PVH Corp. Reports 2024 Second Quarter Earnings Above Guidance

• Second quarter
  • Revenue: Decreased 6% to $2.074 billion compared to the prior year period (decreased 5% on a constant currency basis), in line with guidance of a decrease of 6% to 7% (decrease of 5% to 6% on a constant currency basis)
  • EPS:
    • GAAP basis: $2.80 exceeded guidance of approximately $2.25
    • Non-GAAP basis: $3.01 exceeded guidance of approximately $2.25 (there were no non-GAAP exclusions in the guidance)
    • Included a tax benefit of approximately $0.55 per share related to the favorable settlement of a multi-year audit in an international jurisdiction, the results of which were not known at the time of guidance
• Full year outlook
  • Revenue: Reaffirms projected decrease of 6% to 7% (decrease 6% to 7% on a constant currency basis)
  • Operating margin:
    • GAAP basis: Projected to be approximately 9.8% compared to approximately 10.1% previously, which includes restructuring charges now expected to be incurred in 2024
    • Non-GAAP basis: Reaffirms outlook of approximately flat compared to 10.1% in 2023
  • EPS:
    • GAAP basis: Raising to a range of $11.20 to $11.45 compared to $11.15 to $11.40 previously
    • Non-GAAP basis: Raising to a range of $11.55 to $11.80 compared to $11.00 to $11.25 previously due to the tax benefit resulting from the favorable settlement of the multi-year audit discussed above

PVH Corp. (NYSE:PVH) today reported its 2024 second quarter results and updated its full year EPS outlook.

Stefan Larsson, Chief Executive Officer, commented, "We delivered on our top- and bottom-line commitments and beat our earnings guidance for the second quarter, led by our disciplined execution of the PVH+ Plan. For both Calvin Klein and Tommy Hilfiger, we drove strong consumer engagement and continued to increase product strength and improve newness in our assortment, leading to more full-priced selling and less end-of-season clearance sales, which fueled significant gross margin expansion."

Larsson continued, "Step by step, we continue to build strength in product, consumer engagement and marketplace execution, supported by the build out of our data and demand-driven supply chain. North America continues to be a strong proof point, in Europe we are on plan with our targeted quality of sales initiatives, and in Asia Pacific, we continue to drive strong brand engagement to win the big consumer moments. Looking ahead, as we navigate an increasingly challenging global macroeconomic backdrop, we remain relentlessly focused on delivering brand-accretive, long-term growth."

Zac Coughlin, Chief Financial Officer, said, "We drove strong gross margin and operating margin expansion in the second quarter and are reaffirming our revenue and non-GAAP operating margin guidance, reflecting our disciplined execution of the PVH+ Plan. We remain relentlessly focused on driving efficiencies, maintaining cost discipline and simplifying how we work globally. Powered by our two iconic brands, we have a multi-year unlock opportunity to generate sustainable, profitable growth and strong cash flows, while maximizing returns for shareholders over the long-term."

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.

Second Quarter Review:

• Revenue decreased 6% compared to the prior year period (decreased 5% on a constant currency basis), including a 3% decline resulting from the sale of the Heritage Brands women's intimates business in November 2023. Overall revenue in the Company's international businesses decreased 4% compared to the prior year period (decreased 3% on a constant currency basis), primarily due to the challenging consumer environment in Asia Pacific, particularly in China and Australia, and the continuation of the Company's planned strategic reduction in sales in Europe to drive overall higher quality of sales in the region. In North America, revenue in the Tommy Hilfiger and Calvin Klein businesses combined increased 1% compared to the prior year period, with modest growth in the wholesale business and a low single-digit decline in the direct-to-consumer business.
  • Direct-to-consumer revenue decreased 5% compared to the prior year period (decreased 3% on a constant currency basis). Revenue in the Company's owned and operated stores decreased 4% compared to the prior year period (decreased 3% on a constant currency basis), primarily driven by recent softness in the consumer backdrop. Revenue in the Company's owned and operated digital commerce business declined 6% compared to the prior year period (declined 5% on a constant currency basis), primarily due to the continuation of the Company's planned strategic reduction in Europe.
  • Wholesale revenue decreased 9% compared to the prior year period (decreased 8% on a constant currency basis), primarily due to a 7% reduction resulting from the sale of the Heritage Brands women's intimates business. The remaining decline reflects the continued strategic reduction in revenue in Europe to drive overall higher quality of sales in the region.
• Gross margin increased 250 basis points to 60.1% compared to 57.6% in the prior year period. The significant increase reflects benefits from a favorable shift in channel mix, a reduction in sales to lower margin wholesale accounts, and lower product costs.
• Inventory decreased 12% compared to the prior year period.

Second Quarter Consolidated Results:

• Revenue of $2.074 billion decreased 6% compared to $2.207 billion in the prior year period (decreased 5% on a constant currency basis), including a 3% decline resulting from the sale of the Heritage Brands women's intimates business.
  • Tommy Hilfiger revenue decreased 4% compared to the prior year period (decreased 3% on a constant currency basis).
    • Tommy Hilfiger International revenue decreased 6% (decreased 5% on a constant currency basis) as the revenue decline in Europe discussed above weighs more heavily on the Tommy Hilfiger business.
    • Tommy Hilfiger North America revenue increased 1%.
  • Calvin Klein revenue decreased 1% compared to the prior year period (flat on a constant currency basis).
    • Calvin Klein International revenue decreased 2% (flat on a constant currency basis).
    • Calvin Klein North America revenue increased 1%.
  • Heritage Brands revenue decreased 60% compared to the prior year period, which included a 56% decrease resulting from the sale of the Heritage Brands women's intimates business.
• Earnings before interest and taxes ("EBIT") on a GAAP basis was $174 million, inclusive of a $4 million negative impact attributable to foreign currency translation, compared to $143 million in the prior year period. EBIT on a GAAP basis included costs of $15 million in the current quarter and costs of $39 million in the prior year period described under the heading "Non-GAAP Exclusions" later in this release. EBIT on a non-GAAP basis for these periods excludes these amounts.
  
  
  
  EBIT on a non-GAAP basis was $189 million, inclusive of a $4 million negative impact attributable to foreign currency translation, compared to $182 million in the prior year period. The gross margin improvement discussed above more than offset the impact of the revenue decline in the quarter. 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")

• GAAP basis: $2.80 compared to $1.50 in the prior year period.
• Non-GAAP basis: $3.01 compared to $1.98 in the prior year period.

EPS on both a GAAP and a non-GAAP basis for the second quarter of 2024 includes the negative impact of $0.07 per share related to foreign currency translation.

EPS on a GAAP basis for these periods also included the amounts for the applicable period described under the heading "Non-GAAP Exclusions" later in this release. EPS on a non-GAAP basis for these periods excluded these amounts.

• Interest expense decreased to $19 million from $24 million in the prior year period.
• Effective tax rate was (2.1)% on a GAAP basis as compared to 21.3% in the prior year period. The effective tax rate was (0.1)% on a non-GAAP basis as compared to 21.6% in the prior year period. The decline in the tax rates on a GAAP and non-GAAP basis compared to the prior year period is primarily due to a tax benefit in the current quarter related to the favorable settlement of a multi-year audit in an international jurisdiction.

Stock Repurchase Program:

Delivering on its commitment under the PVH+ Plan to return excess cash to stockholders, the Company repurchased 200,000 shares of its common stock for $25 million during the second quarter of 2024, bringing total share repurchases for the first six months of 2024 to 2.1 million shares for $225 million. The Company currently expects to make common stock repurchases under the stock repurchase program of approximately $400 million for the full year 2024.

2024 Outlook:

Full Year 2024 Guidance

• Revenue: Reaffirming projected decrease of 6% to 7% as compared to 2023 (decrease 6% to 7% on a constant currency basis), inclusive of a 2% reduction resulting from the sale of the Heritage Brands women's intimates business and a 1% reduction from the 53rd week in 2023.
• Operating margin
  • GAAP basis: Projected to be approximately 9.8% compared to 10.1% in 2023. Previous guidance was approximately flat to 2023.
  • Non-GAAP basis: Reaffirming outlook of approximately flat compared to 10.1% in 2023.

Operating margin on a GAAP basis for these periods include the amounts described under the heading "Non-GAAP Exclusions" later in this release. Operating margin on a non-GAAP basis exclude these amounts.

• EPS
  • GAAP basis: Projected to be in a range of $11.20 to $11.45 compared to $10.76 in 2023. Previous guidance was a range of $11.15 to $11.40.
  • Non-GAAP basis: Projected to be in a range of $11.55 to $11.80 compared to $10.68 in 2023. Previous guidance was a range of $11.00 to $11.25.

The 2024 EPS projections include the estimated negative impact of approximately $0.05 per share related to foreign currency translation.

EPS on a GAAP basis for these periods also include the amounts described under the heading "Non-GAAP Exclusions" later in this release. EPS on a non-GAAP basis exclude these amounts.

• Interest expense is projected to decrease to approximately $70 million as compared to $88 million in 2023, primarily due to the repayment in 2023 of the $100 million 7 3/4% debentures and an increase in interest income. Previous guidance was approximately $75 million.
• Effective tax rate is projected to be approximately 16%, with the decrease from previous guidance of approximately 20% primarily attributable to the tax benefit resulting from the favorable settlement of the multi-year audit in an international jurisdiction.

Third Quarter 2024 Guidance

• Revenue is projected to decrease 6% to 7% as compared to the third quarter of 2023 (decrease 7% to 8% on a constant currency basis), inclusive of a reduction of 2% resulting from the sale of the Heritage Brands women's intimates business.
• EPS
  • GAAP basis: Approximately $2.30 compared to $2.66 in the prior year period.
  • Non-GAAP basis: Approximately $2.50 compared to $2.90 in the prior year period.

The third quarter EPS projections include the estimated positive impact of approximately $0.05 per share related to foreign currency translation.

EPS on a GAAP basis for these periods also include the amounts described under the heading "Non-GAAP Exclusions" later in this release. EPS on a non-GAAP basis exclude these amounts.

• Interest expense is projected to decrease to approximately $17 million compared to $22 million in the third quarter of 2023.
• Effective tax rate is projected to be approximately 23%.

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 restructuring costs totaling approximately $35 million incurred and expected to be incurred in 2024 consisting principally of severance related to the Company's multi-year initiative to simplify its operating model by centralizing processes and improving systems and automation to drive more efficient, cost-effective ways of working across the organization, of which $15 million was incurred in the second quarter, approximately $15 million is expected to be incurred in the third quarter, and approximately $5 million is expected to be incurred in the fourth quarter.
• Pre-tax gain of $10 million recorded in the first quarter of 2024 in connection with the Company's sale of the Heritage Brands women's intimates business.
• Pre-tax gain of $46 million recorded in the fourth quarter of 2023 related to the recognized actuarial gain on retirement plans.
• Pre-tax net gain of $13 million recorded in the fourth quarter of 2023 in connection with the sale of the Company's Heritage Brands women's intimates business, which includes a gain on the sale, less costs to sell, and severance and other termination benefits associated with the transaction.
• Pre-tax restructuring costs of $61 million incurred in 2023 consisting principally of severance related to actions taken in the second and third quarters of 2023 under the plans initially announced in August 2022 to reduce people costs in the Company's global offices by approximately 10% by the end of 2023, of which $39 million was incurred in the second quarter, $19 million was incurred in the third quarter and $4 million was incurred in the fourth quarter.
• 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 tables 1 through 5 and 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 second quarter earnings release on Wednesday, August 28 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.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements in this press release and made during the conference call/webcast, including, without limitation, statements relating to the Company's future revenue, earnings, plans, strategies, objectives, expectations and intentions are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated, including, without limitation, (i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) 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, 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; (iii) the ability to realize the intended benefits from the acquisition of licensees or the reversion of licensed rights (such as the announced, in-process plan to bring in-house most of the product categories that are or had been licensed to G-III Apparel Group, Ltd. upon the expirations over time of the underlying license agreements) and avoid any disruptions in the businesses during the transition from operation by the licensee to the direct operation by us; (iv) the Company has significant levels of outstanding debt and borrowing capacity and uses a significant portion of its cash flows to service its indebtedness, as a result of which the Company might not have sufficient funds to operate its businesses in the manner it intends or has operated in the past; (v) the levels of sales of the Company's apparel, footwear and related products, both to its wholesale customers and in its retail stores and its directly operated digital commerce sites, the levels of sales of the Company's licensees at wholesale and retail, and the extent of discounts and promotional pricing in which the Company and its licensees and other business partners are required to engage, all of which can be affected by weather conditions, changes in the economy (including inflationary pressures like those currently being experienced globally), fuel prices, reductions in travel, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, consumer sentiment and other factors; (vi) the Company's ability to manage its growth and inventory; (vii) quota restrictions, the imposition of safeguard controls and the imposition of new or increased duties or tariffs on goods from the countries where the Company or its licensees produce goods under its trademarks, any of which, among other things, could limit the ability to produce products in cost-effective countries, or in countries that have the labor and technical expertise needed, or require the Company to absorb costs or try to pass costs onto consumers, which could materially impact the Company's revenue and profitability; (viii) the availability and cost of raw materials; (ix) the Company's ability to adjust timely to changes in trade regulations and the migration and development of manufacturers (which can affect where the Company's products can best be produced); (x) the regulation or prohibition of the transaction of business with specific individuals or entities and their affiliates or goods manufactured in (or containing raw materials or components from) certain regions, such as the listing of a person or entity as a Specially Designated National or Blocked Person by the U.S. Department of the Treasury's Office of Foreign Assets Control and the issuance of Withhold Release Orders by the U.S. Customs and Border Protection; (xi) changes in available factory and shipping capacity, wage and shipping cost escalation, and store closures in any of the countries where the Company's or its licensees' or wholesale customers' or other business partners' stores are located or products are sold or produced or are planned to be sold or produced, as a result of civil conflict, war or terrorist acts, the threat of any of the foregoing, or political or labor instability, such as the current war in Ukraine that led to the Company's exit from its retail business in Russia and the cessation of its wholesale operations in Russia and Belarus, and the temporary cessation of business by many of its business partners in Ukraine; (xii) disease epidemics and health-related concerns, such as the recent COVID-19 pandemic, which could result in (and, in the case of the COVID-19 pandemic, did result in some of the following) supply-chain disruptions due to closed factories, reduced workforces and production capacity, shipping delays, container and trucker shortages, port congestion and other logistics problems, closed stores, and reduced consumer traffic and purchasing, or governments implement mandatory business closures, travel restrictions or the like, and market or other changes that could result in shortages of inventory available to be delivered to the Company's stores and customers, order cancellations and lost sales, as well as in noncash impairments of the Company's goodwill and other intangible assets, operating lease right-of-use assets, and property, plant and equipment; (xiii) actions taken towards sustainability and social and environmental responsibility as part of the Company's sustainability and social and environmental strategy may not be achieved or may be perceived to be falsely claimed, which could diminish consumer trust in the Company's brands, as well as the Company's brands' values; (xiv) the failure of the Company's licensees to market successfully licensed products or to preserve the value of the Company's brands, or their misuse of the Company's brands; (xv) significant fluctuations of the U.S. dollar against foreign currencies in which the Company transacts significant levels of business; (xvi) the Company's retirement plan expenses recorded throughout the year are calculated using actuarial valuations that incorporate assumptions and estimates about financial market, economic and demographic conditions, and differences between estimated and actual results give rise to gains and losses, which can be significant, that are recorded immediately in earnings, generally in the fourth quarter of the year; (xvii) the impact of new and revised tax legislation and regulations; and (xviii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission ("SEC").

This press release includes, and the conference call/webcast will include, certain non-GAAP financial measures, as defined under SEC rules. Reconciliations of these measures are included in the financial information following this Safe Harbor Statement, as well as in the Company's Current Report on Form 8-K furnished to the SEC in connection with this earnings release, which is available on the Company's website at www.PVH.com and on the SEC's website at www.sec.gov.

The Company does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimate regarding revenue or earnings, whether as a result of the receipt of new information, future events or otherwise.

PVH CORP.

Consolidated GAAP Statements of Operations

(In millions, except per share data)

Please see following pages for information related to non-GAAP measures discussed in this release.

PVH CORP.

Non-GAAP Measures

The Company believes it is useful to investors to present its results for the periods ended August 4, 2024 and July 30, 2023 on a non-GAAP basis by excluding (i) the restructuring costs incurred in the second quarter of 2024 related to the Company's multi-year initiative to simplify its operating model by centralizing processes and improving systems and automation to drive more efficient, cost-effective ways of working across the organization (the "Growth Driver 5 Actions"), consisting principally of severance; (ii) the pre-tax gain recorded in the first quarter of 2024 in connection with the sale of the Company's Heritage Brands women's intimates business (the "Heritage Brands intimates transaction"); (iii) the restructuring costs incurred in the second quarter of 2023 related to actions taken in July 2023 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 (the "2022 cost savings initiative"), consisting principally of severance; and (iv) the tax effects associated with the foregoing pre-tax items. The Company excludes these amounts because it deems them to be non-recurring or non-operational and believes that their exclusion (i) facilitates comparing the results being reported against past and future results by eliminating amounts that it believes are not comparable between periods, thereby permitting management to evaluate performance and investors to make decisions based on the ongoing operations of the Company, 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 the items described above are also the basis for certain incentive compensation calculations. The non-GAAP measures should be viewed in addition to, and not in lieu of or superior to, the Company's operating performance measures calculated in accordance with GAAP. The information presented on a non-GAAP basis may not be comparable to similarly titled measures reported by other companies.

The following table presents the non-GAAP measures that are discussed in this release. Please see Tables 1 through 5 for the reconciliations of the GAAP amounts to amounts on a non-GAAP basis.

PVH CORP.

Reconciliations of GAAP to Non-GAAP Amounts

(In millions, except per share data)

PVH CORP.

Reconciliations of GAAP to Non-GAAP Amounts (continued)

(In millions, except per share data)

PVH CORP.

Notes to Consolidated GAAP Statements of Operations

(In millions, except per share data)

A. The Company computed its diluted net income per common share as follows:

PVH CORP.

Consolidated Balance Sheets

(In millions)

Note: Year over year balances are impacted by changes in foreign currency exchange rates.

PVH CORP.

Segment Data

(In millions)

PVH CORP.

Segment Data (continued)

(In millions)

PVH CORP.

Segment Data (continued)

(In millions)