PVH(US:PVH)2023-08-30 16:36Financial Data and Key Metrics Changes - The company reported a revenue growth of 4% on a reported basis and 2% in constant currency for Q2 2023, exceeding earnings expectations on a non-GAAP basis [9][57] - Non-GAAP EPS guidance for the full year was raised to approximately $10.35, reflecting a 15% increase compared to 2022 [12][84] - Gross margin improved to 57.6%, an increase of 40 basis points year-over-year, despite a negative impact from product costs due to exchange [69][70] Business Line Data and Key Metrics Changes - Direct-to-consumer (D2C) businesses experienced double-digit growth, with significant increases in both stores and owned e-commerce [11][66] - Tommy Hilfiger revenues increased by 6% and Calvin Klein revenues rose by 3% on a reported basis, driven by a focus on consumer engagement [67][68] - Key categories for Tommy, such as polos, saw over 30% year-over-year growth, while Calvin's core premium essentials in D2C grew nearly 30% [53] Market Data and Key Metrics Changes - In Europe, reported revenue growth was high single-digit year-over-year, with the business now nearly 30% larger than pre-pandemic levels [31] - Asia Pacific delivered a strong performance with revenue growth of 16% in constant currency, including over 20% growth in China [36][62] - North America saw mid-single-digit growth in D2C, with significant improvements in profitability across both brands [41][42] Company Strategy and Development Direction - The company is focused on executing the PVH+ Plan, which aims to build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands globally [14][56] - A demand-driven supply chain is being developed, targeting a 25% reduction in inventory levels as a percentage of sales [28][58] - Increased share buybacks from $200 million to $400 million for the full year demonstrate confidence in long-term brand potential [13][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate a choppy macro environment while focusing on long-term growth opportunities [56][84] - The company anticipates continued strong performance in the second half of the year, reaffirming revenue guidance and operating margin outlook [59][75] - Management highlighted the importance of connecting products with culturally relevant events to enhance brand desirability [20][68] Other Important Information - The company is committed to improving its supply chain efficiency, with a focus on on-time delivery and shorter lead times [40][86] - SG&A expenses as a percentage of revenue are expected to increase approximately 70 basis points compared to 2022 due to investments in DTC and international business [81][82] - The company is also addressing the impact of recent wildfires in Maui, ensuring support for affected team members [55] Q&A Session Summary Question: Update on North America traction and profitability - Management noted significant improvements in D2C growth for both brands, with mid-single-digit growth driven by the PVH+ execution [92] - Profitability increased across both brands, with Tommy showing greater than 6% and Calvin greater than 8% improvements [93] Question: Developments in the supply chain side of the PVH+ Plan - Management highlighted strengthened supply chain leadership and foundational improvements leading to a target of 25% less inventory in relation to sales by the end of 2024 [97] Question: Insights on fall product by brand - Early responses to fall products are positive, with good inventory levels and composition across brands [100] Question: SG&A cadence and marketing spend - The $100 million in net savings from the people cost reduction program is expected to have a significant impact in Q4 [110] - Marketing spend is planned to increase by 20%, which management believes will effectively support growth targets [109]