconic cut-through campaigns, amplifying our core strength in the world of underwear and the world of jeans. Building on the successful launch of our Icon Cotton Stretch, we are this fall launching the equivalent in women's underwear, which is our Icon Cotton Modal program. You'll see us activate again with a full funnel, cut-through approach, featuring one of the most current global superstars in music. Next to this, we will also continue to build out our men's iconic underwear campaigns, similar to the Jeremy Allen White and Bad Bunny format that became viral global sensations. and every time we'll add product newness and innovation, this time supported by superstars from the world of sport, music, and including K-pop, where Calvin has so much strength. Along with these underwear anchor campaigns, we will lean in and expand the impact of other big growth categories for the brand, like fashion, denim, and outerwear. Finally, for Calvin, we will also direct more of our media investments to a highly targeted traffic driving media to further amplify these campaigns and further strengthen the wholesale and in-store impact. In TOMI, you'll see us launch a new cut-through fall lifestyle campaign where we will amplify the strength of the fall assortment with a 20% increase in media investment versus last year to drive high quality traffic. And we will build out the top, middle and bottom parts of the consumer funnel for maximum impact. In connection to this, you'll also see the newness in Tommy's fall product assortment with improvement across fabric, function, and fit. This is the product strength that drove the European order books to growth in the fall. And across our icons and key product categories, we're designing into strong newness. We're also doubling down on our F1 program as the sport expands in relevance in the U.S. and globally. You might have already seen that we just announced a new partnership with Cadillac, another American icon where Tommy will be the first lifestyle sponsor of the Cadillac Formula One team, reinforcing Tommy's 40-year legacy of fusing fashion, sport, and entertainment. Later this month, Tommy is featured in the highly anticipated F1 movie with Damson Idris and Brad Pitt, which will be the biggest movie launched this summer globally. We're already seeing the impact of the FilmStrong media campaign, which features Tommy Hilfiger on the mega screen in Piccadilly Circus. And we are starting to see incredible engagement on social media. Across the regions, Our brands are entering fall 25 with a stronger product assortment across both key categories and strong newness and innovation in hero product with a commercial plan that tightly aligns our execution across product, marketing, and the marketplace. And we will in both Calvin and Tommy have very strong fall and holiday cut-through campaigns with regionally relevant talent amplification. In markets around the world, You see us in Calvin further ignite the worlds of underwear and denim. And in Tommy, we'll connect iconic Tommy lifestyle to culture anchored in a strong men's focus. And we'll do it in close collaboration with our partners around the world. To further support our back half execution, as I've mentioned for Calvin and also for Tommy, we're increasing our investment across the marketing funnel to drive high quality traffic. In closing, for the first quarter, we delivered on our plan, driven by our disciplined PVH Plus execution. And we have our sleeves rolled up, focusing 100% on what's within our control to improve the back half of the year by broadening and scaling our successful PVH Plus plan initiatives in both Calvin and Tommy across all three regions. We are on a multi-year journey to unlock the full potential of Calvin, Tommy, and PBH, where it's all about tapping into the global consumer love for both Calvin Klein and Tommy Hilfiger, two of the most iconic brands in the market and step-by-step building them into the most desirable lifestyle brands in the world. We're staying relentlessly focused, learning and improving continuously to build the product strength, consumer engagement, and marketplace execution that over time will tap into the full potential of these incredible brands and make us win repeatedly with the consumer, and as a result, create the most shareholder value over time. And with that, I'll turn the call over to Zach.