New York, NY — PVH Corp.  reported its 2022 fourth quarter and full year results and provided its 2023 outlook.

Stefan Larsson, Chief Executive Officer, commented, “We delivered strong fourth quarter performance with stronger than expected high-single digit constant currency revenue growth and earnings above guidance. Our disciplined execution of the PVH+ Plan, our multi-year, brand-focused, direct-to-consumer and digitally-led strategy enabled us to compete to win despite the challenging macro situation. Since we introduced our PVH+ Plan, we have made significant progress all around the world in driving brand desirability by getting closer to the consumer, creating great products and delivering very strong consumer engagement through impactful talent partnerships.”

Mr. Larsson, added, “Looking ahead, we are entering 2023 with significant momentum, and we will continue to execute the PVH+ Plan with discipline towards our long-term vision to build TOMMY HILFIGER and Calvin Klein into the most desirable lifestyle brands in the world and be one of the highest performing brand groups in our sector.”

Zac Coughlin, Chief Financial Officer, said, “We are well positioned to achieve double-digit EPS growth in 2023 and have a multi-year opportunity ahead of us to drive meaningful top and bottom-line growth. Our plan is built on two of the most powerful brands in the fashion industry, and we are doubling down on the PVH+ Plan growth drivers and focusing on what is within our control to drive sustainable and profitable growth, generate strong cash flows, and deliver attractive returns for our shareholders.”

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. References to the Company’s underlying revenue growth refers to the revenue change on a constant currency basis, excluding the impacts of the war in Ukraine, the Heritage Brands transaction and the exit from the Heritage Brands retail business, as applicable.

Fourth Quarter Review:

• Revenue increased 2% compared to the prior year period (increased 8% on a constant currency basis), inclusive of a 1% reduction resulting from the impact of the war in Ukraine, including closures of Company stores in Russia, the cessation of wholesale shipments to Russia and Belarus, and a reduction in wholesale shipments to Ukraine.The Company’s underlying high single-digit revenue growth compared to the prior year period was driven by growth in both its Tommy Hilfiger and Calvin Klein brand businesses. The increase included strong revenue growth in Europe, as well as growth in North America, particularly in the direct-to-consumer business, despite the challenging global macroeconomic environment. The Company continued to experience negative impacts from the COVID-19 pandemic in China.
  • Direct-to-consumer revenue increased 4% compared to the prior year period (increased 10% on a constant currency basis).
  • Wholesale revenue was flat compared to the prior year period (increased 6% on a constant currency basis).
  • Total digital revenue decreased 8% (decreased 2% on a constant currency basis) compared to exceptionally strong revenue in the prior year period. Digital revenue includes the sales through the Company’s digital commerce businesses and sales to the digital businesses of its traditional and pure play wholesale customers reflected in the direct-to-consumer and wholesale revenues above. Digital penetration as a percentage of total revenue was approximately 20%.
• Gross margin was 55.9% compared to 58.3% in the prior year period. The benefit from price increases and a favorable shift in regional and channel mix were more than offset by higher costs and increased promotional activity due to elevated inventory levels industry-wide.
• Inventory increased 34% compared to the prior year period due to a combination of (i) abnormally low inventory levels in the prior year period, (ii) earlier receipts of inventory, and (iii) higher product costs.

Fourth Quarter Consolidated Results:

• Revenue increased 2% to $2.489 billion compared to the prior year period (increased 8% on a constant currency basis), inclusive of a 1% reduction resulting from the impact of the war in Ukraine.
  • Tommy Hilfiger revenue increased 3% compared to the prior year period (increased 10% on a constant currency basis)
    • Tommy Hilfiger International revenue increased 3% (increased 11% on a constant currency basis)
    • Tommy Hilfiger North America revenue increased 5%
  • Calvin Klein revenue increased 3% compared to the prior year period (increased 8% on a constant currency basis)
    • Calvin Klein International revenue increased 2% (increased 10% on a constant currency basis)
    • Calvin Klein North America revenue increased 4%
  • Heritage Brands revenue decreased 10% compared to the prior year period.
• Earnings before interest and taxes (“EBIT”) on a GAAP basis was $297 million, inclusive of a $21 million negative impact due to foreign currency translation, compared to $223 million in the prior year period. Included in the fourth quarter and the prior year period were recognized actuarial gains on retirement plans of $78 million and $49 million, respectively. EBIT on a GAAP basis for the fourth quarter also includes other amounts described under the heading “Non-GAAP Exclusions” later in this release. EBIT on a non-GAAP basis for these periods exclude these amounts.EBIT on a non-GAAP basis was $215 million, inclusive of a $21 million negative impact due to foreign currency translation, compared to $175 million in the prior year period. The increase was driven by revenue growth on a constant currency basis and lower expenses, partially offset by the lower gross margins discussed above. Expenses decreased compared to the prior year period as 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: $2.18 compared to $5.53 in the prior year period.
  • Non-GAAP basis: $2.38 compared to $2.84 in the prior year period.

EPS on both a GAAP basis and non-GAAP basis for the fourth quarter included the negative impacts of (i) $0.23 per share related to foreign currency translation and (ii) $0.13 per share related to the war in Ukraine.

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 exclude these amounts.

• Interest expense decreased to $22 million from $24 million in the prior year period.
• Effective tax rate was 49.7% on a GAAP basis as compared to (96.0)% in the prior year period. The effective tax rate for the fourth quarter of 2022 included the negative impact resulting from the $417 million pre-tax noncash goodwill impairment charge recorded in the third quarter of 2022, which is non-deductible for tax purposes and factored into the Company’s annualized effective tax rate. The effective tax rate in the prior year period included one-time discrete tax benefits of $152 million, principally resulting from a tax accounting method change made in conjunction with the Company’s 2020 U.S. federal income tax return. The effective tax rates on a non-GAAP basis for these periods exclude these impacts. The effective tax rate was 21.7% on a non-GAAP basis compared to (33.2)% in the prior year period. Included in the effective tax rate on a non-GAAP basis for the prior year period was a discrete tax benefit related to the resolution of uncertain tax positions.

Full Year 2022 Consolidated Results:

• Revenue decreased 1% to $9.024 billion compared to 2021 (increased 5% on a constant currency basis), inclusive of a 3% negative impact consisting of (i) a 2% reduction resulting from the Heritage Brands transaction (as defined under the heading “Non-GAAP Exclusions”) and the exit from the Heritage Brands Retail business and (ii) a 1% reduction resulting from the war in Ukraine.
  • Tommy Hilfiger revenue decreased 1% compared to 2021 (increased 7% on a constant currency basis)
    • Tommy Hilfiger International revenue decreased 4% (increased 6% on a constant currency basis)
    • Tommy Hilfiger North America revenue increased 9%
  • Calvin Klein revenue increased 3% compared to 2021 (increased 10% on a constant currency basis)
    • Calvin Klein International revenue increased 1% (increased 10% on a constant currency basis)
    • Calvin Klein North America revenue increased 8%
  • Heritage Brands revenue decreased 26% compared to 2021, and includes a 25% decrease resulting from the Heritage Brands transaction and the exit from the Heritage Brands Retail business.
• EBIT on a GAAP basis was $471 million, inclusive of a $94 million negative impact due to foreign currency translation, compared to $1.077 billion in 2021. These results include the amounts for the applicable period described under the heading “Non-GAAP Exclusions” later in this release. EBIT on a non-GAAP basis for these periods exclude these amounts.EBIT on a non-GAAP basis was $857 million, inclusive of a $94 million negative impact due to foreign currency translation, compared to $983 million in 2021.

• EPS
  • GAAP basis: $3.03 compared to $13.25 in 2021.
  • Non-GAAP basis: $8.97 compared to $10.15 in 2021.

EPS on both a GAAP basis and non-GAAP basis for 2022 included the negative impacts of (i) $1.09 per share related to foreign currency translation and (ii) $0.58 per share related to the war in Ukraine, apart from the one-time noncash asset impairments recorded in the second quarter in connection with the Company’s decision to exit from its Russia business discussed under the heading “Non-GAAP Exclusions” later in this release.

EPS on a GAAP basis for these periods also included the other amounts for the applicable period described under the heading “Non-GAAP Exclusions” later in this release. EPS on a non-GAAP basis excludes the one-time noncash impairments recorded in the second quarter discussed above and these other amounts.

• Interest expense decreased to $83 million from $104 million in 2021 primarily due to the impact of voluntary debt repayments made in 2021.
• Effective tax rate was 48.4% on a GAAP basis as compared to 2.1% in 2021. The effective tax rate was 23.3% on a non-GAAP basis compared to 17.1% in 2021.

Stock Repurchase Program:

Delivering on its commitment under the PVH+ Plan to return excess cash to stockholders, the Company repurchased 6.2 million shares of its common stock for approximately $400 million during 2022.

2023 Outlook:

Full Year 2023 Guidance

• Revenue is projected to increase 3% to 4% as compared to 2022 (increase 2% to 3% on a constant currency basis), which reflects a benefit of less than 1% from the 53rd week in 2023.
• Operating margin is projected to be approximately 10%.
• EPS is projected to be approximately $10.00 compared to $3.03 on a GAAP basis and $8.97 on a non-GAAP basis in 2022. The 2023 EPS projection includes the estimated positive impact of approximately $0.15 per share related to foreign currency translation. EPS on a GAAP basis for 2022 included the amounts described under the heading “Non-GAAP Exclusions” later in this release. EPS on a non-GAAP basis excluded these amounts.
• Interest expense is projected to increase to approximately $100 million compared to $83 million in 2022 primarily due to higher interest rates.
• Effective tax rate is projected to be approximately 24%.

First Quarter 2023 Guidance

• Revenue is projected to be relatively flat as compared to the first quarter of 2022 (increase approximately 3% on a constant currency basis).
• EPS is projected to be approximately $1.90 compared to $1.94 in the first quarter of 2022. The first quarter 2023 EPS projection includes the estimated negative impact of approximately $0.10 per share related to foreign currency translation.
• Interest expense is projected to increase to approximately $23 million compared to $22 million in the first quarter of 2022.
• Effective tax rate is projected to be approximately 24%.

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 gain of $78 million recorded in the fourth quarter of 2022 related to the recognized actuarial gain on retirement plans.
• Pre-tax noncash goodwill impairment charge of $417 million recorded in the third quarter of 2022, which was non-operational and driven by a significant increase in discount rates.
• Pre-tax costs of $20 million incurred in 2022, consisting of severance related to initial actions 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, of which $17 million was incurred in the third quarter and $4 million was incurred in the fourth quarter.
• Pre-tax net costs of $43 million recorded in 2022 in connection with the Company’s decision to exit from its Russia business, primarily consisting of noncash asset impairments and a gain on contract terminations, of which $50 million of charges were recorded in the second quarter and an $8 million gain was recorded in the fourth quarter.
• Pre-tax gain of $16 million recorded in the second quarter of 2022 in connection with the sale of the Company’s equity investment in Karl Lagerfeld Holding B.V.
• Pre-tax gain of $49 million recorded in the fourth quarter of 2021 related to the recognized actuarial gain on retirement plans.
• One-time discrete tax benefits of $152 million recorded in the fourth quarter of 2021 principally resulting from a tax accounting method change made in conjunction with the Company’s 2020 U.S. federal income tax return.
• Pre-tax net gain of $113 million recorded in the third quarter of 2021 in connection with the sale of certain intellectual property and other assets of the Company’s Heritage Brands business that closed on the first day of the third quarter of 2021 (the “Heritage Brands transaction”), which includes a gain on the sale, less costs to sell, a net gain on the Company’s retirement plans associated with the transaction, and severance costs.
• Pre-tax costs of $48 million incurred in 2021 in connection with actions announced in March 2021 to streamline the Company’s organization through reductions in its workforce, primarily in certain international markets, and to reduce its real estate footprint, including reductions in office space and select store closures, consisting of noncash asset impairments, severance, and contract termination and other costs, of which $43 million was incurred in the first quarter, $2 million was incurred in the second quarter, and $2 million was incurred in the third quarter.
• Pre-tax costs of $21 million incurred in 2021 in connection with the exit from the Heritage Brands Retail business announced in July 2020 that was substantially completed in the second quarter of 2021, consisting of severance and other termination benefits, accelerated amortization of lease assets and contract termination and other costs, of which $8 million was incurred in the first quarter and $13 million was incurred in the second 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 8 and the section entitled “Reconciliations of Constant Currency Revenue” 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 fourth quarter earnings release on Tuesday, March 28, 2023 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.