• First quarter revenue increased 2% to $2.158 billion compared to the prior year period (increased 5% on a constant currency basis) and exceeded guidance of relatively flat to the prior year period (increase approximately 3% on a constant currency basis)
• First quarter EPS of $2.14 exceeded guidance of approximately $1.90
• Full year outlook
  • Revenue: Reaffirms projected increase of 3% to 4% (increase 2% to 3% on a constant currency basis)
  • Operating margin: Reaffirms outlook approximately 10%
  • EPS: Reaffirms outlook of approximately $10.00

PVH Corp. [NYSE: PVH] today reported its 2023 first quarter results and reaffirmed its full year outlook.

Stefan Larsson, Chief Executive Officer, commented, “We delivered a strong start to the year with first quarter performance ahead of our guidance for both revenue and earnings, driven by our disciplined execution of the PVH+ Plan. We are reaffirming our guidance for the year, reflecting the confidence we have in our ability to continue to deliver on our near-term commitments, while maintaining a strong focus on our long-term vision to build Calvin Klein and TOMMY HILFIGER into the most desirable lifestyle brands in the world, and position PVH as one of the best performing brand groups in our sector.”

Mr. Larsson, added, “We are gaining good traction for both brands in all regions, driven by our focus on the key growth drivers of our multi-year PVH+ Plan: winning with product, winning with consumer engagement, winning in the digitally-led marketplace, building a demand- and data-driven operating model, and investing in growth while driving cost efficiencies.”

Zac Coughlin, Chief Financial Officer, said, “We drove strong first quarter results which included mid-single-digit constant currency revenue growth and double-digit EPS growth. We have growing confidence in our execution of the PVH+ Plan and our full year outlook. As such, we are making strategic investments to drive our multi-year brand-led growth in important areas such as marketing. We are well positioned to achieve double-digit EPS growth in 2023, while at the same time, we expect to generate significant cash flow.”

Non-GAAP Amounts:

Amounts stated to be on a non-GAAP basis exclude the items that are defined or described in greater detail near the end of this release under the heading “Non-GAAP Exclusions.” Amounts stated on a constant currency basis also are deemed to be on a non-GAAP basis. Reconciliations of amounts on a GAAP basis to amounts on a non-GAAP basis are presented after the Non-GAAP Exclusions section and identify and quantify all excluded items.

First Quarter Review:

• Revenue increased 2% compared to the prior year period (increased 5% on a constant currency basis). The Company’s revenue growth was driven by solid performance in its international businesses, particularly in the Asia Pacific region, including 44% growth in local currency in China following the lifting of COVID restrictions in the fourth quarter of 2022, and continued growth in Europe in euros. The increase also reflected strong growth in the North America direct-to-consumer business.
  • Direct-to-consumer revenue increased 8% compared to the prior year period (increased 12% on a constant currency basis), with strong growth in both the Company’s owned and operated stores and owned and operated digital commerce business.
  • Wholesale revenue decreased 2% compared to the prior year period (increased 1% on a constant currency basis).
  • Owned and operated digital commerce revenue increased 4% compared to the prior year period (increased 8% on a constant currency basis). Total digital revenue decreased 3% compared to the prior year period (decreased 1% on a constant currency basis). The strong growth in the Company’s owned and operated digital commerce business was more than offset by a decrease in wholesale sales to the Company’s wholesale.com and pure play customers. Digital penetration as a percentage of total revenue was approximately 20%.
• Gross margin was 57.9% compared to 58.4% in the prior year period. The benefits from price increases, lower freight costs, and a favorable shift in regional and channel mix were more than offset by higher product costs, including an approximately 150 basis point negative impact on inventory costs due to foreign currency exchange rates.
• Inventory levels have decreased compared to the fourth quarter of 2022, with improvement in all regions. Inventory was 24% higher than the prior year’s first quarter due to a combination of (i) abnormally low inventory levels in the prior year period, (ii) early receipts of inventory, and (iii) higher product costs.

First Quarter Consolidated Results:

• Revenue increased 2% to $2.158 billion compared to the prior year period (increased 5% on a constant currency basis).
  • Tommy Hilfiger revenue increased 5% compared to the prior year period (increased 8% on a constant currency basis)
    • Tommy Hilfiger International revenue increased 3% (increased 7% on a constant currency basis)
    • Tommy Hilfiger North America revenue increased 11%
  • Calvin Klein revenue was flat compared to the prior year period (increased 3% on a constant currency basis)
    • Calvin Klein International revenue increased 7% (increased 11% on a constant currency basis)
    • Calvin Klein North America revenue decreased 12%. Continued growth in the direct-to-consumer business was more than offset by a decrease in the wholesale business.
  • Heritage Brands revenue decreased 12% compared to the prior year period
• Earnings before interest and taxes (“EBIT”) was $199 million, inclusive of a $9 million negative impact due to foreign currency translation, compared to $210 million in the prior year period. The revenue growth on a constant currency basis was offset by lower gross margins, including the approximately 150 basis point negative impact on inventory costs due to foreign currency exchange rates, discussed above. The Company continues to take a disciplined approach to managing expenses, driving cost efficiencies while making targeted investments to drive its strategic initiatives.
• Earnings per share (“EPS”) was $2.14, a 10% increase compared to $1.94 in the prior year period. EPS for the first quarter included the negative impact of $0.11 per share related to foreign currency translation.
• Interest expense of $22 million was flat as compared to the prior year period.
• Effective tax rate was 23.1% as compared to 29.4% in the prior year period.

2023 Outlook:

Full Year 2023 Guidance

• Revenue is projected to increase 3% to 4% as compared to 2022 (increase 2% to 3% on a constant currency basis).
• Operating margin is projected to be approximately 10%.
• EPS is projected to be approximately $10.00 compared to $3.03 on a GAAP basis and $8.97 on a non-GAAP basis in 2022. The 2023 EPS projection includes the estimated positive impact of approximately $0.15 per share related to foreign currency translation. EPS on a GAAP basis for 2022 included the amounts described under the heading “Non-GAAP Exclusions” later in this release. EPS on a non-GAAP basis excluded these amounts.
• Interest expense is projected to increase to approximately $100 million compared to $83 million in 2022 primarily due to higher interest rates.
• Effective tax rate is projected to be approximately 24%.

Second Quarter 2023 Guidance

• Revenue is projected to increase low single-digits as compared to the second quarter of 2022.
• EPS is projected to be approximately $1.70 compared to $1.72 on a GAAP basis and $2.08 on a non-GAAP basis in the second quarter of 2022. The second quarter 2023 EPS projection includes the estimated positive impact of approximately $0.05 per share related to foreign currency translation. EPS on a GAAP basis for the second quarter of 2022 included the amounts described under the heading “Non-GAAP Exclusions” later in this release. EPS on a non-GAAP basis excluded these amounts.
• Interest expense is projected to increase to approximately $25 million compared to $20 million in the second quarter of 2022.
• Effective tax rate is projected to be approximately 26%.

Please see the section entitled “Full Year and Quarterly Reconciliations of GAAP to Non-GAAP Amounts” at the end of this release for further detail and reconciliations of GAAP to non-GAAP amounts discussed in this section.

Non-GAAP Exclusions:

The discussions in this release that refer to non-GAAP amounts exclude the following:

• Pre-tax gain of $78 million recorded in the fourth quarter of 2022 related to the recognized actuarial gain on retirement plans.
• Pre-tax noncash goodwill impairment charge of $417 million recorded in the third quarter of 2022, which was non-operational and driven by a significant increase in discount rates.
• Pre-tax costs of $20 million incurred in 2022, consisting of severance related to initial actions under the plans announced in August 2022 to reduce people costs in the Company’s global offices by approximately 10% by the end of 2023, of which $17 million was incurred in the third quarter and $4 million was incurred in the fourth quarter.
• Pre-tax net costs of $43 million recorded in 2022 in connection with the Company’s decision to exit from its Russia business, primarily consisting of noncash asset impairments and a gain on contract terminations, of which $50 million of charges were recorded in the second quarter and an $8 million gain was recorded in the fourth quarter.
• Pre-tax gain of $16 million recorded in the second quarter of 2022 in connection with the sale of the Company’s equity investment in Karl Lagerfeld Holding B.V.
• Estimated tax effects associated with the above pre-tax items, which are based on the Company’s assessment of deductibility. In making this assessment, the Company evaluated each item that it had identified above as a non-GAAP exclusion to determine if such item was (i) taxable or tax deductible, in which case the tax effect was taken at the applicable income tax rate in the local jurisdiction, or (ii) non-taxable or non-deductible, in which case the Company assumed no tax effect.

The Company presents constant currency revenue information, which is a non-GAAP financial measure, because it is a global company that transacts business in multiple currencies and reports financial information in U.S. dollars. Foreign currency exchange rate fluctuations affect the amounts reported by the Company in U.S. dollars with respect to its foreign revenues and can have a significant impact on the Company’s reported revenues. The Company calculates constant currency revenue information by translating its foreign revenues for the relevant period into U.S. dollars at the average exchange rates in effect during the comparable prior year period (rather than at the actual exchange rates in effect during the relevant period).

The Company presents non-GAAP financial measures, including constant currency revenue information, as a supplement to its GAAP results. The Company believes presenting non-GAAP financial measures provides useful information to investors, as it provides information to assess how its businesses performed excluding the effects of non-recurring and non-operational amounts and the effects of changes in foreign currency exchange rates, as applicable, and (i) facilitates comparing the results being reported against past and future results by eliminating amounts that it believes are not comparable between periods and (ii) assists investors in evaluating the effectiveness of the Company’s operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. The Company believes that investors often look at ongoing operations of an enterprise as a measure of assessing performance. The Company uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, the Company’s Board of Directors and others. The Company’s results excluding non-recurring and non-operational amounts are also the basis for certain incentive compensation calculations. Non-GAAP financial measures should be viewed in addition to, and not in lieu of or as superior to, the Company’s operating performance calculated in accordance with GAAP. The non-GAAP financial measures presented may not be comparable to similarly described measures reported by other companies.

Please see the sections entitled “Reconciliations of Constant Currency Revenue” and “Full Year and Quarterly Reconciliations of GAAP to Non-GAAP Amounts” later in this release for reconciliations of GAAP to non-GAAP amounts.

Conference Call Information:

The Company will host a conference call to discuss its first quarter earnings release on Thursday, June 1, 2023 at 9:00 a.m. EDT. Please log on to the Company’s website at www.PVH.com and go to the Events page in the Investors section to listen to the live webcast of the conference call. The webcast will be available for replay for one year after it is held. Please log on to www.PVH.com as described above to listen to the replay. The conference call and webcast consist of copyrighted material. They may not be re-recorded, reproduced, re-transmitted, rebroadcast or otherwise used without the Company’s express written permission. Your participation represents your consent to these terms and conditions, which are governed by New York law.

Please refer to the section entitled “Reconciliations of Constant Currency Revenue” on page 12 of this release for a description of the presentation of constant currency amounts.

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