PVH Corp. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance Review: Over-delivered on top and bottom line versus guidance. Gross margin increased 120 basis points to a new record. Maintained double-digit EBIT margins at 10%.
• Brand Activities:
  • Calvin Klein: Spring campaign with Jeremy Allen White, global campaigns with Kendall Jenner, etc. Opened flagship store on Champs Elysees. Improved product categories like underwear, denim.
  • Tommy Hilfiger: Strong brand-building year, engaged with global talent. Returned to New York Fashion Week, had runway show, capsule collection with Jisoo.
• Regional Performance:
  • North America: Leaned into PVH+ plan execution, achieved double-digit EBIT margin each quarter.
  • Europe: Proactive quality of sales actions led to improved brand position, two consecutive quarters of DTC store revenue growth.
  • Asia Pacific: Disciplined PVH+ plan execution drove growth, leveraged global brand ambassadors.
• PVH+ Plan Execution: Drove cost efficiencies, simplified organization, shifted culture to brand builders. Put in place technology roadmap to become data and demand-driven.

Segment Performance

• Calvin Klein: Fourth quarter revenues up 1% on constant currency basis, down 2% on reported basis. Full year revenues up 1% on constant currency basis, down 2% on reported basis. Drove growth in key product categories like underwear, denim, etc.
• Tommy Hilfiger: Fourth quarter revenues down 3% on constant currency basis, down 5% on reported basis. Full year revenues down 3% on constant currency basis, down 5% on reported basis. Leaned into classic American cool DNA and engaged with global talent.
• North America: Calvin and Tommy combined 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.
• Europe: Achieved two consecutive quarters of DTC store revenue growth. Fall '25 order books returned to growth. Sales in euros flat in fourth quarter excluding 53rd week impact.
• Asia Pacific: Delivered constant currency revenue growth for the quarter and full year. Continues to be a growth engine long term, with diversified business across the region

Guidance

• 2025 Outlook: Expect revenue flat to slightly up on reported and constant currency basis. EBIT margins flat to slightly up. Accelerate stock buybacks.
• First Quarter Projection: Revenue flat to down 2% on reported basis, flat to down 1% on constant currency basis. Europe revenue up mid-single digits in euros. North America revenue approximately flat. Asia Pacific revenue down low double digits. Gross margin to decline due to freight costs, Calvin Klein product delays, and wholesale mix. SG&A expenses as % of revenue to decrease ~100 basis points. Operating margin ~8% - 8.5%, down 150 - 200 basis points from prior year. EPS projected $2.10 - $2.25.
• Full Year Outlook: Revenue flat to slightly up. Operating margin flat to slightly up. Non-GAAP EPS projected $12.40 - $12.75. Europe to return to growth. Americas to drive double-digit EBIT margin. Asia Pacific to be growth engine long term. Calvin Klein product delays to impact first-half gross margin, improving in second half. SG&A expenses to decrease ~100 basis points due to Growth Driver 5 actions.

Risks

• Global Macro Volatility: Uncertainty around US consumer demand, retail traffic trends in North America.
• China Market Challenges: Post-New Year holiday slowdown led to revenue step down. PVH being added to MFCOM's unreliable entity list.
• Calvin Klein Product Delays: Initial product development timelines led to extended timelines, pressured production costs, causing temporary margin headwind in first half of 2025.
• Operational Execution: Dependence on successful execution of PVH+ plan, cost efficiencies, and product/marketing initiatives to achieve guidance

Question and Answer

• Q: Jay Sole on Europe quality sales initiative and PVH+ plan impact A: Stefan Larsson mentioned Europe quality sales actions included stopping third-party sales on digital platforms, reducing digital platforms, and improving inventory. PVH+ plan elevates execution, connecting to high-quality growth. Europe order books for Fall '25 returned to growth. Zac Coughlin added Europe profitability in euros to grow by low double-digit percentage year.
• Q: Michael Binetti on 2026 margin profile A: Stefan Larsson said Europe order books growing, cost efficiency work taking full hold in back half, Calvin Klein margin improving in back half. Zac Coughlin stated actions in control will lead to higher profit levels in 2026, with fourth quarter operating margin much higher than 2024, raising the water level for 2026.
• Q: Dana Telsey on brand product-engagement connection and marketing spend A: Stefan Larsson gave examples like Calvin Klein's Bad Bunny underwear campaign and Tommy Hilfiger's Caribbean event. Mentioned marketing is a top priority and they continue to invest in growth.
• Q: Brooke Roach on North America wholesale partnerships and G3 business return A: Stefan Larsson talked about strong partnerships with key wholesale partners in North America, focusing on product strength, relevance, and marketing support. Excited about progress with Calvin Klein women's sportswear launch with Lily Collins.
• Q: Matthew Boss on North America inventory planning and first quarter gross margin A: Stefan Larsson said North America saw consumer step back in February, but focus on product, marketing, etc. Zac Coughlin explained first quarter gross margin decline due to increased promotional environment, freight costs, and G3 women's sportswear transition. Full year gross margin expected down ~100 basis points, with下半年 improvement.
• Q: Krista Zuber on inventory optimization A: Stefan Larsson said they focus on season-by-season better planning and buying of assortment and inventory to connect to demand, aiming to continue optimizing inventory to demand over the long term