PVH Corp. Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Brand Execution: Further strengthen PVH plus execution, strengthening brand-building consumer flywheel. Leverage strong consumer love for iconic brands, focus on big product categories, bring innovation and newness into iconic product franchises, amplify with powerful marketing and next-level channel execution.
• Product Innovation: Calvin Klein saw growth in underwear and denim categories with successful campaigns and new product launches. Tommy had collaborations and capsule collections tied to sports and lifestyle.
• Marketing Investment: Increase marketing investments in the back half to generate higher visibility and customer impact, with full-funnel marketing campaigns for both brands.
• Regional Performance: Europe had D2C growth and store revenue growth; The Americas had revenue growth and digital commerce growth; Asia Pacific stabilized business in key markets.

Segment Performance:

• Brand-wise:
  • Calvin Klein: Drove powerful growth in underwear and denim categories. Men's ICON Cotton Stretch hero product franchise with Bad Bunny campaign was successful, driving brand awareness and sales. Women's underwear launched Icon cotton modal franchise.
  • Tommy: Continued to connect with culture, with partnerships like Formula One and Apple Studios, and launched full-funnel global campaigns. Had successful sell-through of limited edition A Pax GP collection and capsule collection with US sale GP team.
• Regional-wise:
  • Europe: Drove another quarter of total D2C growth and fourth consecutive quarter of store revenue growth. Overall revenue down low single digits in constant currency for the quarter, but ended first half with revenue slightly up vs last year. Wholesale order book for Spring 2026 up low single digits.
  • The Americas: Revenue up 11% driven by double-digit wholesale growth (including Calvin Klein women's sportswear and jeans wholesale transition in-house). Direct-to-consumer revenue flat sequentially vs Q1, with digital commerce business up double digits for fourth consecutive quarter.
  • Asia Pacific: Drove better-than-expected top-line performance with revenues declining low single digits in constant currency, significant sequential improvement vs Q1. Started to stabilize business in key markets.

Guidance:

• Reaffirm full-year earnings guidance and raise reported revenue guidance despite tariffs doubling and uneven global macro.
• Third Quarter: Projected revenue flat to slight increase on reported basis, down slightly on constant currency basis vs prior year. Gross margin expected to decline approx 175 basis points vs prior year. SG&A as % of revenue expected to be up approx 75 basis points. Operating margin projected at approx 8%, EPS in range of $2.35 to $2.50.
• Full Year: Reaffirm constant currency revenue guidance flat to slight increase, operating margin outlook approx 8.5%, EPS outlook in range of $10.75 to $11. Tariffs have net negative impact on earnings, mitigated by strategic actions over time.

Risks:

• Global trade policy uncertainty and its impact on broader macroeconomic environment and consumer spending behavior.
• Tariffs effectively doubling, which has an impact on gross margin and earnings.
• Transitory operational challenges in setting up Calvin Klein global product capability in New York initially.

Q: Jay Sole asked about the drivers of marketing investments and Zac's thoughts on marketing investments in the P&L.

A: Stefan Larsson said marketing investments are based on product strength, full-funnel marketing amplification, and consumer engagement strengthening. Zac Coughlin mentioned SG&A cost savings from value driver five actions continue, with mitigation in Q3 but marketing investment in Q3 causing some deleverage, but SG&A leverage to return in Q4.

Q: Michael Binetti inquired about tariffs' impact on gross margin and outlook for 2026.

A: Stefan Larsson emphasized brand strength in navigating tariffs, and Zac Coughlin stated about diversified supply chain, mitigation efforts, and continuing to look at levers across value chain to mitigate tariff impact.

Q: Brooke Roach asked for an operational update on Calvin Klein's transformation.

A: Stefan Larsson said Calvin Klein has worked through initial operational challenges, made sequential improvements in Fall 2025, secured go-in margin improvements for Spring 2026, and is back on track with global product capabilities.

Q: Matthew Boss asked about drivers of sequential improvement in direct-to-consumer in The Americas and composition of Fall '25 order book in Europe.

A: Stefan Larsson said improved D2C in The Americas was due to product strength, marketing amplification, full-funnel expansion, and consumer focus. In Europe, Fall order books grew due to product strength across Calvin and Tommy, and Spring 2026 order books continued to build on that strength.

Q: Dana Telsey asked about promotional trends overseas vs US and store portfolio enhancements.

A: Stefan Larsson discussed global consumer uncertainty and store plans like opening new flagship stores in Tokyo and New York.

Q: Tom asked about North American wholesale environment and impact of G3 license insourcing.

A: Stefan Larsson and Zac Coughlin mentioned North American wholesale had benefit from Calvin Klein women's business relaunch and normalization of wholesale shipment across first half and second half.