PVH Corp. 2027 Q2 Earnings Call

Thank you, operator. Good morning, everyone, and welcome to the PVH Corp second quarter 2026 earnings conference call. Leading the call today will be Stefan Larsson, Chief Executive Officer, and Melissa Stone, Interim Chief Financial Officer and Executive Vice President, Global Financial Planning and Analysis. Alexis Rollier, our incoming Chief Financial Officer, has joined PVH, and we look forward to having him lead our third quarter 2026 earnings conference call along with Stefan. 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 on any transcript or replay of this call. The information to be discussed includes forward-looking statements that reflect PVH's view as of September 2, 2026, 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. 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 second quarter 2026 earnings release, which can be found on www.pvh.com and in the company's current report on Form 8-K furnished to the SEC in connection with the release. At this time, I am pleased to turn the conference over to Stefan Larsson.

Thank you, Kate, and good morning, everyone, and thank you for joining our call today. I would like to start by acknowledging our Calvin Klein, Tommy Hilfiger, and PVH teams around the world. Thanks to your hard work, we continue to make meaningful progress on our multi-year PVH+ Plan. During the second quarter, we built momentum while navigating a dynamic environment, achieving our revenue guidance and beating on profitability. This morning, I am also thrilled to formally welcome our new Chief Financial Officer, Alexis Rollier, to PVH. Alexis will officially join us in New York next week. He comes to us with deep financial and operational experience, most recently as the Global CFO and COO at Sephora, where he drove disciplined growth and significant profit expansion. Alexis' experience combining consumer-facing improvements with effective financial steering will help us deliver our PVH+ Plan and drive long-term shareholder value.

I can't wait for you all to get to know him. Now, on to a discussion of the second quarter. This morning, I'm going to start with an overview of the results before turning to progress on our PVH+ Plan, and we'll end with our thoughts on the remainder of the year and future opportunities. Turning to the second quarter, we delivered revenues in line with our guidance across all three regions and our licensing business. Calvin Klein and Tommy Hilfiger revenues were in line with expectations, with consistent year-over-year revenue performance, excluding the impacts of wholesale shipment timing. We continue to drive momentum in our D2C business, led by growth in both APAC and the Americas, while the wholesale business was impacted by the tough macro environment in Europe.

E-commerce continued to be a source of strength, supported by strong year-over-year increases in online traffic across both brands, with Calvin up double digits and Tommy up high single digits. These results reflect the overall progress we are making in elevating our product, marketing, and the consumer experience. We beat our guidance on all elements of profitability. Importantly, our gross margins, excluding tariff refunds, improved year-over-year and were above expectations. We continue to lean into our strong cost discipline while remaining committed to a balanced approach to investment that prioritize brand building in support of the PVH+ Plan. We ended the quarter with very good inventory levels, down 3% versus last year, and we are well-positioned for fall and holiday with improved stock freshness. Turning to our performance by region. Across the regions, our performance was in line with our expectations.

We drove D2C growth across the Americas and APAC and delivered better-than-expected gross margin expansion across both brands. In the Americas, our business remained resilient, driven by e-commerce growth, strong AUR expansion, and disciplined execution. In APAC, we saw continued strength in D2C, led by stores and better-than-expected gross margin performance. Stronger consumer engagement drove higher conversion and AUR growth with strengthened promotion management. In EMEA, we delivered on our revenue guidance for the quarter and drove e-commerce growth across both brands. We also improved D2C versus the prior quarter, while the wholesale channel remained under pressure, reflecting the challenging environment. Turning to licensing, which is a significant high-value business for us, generating over $350 million in annual revenue and supporting more than $3 billion in licensed net sales globally. Licensing is a recurring, growing, strong, profitable revenue stream, driven by long-term relationships with brand-building partners.

We are focused on complementing our own strength in our core categories with the expertise and capabilities of our long-term strategic licensing partners. During the second quarter, excluding the impact from the previously announced transition of our women's North America wholesale categories, we continued to grow our go-forward licensing portfolio. We expect that growth to continue through the balance of the year. Importantly, we also remain on plan with the transition of our women's wholesale business in North America and expect it to be substantially complete by the end of 2026. From there, we expect to grow our overall licensing business. Turning to the drivers of our Q2 performance. We are relentless in delivering on our PVH+ Plan, and we continue to build momentum while navigating a dynamic business environment. Now, let's take a moment to discuss the progress we have made across each pillar of the plan.

When we connect all parts of the consumer journey, all the way to our doors and stores, we drive real commercial impact. During the quarter, we continued to sharpen our consumer focus, deliver stronger products, and engage our consumers with cut-through 360 marketing, all while improving the marketplace experience in both D2C and wholesale. Let me share some specific examples that demonstrate the meaningful progress we continued to make this quarter. Starting with building strength with the consumer. We know that both brands outperform with Gen Z and younger millennials, and within those, perform strongly with the highest value consumer segments, the status shopper and the style enthusiast. We continue to focus our investments on reaching these power segments, and we are seeing early signs that it's helping us acquire and retain high-quality consumers who shop more often, are less price sensitive, and are more loyal.

We see this in our acquisition of online consumers, which is up significantly across both brands. We see it in the performance in the Americas and APAC, where we are driving D2C growth with higher pricing power. We see it in our growing number of returning consumers at both Calvin and Tommy. Next is product. During the quarter, once again, we grew multiple full hero categories in D2C, where we have the biggest right to win. Specifically, in Calvin Klein Denim, global sales rose double digits across both men's and women's. With women's jeans a particular standout, as consumers responded really well to our new take on Calvin icons, leading to very strong gross margins and AURs up double digits. In Calvin Klein Underwear, we drove low single-digit global growth for the total category with mid-single AUR improvement.

At Tommy, D2C growth was driven by sweaters, which were up double digits, and shirts and polos, which were both up mid-single digits, with linen a particular standout across categories, rising over 30% across all regions. Third, we continued to drive strong consumer engagement, increasingly connecting all the parts of the consumer journey end to end. As previously discussed, we strategically increased our marketing spend in the first half of the year, and this investment, together with a sharper focus on our target consumer segments, delivered low single-digit e-commerce growth across both Calvin and Tommy, with improvements in share of online search. In Calvin Klein, the standout moment this quarter was Jungkook for Calvin Klein. It's Jungkook's first product collaboration with us and our most successful global product collaboration in the history of the brand.

Jungkook is a global phenomenon with a unique ability to connect with fans across regions and demographics. By linking the campaign's product, marketing, and immersive retail activations globally, our teams created a true cultural moment that drove 5 billion in social media reach, triple-digit growth in e-commerce traffic compared to the spring brand campaign, and over 90% global sell-through. This collaboration is such a powerful example of how we can successfully deliver 360 global brand activations. In Tommy, through our global partnership with Liverpool Football Club, we invited consumers into an iconic summer of soccer and style. Together with Cadillac Formula 1, U.S. SailGP, and our other partnerships, we continue to connect our iconic brand and products to growing influential sport and entertainment platforms, leveraging Tommy's unique heritage across fashion, art, music, entertainment, and sport.

Finally, we also continue to upgrade our marketplace experience across both brands, further investing in the shopping experience across digital, shop-in-shops, and store concepts. Globally, we have now completed over 120 refurbishments and relocations and over 130 new store openings year to date. Looking at recent performance across regions and brands, I like where we are positioned. There is still more work to be done, but we are making good progress, and I'm optimistic that we will build on this momentum as we continue to thoughtfully execute the PVH+ Plan. This morning, I would also like to share an update on our cost management actions. We have extended beyond our traditional one-time programmatic cost actions to focus on more systematic, repeatable ways to become more efficient. We are embedding a culture of cost discipline in two main ways.

First, we have globalized and centralized our indirect procurement capabilities to optimize spend by consolidating our indirect supplier base, standardizing our ways of working, and operating as one global team to leverage the full PVH scale across key areas, including global freight cost, packaging, parcel sourcing, marketing production. Second, we are now driving enterprise-wide cost management by spend category, with senior leaders responsible for optimizing how we use our resources more effectively and more efficiently against our PVH+ priorities. Through these efforts, we are reducing cost across nearly a dozen categories and have already confirmed annualized run rate savings of approximately $45 million, with a portion of these savings in 2026 and a full realization in 2027. This is important work, and we are committed to finding next-level sustainable cost savings.