PVH(PVH) - 2025 Q3 - Quarterly Report

Net Income and Comprehensive Income - Net income for the thirteen weeks ended November 3, 2024, was $131.9 million, compared to$161.6 million in the same period last year[9] - Net income for the thirty-nine weeks ended November 3, 2024, was $441.3 million, compared to$391.8 million in the same period last year[9] - Total other comprehensive loss for the thirteen weeks ended November 3, 2024, was $12.8 million, compared to$81.6 million in the same period last year[9] - Total other comprehensive loss for the thirty-nine weeks ended November 3, 2024, was $34.0 million, compared to$91.6 million in the same period last year[9] - Comprehensive income for the thirty-nine weeks ended October 29, 2023, was $107.5 million,$112.7 million, and $80.0 million for the respective periods[16] - Comprehensive income for the thirty-nine weeks ended November 3, 2024, was$147.4 million[18] Cash and Cash Equivalents - Cash and cash equivalents as of November 3, 2024, were $559.6 million, compared to$707.6 million as of February 4, 2024, and $357.6 million as of October 29, 2023[12] Total Assets and Liabilities - Total current assets as of November 3, 2024, were$3,478.2 million, compared to $3,259.7 million as of February 4, 2024, and$3,347.1 million as of October 29, 2023[12] - Total liabilities as of November 3, 2024, were $5,953.1 million, compared to$6,053.0 million as of February 4, 2024, and $6,112.8 million as of October 29, 2023[12] Cash Flow Activities - Net cash provided by operating activities for the thirty-nine weeks ended November 3, 2024, was$254.4 million, compared to $311.7 million in the same period last year[14] - Net cash used by investing activities for the thirty-nine weeks ended November 3, 2024, was$100.6 million, compared to $165.3 million in the same period last year[14] - Net cash used by financing activities for the thirty-nine weeks ended November 3, 2024, was$300.0 million, compared to $330.8 million in the same period last year[14] Foreign Currency and Hedging - Foreign currency translation adjustments resulted in a loss of$16.7 million, a gain of $21.1 million, and a loss of$154.6 million for the respective periods[16] - Net unrealized and realized loss related to effective cash flow hedges was $2.0 million, a gain of$0.3 million, and a gain of $24.7 million for the respective periods[16] - Net loss on net investment hedges was$9.8 million, $2.9 million, and a gain of$48.3 million for the respective periods[16] - The notional amount outstanding of foreign currency forward contracts was $1,341.0 million at November 3, 2024, with contracts expiring between November 2024 and April 2026[90] - The fair value and carrying value of foreign currency borrowings designated as net investment hedges were$1,222.6 million and $1,211.0 million, respectively, as of November 3, 2024[86] - The company entered into cross-currency swap contracts in 2023, converting$500.0 million of USD-denominated debt to €457.2 million of EUR-denominated debt, with a weighted average interest rate of 1.405%[87] - The total gain recognized in other comprehensive income from cash flow and net investment hedges was $19.7 million for the thirteen weeks ended November 3, 2024[93] - The total gain reclassified from accumulated other comprehensive loss (AOCL) into income was$7.0 million for the thirteen weeks ended November 3, 2024[94] - A net gain in AOCL on foreign currency forward contracts of $10.7 million is estimated to be reclassified in the next 12 months to cost of goods sold[94] Stock-Based Compensation and Equity - Stock-based compensation expense was$13.1 million, $14.3 million, and$12.1 million for the respective periods[16] - Stock-based compensation expense for the thirty-nine weeks ended November 3, 2024, was $39.1 million, with a recognized income tax benefit of$4.8 million[110] - The weighted average grant date fair value per stock option for the thirty-nine weeks ended November 3, 2024, was $60.96, with a weighted average risk-free interest rate of 4.33$93.14 per RSU[113] - PSU awards granted in 2021 resulted in 55,000 shares earned, with performance on the one-year EBIT measure above the maximum level and three-year TSR measure between threshold and target levels[115] - The company estimates the fair value of stock options using the Black-Scholes-Merton model, with a weighted average expected stock option term of 6.25 years and company volatility of 53.32%[111] - The fair value of RSUs is determined based on the closing price of the company's common stock on the grant date[112] - Weighted average grant date fair value per PSU is $138.12 with a weighted average risk-free interest rate of 4.71$106.68[120] - Accumulated Other Comprehensive Loss (AOCL) increased to $787.6 million at November 3, 2024 from$753.6 million at February 4, 2024, driven by unfavorable foreign currency translation adjustments[121][122] Revenue and Sales - Revenue from Israel and the Middle East is expected to be less than 1% and 2% of total revenue in 2024, respectively[27] - Total revenue for the thirteen weeks ended 11/3/24 was $2,255.1 million, down from$2,362.9 million in the same period in 2023[150] - Tommy Hilfiger North America segment revenue for the thirteen weeks ended 11/3/24 was $349.8 million, down from$359.2 million in the same period in 2023[150] - Calvin Klein North America segment revenue for the thirteen weeks ended 11/3/24 was $341.8 million, down from$375.5 million in the same period in 2023[150] - Calvin Klein International segment revenue for the thirteen weeks ended 11/3/24 was $652.1 million, up from$646.7 million in the same period in 2023[150] - Heritage Brands Wholesale segment revenue for the thirteen weeks ended 11/3/24 was $60.3 million, down from$130.8 million in the same period in 2023[150] - Total net sales for the thirteen weeks ended 11/3/24 were $2,131.0 million, down from$2,225.8 million in the same period in 2023[150] - Wholesale net sales for the thirteen weeks ended November 3, 2024 were $1,203.1 million, down 7.6$1,301.6 million in the same period in 2023[152] - Owned and operated retail stores generated $760.0 million in revenue for the thirteen weeks ended November 3, 2024, a slight increase from$754.7 million in the same period in 2023[152] Income Before Interest and Taxes - Income before interest and taxes for the thirteen weeks ended November 3, 2024 was $183.1 million, compared to$229.8 million in the same period in 2023, a decrease of 20.3%[153] - Tommy Hilfiger International segment income before interest and taxes for the thirteen weeks ended November 3, 2024 was $58.0 million, down 36.1$90.8 million in the same period in 2023[153] - Calvin Klein International segment income before interest and taxes for the thirteen weeks ended November 3, 2024 was $84.5 million, down 11.0$94.9 million in the same period in 2023[153] Deferred Revenue and Contractual Obligations - Contractual minimum fees from license agreements not yet satisfied total $647.6 million, with$62.9 million expected to be recognized in 2024, $236.8 million in 2025, and$347.9 million thereafter[33] - Deferred revenue recognized during the thirteen weeks ended November 3, 2024, was $2.6 million, compared to$4.0 million for the same period in 2023[35] - Long-term deferred revenue liabilities were $7.4 million as of November 3, 2024, down from$9.4 million as of February 4, 2024[36] - Deferred revenue balance at the end of the thirty-nine weeks ended November 3, 2024, was $46.7 million, down from$48.4 million for the same period in 2023[39] Pension Plans and Employee Benefits - The company has two noncontributory qualified defined benefit pension plans covering substantially all employees resident in the United States hired prior to January 1, 2022, with benefits based on career average compensation and years of credited service[51] - The company's Pension Plans and supplemental pension plan will freeze pensionable compensation and credited service amounts effective June 30, 2024, except for employees near retirement age who meet a specified service requirement[51] - The total net benefit cost for the Pension Plans was $0.9 million for the thirteen weeks ended November 3, 2024, and$5.7 million for the thirty-nine weeks ended November 3, 2024[53] - The total net benefit cost for the SERP Plans was $0.7 million for the thirteen weeks ended November 3, 2024, and$2.4 million for the thirty-nine weeks ended November 3, 2024[54] Long-Term Debt and Financing - The company's long-term debt carrying amount was $2,165.3 million as of November 3, 2024, with a current portion of$511.1 million[61] - The company's mandatory long-term debt repayments for the remainder of 2024 through 2029 total $2,175.3 million, with$511.9 million due in 2025 and $1,079.7 million due in 2027[62] - Approximately 80$9.0 million on its term loan under the 2022 facilities during the thirty-nine weeks ended November 3, 2024[66] - The company issued €525.0 million principal amount of 4 1/8% senior notes due July 16, 2029, with €5.4 million in fees paid in connection with the issuance[73] - The company had $84.9 million of standby letters of credit and bank guarantees outstanding as of November 3, 2024[77] Income Tax Rates - The effective income tax rate for the thirteen weeks ended November 3, 2024 was 21.0$56.5 million, with foreign currency forward contracts valued at $14.2 million and cross-currency swap contracts at$15.6 million[101] - The company's rabbi trust assets were valued at $13.8 million as of November 3, 2024, with corresponding deferred compensation liabilities included in accrued expenses[104] - The fair value of long-term debt as of November 3, 2024, was$2,176.5 million, compared to a carrying amount of $2,165.3 million[107] Cost Savings and Restructuring - The company expects to generate annual cost savings of$200 million to $300 million by 2026 through its Growth Driver 5 Actions, with$27.5 million in pre-tax severance and termination costs incurred during the thirty-nine weeks ended November 3, 2024[130][131] - A pre-tax gain of $9.5 million was recorded from the sale of a warehouse and distribution center during the thirty-nine weeks ended November 3, 2024[132] - The 2022 cost savings initiative resulted in annual cost savings of over$100 million, with $81.5 million in pre-tax severance and termination costs incurred during 2022 and 2023[134][136] - Severance, termination benefits, and other employee costs liability decreased from$20.4 million to 4.1 million during the thirty-nine weeks ended 11/3/24[138] Business Divestitures and Acquisitions - The Company completed the sale of its women's intimates businesses under the Warner's, Olga, and True&Co. trademarks to Basic Resources on November 27, 2023[20] - The company sold its women's intimates businesses for 160.0 million, resulting in a gain of $15.3 million in Q4 2023 and an additional$10.0 million gain in Q1 2024[41][42] Impairment Testing - Goodwill impairment test for 2024 showed no impairment, with the Tommy Hilfiger International reporting unit's fair value exceeding its carrying amount by approximately 10%[48][49] - The indefinite-lived intangible asset with the least excess fair value exceeded its carrying amount by 19% in the 2024 impairment test[50] Supply Chain and Logistics - Shipping delays due to attacks in the Red Sea and potential port strikes could increase freight costs and impact inventory and sales volume[28][30] - Attacks on commercial shipping vessels in the Red Sea have led to supply chain disruptions, but did not materially impact the company's business in 2023 or the first nine months of 2024[28] - A brief port strike on the East and Gulf Coasts of the United States in October 2024 did not materially impact the company's business in Q3 2024, but a resumption could lead to shipping delays and increased freight costs[30] Trade Receivables and Credit Losses - Trade receivables, net as of November 3, 2024, were $979.7 million, compared to$793.3 million as of February 4, 2024, and $1,045.4 million as of October 29, 2023[12] - The allowance for credit losses on trade receivables was$46.6 million as of November 3, 2024, compared to $43.9 million as of October 29, 2023[168] - Suppliers had elected to sell$422.9 million of the company's payment obligations through the supply chain finance program as of November 3, 2024, compared to $348.3 million as of October 29, 2023[170] Warehousing and Distribution - Warehousing and distribution expenses for the thirteen weeks ended November 3, 2024 totaled$84.2 million, a decrease of 5.1% from $88.7 million in the same period in 2023[167] Employee Agreements and Compensation - The company incurred$50.7 million in costs related to an amendment to Mr. Tommy Hilfiger's employment agreement, which was included in the Tommy Hilfiger North America and International segments[156] Share Repurchases and Dividends - The company repurchased 2.4 million shares for $254.2 million (excluding$2.2 million excise taxes) during the thirty-nine weeks ended November 3, 2024, with $2.019 billion remaining in the stock repurchase program[126] - Dividends declared were$2.4 million, $2.4 million, and$2.3 million for the respective periods[16] - Dividends declared were $0.0375 per common share for the thirty-nine weeks ended October 29, 2023[16] International Operations and Geopolitical Risks - The company exited its Russia business in Q2 2022, with less than 1% of 2024 revenue expected from Ukraine[31] - Less than 1% of the company's revenue in 2024 is expected to be generated in Israel, and less than 2% in the Middle East, including Israel[27] - The Israel-Hamas war and the war in Ukraine did not have a material impact on the company's business in 2023 and are not expected to in 2024[27][31] Financial Reporting and Accounting Policies - The company's fiscal years are based on 52-53 week periods ending on the Sunday closest to February 1, designated by the calendar year in which the fiscal year commences[22] - The company's consolidated financial statements are prepared in conformity with U.S. GAAP, requiring management to make estimates and assumptions that could materially differ from actual results[24] Non-Financial Assets and Impairments - The company's non-financial assets, including goodwill and property, plant, and equipment, are not required to be measured at fair value on a recurring basis, and no impairments were recorded during the thirty-nine weeks ended November 3, 2024[106]