PVH Corp. (PVH) Earnings

Management highlights

- Overall Q1 Financial Performance * Total Q1 2026 revenue was $2 billion, up 2% reported (exceeding guidance) and down 2% constant currency (in line with expectations) * Gross margin held flat year-over-year at 58.6%, with gross margin expansion across all regions when excluding tariff impacts * Non-GAAP operating margin was 6.5%, hitting the high end of prior guidance; EPS came in above guidance driven by lower than expected tax and interest expense * End-of-quarter inventory was 5% lower than Q1 2025, supported by improved on-time delivery and better demand alignment * Brand and Commercial Strategy * Focused execution on target "power consumer" segments: the status shopper for Calvin Klein, and the style enthusiast for Tommy Hilfiger, who deliver higher frequency, higher order values and greater loyalty * Prioritized growth in core iconic product categories: underwear and denim for Calvin Klein; sweaters, outerwear, shirts, and knits for Tommy Hilfiger, with consistent product innovation and full-funnel 360-degree marketing activations * Notable successful activations included the John Cook x Calvin Klein 90s-inspired capsule collection (the most successful Calvin collaboration to date, with 99% sell-through on Tmall China and a complete sellout at the LA pop-up) and the announcement of Travis Kelce as Tommy Hilfiger's global brand ambassador (generating hundreds of millions of social reach from the announcement alone) * The John Cook collaboration leveraged culturally relevant talent, digital-first storytelling, and in-store activations to drive broad consumer engagement * Operational Progress * Completed over 140 combined new store openings and store/shop-in-shop refurbishments globally to elevate the in-store consumer experience, with new concept rollouts ongoing in Seoul, New York, Stockholm and other key markets * Leveraging the enterprise data platform and partnerships with OpenAI and Salesforce to build a more data and demand-driven operating model, enabling faster decision making and closer alignment with consumer demand * Increased marketing spend by 50 basis points versus last year, which has driven higher online traffic, new consumer acquisition, and mid-single-digit constant currency e-commerce growth across all regions and brands * Completed the bulk of the North America women's Tommy Hilfiger wholesale license takeback, with the new Macy's launch delivering sell-through that outperforms initial plans

Guidance

- Full-year 2026 guidance has been updated to reflect the prolonged impacts of the Middle East conflict, offset by new tariff refunds not included in prior guidance: * Reported revenue guidance revised to flat year-over-year, down from prior guidance of a slight increase; constant currency revenue is now expected to be down slightly, from prior guidance of flat to slightly up * Full-year operating margin guidance is maintained at approximately 8.8%: the 100 basis point favorable impact from $100 million in expected tariff refunds offsets the negative deleverage impact from lower EMEA revenue * Revenue growth guidance for the Americas, Asia Pacific, and core licensing business segments remains unchanged, with growth still expected for both Americas and APAC * EMEA full-year revenue is now expected to decline mid-single digits in constant currency * Gross margin is now expected to increase 100 basis points year-over-year (up from prior guidance of a slight increase), matching the 100 basis point benefit from tariff refunds * SG&A as a percent of revenue is now expected to increase 100 basis points year-over-year (up from prior guidance of a slight increase) due to revenue deleverage, which management will offset with targeted cost efficiencies * Marketing investment guidance is unchanged: full-year marketing spend will increase by at least 50 basis points to approximately 6% of revenue, consistent with initial plans * Full-year EPS guidance is maintained at $11.80 to $12.10 * Capital expenditure guidance remains at $250 million, focused on e-commerce infrastructure and store/shop-in-shop upgrades; share repurchase guidance of at least $300 million for the full year is also unchanged - Second quarter 2026 guidance: * Reported revenue expected to decline 3% to 4% year-over-year, or 4% to 5% in constant currency * Gross margin expected to increase 470 basis points year-over-year driven by the recognition of full tariff refunds in Q2; excluding the refund impact, gross margin is expected to be flat with Q2 2025 * Operating margin expected to be approximately 9.5%, with the tariff refund benefit partially offset by Middle East conflict impacts on EMEA * Second quarter EPS expected to be $3.00 to $3.10 - Four-year EBIT margin and EPS guidance is reaffirmed

Segment performance

By Brand: - Calvin Klein: Total revenue was up 1% on a reported basis and down 3% in constant currency. In direct-to-consumer (D2C), global underwear grew mid-single digits and denim grew double digits, driving overall brand momentum. - Tommy Hilfiger: Total revenue was up 3% on a reported basis and down 2% in constant currency. In D2C, core sweaters and outerwear grew double digits, leading mid-single-digit core category growth. - Licensing: Total revenue was down 7% year-over-year, primarily due to ongoing North America women's wholesale license transitions. Excluding transition impacts, the core go-forward licensing business was down 1%, with full-year growth still expected. By Region: - EMEA: Revenue was up 2% reported and down 5% in constant currency. Both D2C and wholesale declined mid-single digits in constant currency, with the slowdown concentrated in April due to Middle East conflict impacts. - Americas: Revenue was down 1% year-over-year. Low single-digit D2C growth (led by low double-digit e-commerce growth) was more than offset by a mid-single-digit wholesale decline driven by pre-planned shipment timing shifts. - Asia Pacific: Revenue was up 10% reported and up 6% in constant currency, including a 4% tailwind from Lunar New Year timing. D2C grew low teens in constant currency, with China delivering high single-digit constant currency growth and double-digit D2C growth. Growth was partially offset by demand headwinds in Australia from high fuel prices and interest rates. By Channel: - Direct-to-consumer: Revenue was up 6% reported and up 3% in constant currency (includes 2% Lunar New Year timing tailwind). E-commerce revenue grew 11% reported / 6% constant currency, with growth across both brands and all regions. Retail store revenue was up 5% reported / 2% constant currency. - Wholesale: Revenue was flat reported and down 6% in constant currency, with declines across all regions driven by timing shifts and cautious partner sentiment.

Risks & headwinds

- The prolonged Middle East conflict has created three layers of negative impact for the EMEA region: directly reduced wholesale demand in the Middle East, demand slowdown in Turkey driven by lower tourism and macro pressures, and broader reduced consumer sentiment across core EMEA driven by higher fuel prices and lower foot traffic to physical stores - The conflict impact was most pronounced in April 2026, with only a partial improvement in May, and is expected to weigh on results for the full second quarter and the back half of 2026, leading to a downward revision to the full-year EMEA outlook - Australian consumer demand is already under pressure from high domestic fuel prices and elevated interest rates, weighing on regional results - Ongoing tariffs on imports to the U.S. remain a material headwind, with an expected full-year 195 million EBIT headwind (215 basis point operating margin impact) that management partially offsets with mitigation actions - Wholesale partners across regions remain cautious amid uncertain macroeconomic conditions, leading to soft wholesale demand relative to D2C

Analyst Q&A

• Q: The PVH Plus plan is scaling across the business with visible success. How far along is the plan's implementation across the product assortment, and why has inventory stayed at healthy 5% year-over-year declines despite the EMEA slowdown, with no expected major markdown cycle?

  A: The plan has delivered clear proof points in Q1 2026, with strategy now scaled across entire core categories: all Calvin Klein D2C underwear is up mid-single digits, and all D2C denim is up double digits, while Tommy Hilfiger's core sweater and outerwear categories are also up double digits. The plan combines sharper consumer targeting, product innovation in core categories, and increased marketing investment, which has driven D2C growth and expanding gross margins outside of tariff impacts. The demand-driven operating model built under the plan has strengthened supply chain execution and improved on-time delivery, keeping inventory aligned with demand despite the EMEA slowdown. Total inventory is down 5% year-over-year, with no material overhang that would require large, margin-dilutive markdowns. ---

• Q: What is the breakdown of the Middle East conflict headwind between direct impacts (Middle East, Turkey) and indirect broader European consumer impacts, and what mitigation plans are in place?

  A: Approximately half of the total negative top-line impact comes from direct effects on the Middle East and Turkey, and half comes from indirect macro effects on broader EMEA consumer spending, which is most visible in reduced physical store traffic. The company is mitigating by leaning into existing momentum in the still-growing Americas and APAC regions, continuing to invest in marketing to drive ongoing e-commerce growth (which remains positive even in EMEA), and maintaining strict inventory discipline to protect margins. Growth guidance for Americas and APAC is unchanged, with continued D2C growth expected across both regions for the full year and Q2. ---

• Q: How will EBIT margin recover to the full-year guided level after the expected Q2 pressure, and how will the company use the cash from the unexpected tariff refunds?

  A: The full-year 8.8% operating margin guidance is maintained, as the $100 million tariff refund benefit fully absorbs the Middle East conflict impact while allowing planned brand investments to continue. Margin recovery in the second half will come from three main factors: wholesale timing shifts that benefit the second half, growing gross margin improvements from inventory and supply chain optimization, and reduced SG&A deleverage as marketing investments are concentrated in the first half per the original plan, leading to easier comparisons in the back half. The company will follow its standard capital allocation framework: it maintains planned investments in brand marketing, digital infrastructure and store upgrades, keeps the $250 million capex and $300 million minimum share repurchase guidance unchanged, balancing long-term growth investment with shareholder returns. ---

• Q: How is marketing strategy expected to evolve in the back half of 2026 for both brands, and what is the update on license takeback progress?

  A: Marketing will continue the successful focused strategy already deployed, with consistent full-funnel activations centered on core categories, product innovation, and culturally relevant talent for each brand, all targeted at the core power consumer segments. For Calvin Klein, this means more high-impact collaborations and activations focused on underwear and denim; for Tommy Hilfiger, it means leaning into existing successful sports partnerships and the upcoming Travis Kelce fall campaign. The bulk of the North America women's wholesale license takeback is complete, with the new Tommy Hilfiger women's launch at Macy's delivering sell-through that outperforms initial plans. The core go-forward licensing business is already on track to grow for the full year.