Q4 2019 Earnings Call

[music].

Good day, ladies and gentlemen, welcome to the P. H fourth quarter, two talking to 19 earnings call.

Today's call is being recorded.

The Safe Harbor statement would be registry part Dana pardon.

Thank you operator, good morning, everyone and welcome to the PVH Corp. fourth quarter and full year 2019, earning conference call. This webcast and conference call is being recorded on behalf of PDH and consistent copyright.

Had material it may not be recorded or rebroadcast or otherwise transmitted without P. D. H is written permission your participation in the question and answer session constitutes your consent to having anything you say appear on any transcript a replay of this call.

The information being made available includes forward looking statements that reflects PDH and view as of April 1st Twentytwenty, a future events and financial performance.

These statements are subject to risks and uncertainties indicated in the company's FCC filing and the Safe Harbor statement included in the press release that is a subject of this call.

These risks and uncertainties include PDH is right to change it strategies objectives expectations, then intentions and it's easy to use significant cash flow to service its debt obligations.

Inefficiently at this time the covert Nike outbreak is having a significant impact on the company's business financial condition cash flow and results of operations. There are significant uncertainty about the duration and extent of the impact of the virus.

Haneke nature of these circumstances means what is said on this call could change materially at anytime therefore, the operation of the company's dismissed and its future results of operations could differ materially from historical practices and results of current description estimate and suggestions TV.

It does not undertake any obligation to update publicly any forward looking statement, including without limitation any estimates or suggestions regarding revenue or earnings.

Generally the financial information provided is on a non-GAAP basis as defined under FCC rules reconciliation to GAAP amounts are included in PVH. Its fourth quarter 2019 earnings release, which can be found on www dot PVH dotcom and and the company's current report on form 8-K.

Furnished to the FCC in connection with this release.

At this time I'm pleased to trying to compensate over to Mr. met each Rico, chairman and CEO of T D H.

Andrew Good morning, everyone. Joining me on the call is low stuff in Washington, or President luxury from our Chief operating Officer, one Chief Financial Officer.

And Dana Perlman, Treasurer, and senior Vice President of business development and Investor Relations.

We're all working from home today.

So I want to thank everyone for joining us on all fourth quarter cool.

I loved commas that is reviewed strange to be sitting in my living room for this call and not in my conference room, but I suppose that is a new normal everywhere and I hope everyone is safe and healthy this morning.

We were extremely crews to how we ended the year, we had a strong holiday season with increasing momentum of course, Tommy Hilfiger, and Calvin Klein and the majority of the regions, where we operate.

We had a significant revenue of about $100 million and exceeded our earnings guidance from the on a non-GAAP basis.

Despite the impact from the Corona virus, which was not contemplated in our initial outlook.

If you compare off the school year earnings per share results with all guidance, although at least $9.45. We've had a 31 should be.

The earnings out of a business outperformance from Calvin and Tommy.

Three scent bead from lower interest and taxes.

This was offset by a 25 cents kit for the Corona humans Horn reserves that we booked that were recorded at the very until the fourth quarter, which was not contemplated in our initial guidance.

I believe the magnitude of our business outperformance, especially ourselves out performance given the backdrop that we were dealing with in the fourth quarter, which truly impressive and speaks to the health of all brands and the momentum in the business that we saw in the fourth quarter.

We were pleased to every year with very clean inventories overall, our inventory uppers position.

It was down 7% year over year, which also was better than the guidance we talked about.

Before I go into our financial results I wanted to take a few moments to talk about the Corona virus, which I'm sure is top of mind, everyone in the investment community.

This is an unprecedented times and is already rapidly changing situation and our hearts go out to all those impacted by the events that are unfolding.

Oh PVH people are demonstrating their passion and dedication to PVH with most of all regions working remotely from home to continuing to operate all business through the some certain times. It has been inspiring to see our people rallied together and I truly believe there just demonstrates the power of.

The age.

The spread of the Kirker Corona virus is unfortunately, having a major impact on our business.

Temporary store closings felt across multiple continents, including store closures across Europe, the Americas and Australia.

Our coast wholesale customers and licensees have been similarly impacted which in turn they could negatively impacts PVH.

Digital sites and those of our key partners continue to surface consumers and we are seeing significant growth there.

Pending on the market, we are seeing anywhere from 20% to over 50% growth on the online versus last year.

Which we are balancing what the health and safety of all workers in the distribution center, and making sure goods get to consumers.

As a reminder, our digital business in 2019 was up approximately 20% globally and now represents about 12% of our total revenues versus 10% in 2018.

In China, we are seeing some encouraging early signs of recovery.

All of our stores of reopened.

What stores are operating with shorter hours and approximately 95% of our franchisees stores are also open.

We are seeing some rebound in sales with improvement in a week over week and for the month of March total business was down only about 35%.

What digital sales are comping up closer to plus 40%.

We know it clearly we'll take some time to return to normalcy and hope that our other regions will follow a similar path to normal business wants to pandemic.

Has passed.

Before I go into our business review and forward looking comments I want to touch on a few topics, giving the current given the current climate.

The health of our balance sheet remarried remains our core strength.

We recently drew down about $750 million from our revolver, which gives us over $1.2 billion in cash and available borrowings. We ended the fourth quarter with a gross leverage ratio of 2.2 times and a net leverage ratio of one.

0.9 times.

Cash preservation is a critical focus area of us now.

We suspended our stock repurchasing program and also suspended our cash dividend beginning in the first quarter of 20 Twond.

Cost cogent cutting measures have been implemented we have taken a hard look at expenses and are reducing or canceling discretionary spending and variable expenses.

In many areas to navigate successfully and take the pressure off the business. This includes our marketing expense struers, although we continue to invest.

Digital businesses as this is a critical channel for us to maintain our connection with all consumers and to transact globally with all consumers.

As of now store associates in the U.S., Canada, and Europe continued to be paid through this week and next and we are evaluating aiding any and all payroll opportunities and salary reductions, including looking at would different governments are offering as relief package.

His each region.

We took a hard look at capital expenditures and now expect spend around 190 million in Capex for Twentytwenty about a 45% reduction from 2019.

As we have canceled or delayed capital projects that are not business critical at this time.

On the supply side, our supply chain is one of our key competitive advantages and we have strong relationships with long term partners.

Therefore, we've been able to reduce our inventory can is for the fall season, and we are redeploying some inventories, particularly core and core fashion from summer to fall and consolidating some seasons, particularly holiday in spring, which will give us more time to make better decisions about making.

Inventory commitments.

As we operate in so many countries around the world. We have a task force headed up by stuff and loss in our president reviewing all options, including government relief and support and different inventory programs that we would utilize in each region.

We will take advantage of any government support that's available to us as it is appropriate.

Lastly, as a reminder, in January we announced our transaction to sell our speed all business to Petland.

Which is expected to close in April for this coming month for all business and we will take advantage of that support is about $170 million.

Come in as cash sometime in April.

Before I go into our financial review I, just want to take a moment and read iterate my confidence in PV age and the stress that we have that will enable us to navigate this crisis.

Our brands, our iconic with incredibly strong brand health across the board.

We have great consumer brand royalty and we are taking this opportunity to deepen our connection with the consumers even further as we leverage our always on digital approach the diversification of our business is a true advantage both from a belief.

Our regional and aged and a brand point of view and we have significant category and regional opportunities to further extend our brands after dependent damage subsides.

Well the near term is uncertain I do believe that PVH will emerge from this even stronger given the strength of all brands, our people and our strong competitive balance sheet.

Moving on to the business. We are pleased with the fourth quarter results in especially in light of the challenging and volatile global backdrop.

Our revenues rose, 6% on a constant currency basis, which significantly exceeded our previous guidance and exceeded it by about $100 million I think that's clearly demonstrates the momentum that we saw more in the business, particularly in the sit in the December holiday season.

And in the January period, right, we thought before the Corona virus hit.

Outperformance was principally driven by our international businesses, which represented about 75 million of the 100 million dollar beat Europe in particular was strong but also China.

In North America, we saw an outperformance against all plans of about $25 million is in sales and that was driven principally by all retail businesses, which comped. The significantly ahead of our initial plans our brand health in the region. All regions is very strong for both Tommy sales.

Figure and Calvin Klein, and we feel we significantly outperformed our competition in the fourth quarter.

Tommy Concedes continued to see an excellent response to its a lifestyle offerings, which enabled us to continue to get Gainshare from regional and global competitors Calvin Klein in Europe continued to see great trajectory of growth and we remain confident in the long term path to 2 billion.

In dollars in revenues, which were just about double our business from today.

As we expand at both it category all food offerings and capitalize on the consumer appetite for the brand.

If we look to the current state of the business in Europe, obviously the region today is quite challenged due to the Corona virus epidemic our stores remain temporarily closed as per government regulations, and so are those although certain of our key wholesale partners.

For the coated 19 outbreak our strong order books were for both brands plus 12% for spring and fall, where plus 12% for Tommy and over 20% increase for Calvin Klein.

However in light of the crisis, there will be some pressure from our partners and we need to support them through this this period and allow for some level of cancellations in order to move goods through and in order to get inventories back in lines.

We'll continue to manage this this situation in order to position on both Calvin Klein and Tommy Hilfiger for long term growth in Europe.

Moving to North America, we had a great holiday season relative to our plans a wholesale businesses performed quite well for both Tommy and Calvin, particularly on digital channels, where we continue to grow our penetration.

Well, we remain a key account for a wholesale partners our brands our traffic drivers.

And on North America retail business in North America, Calvin Klein post in the 800 basis points acceleration in comp stores relative to the third quarter, which we were very pleased with comps overall for the quarter came in at plus 4%.

However, we saw a traffic and sales under pressure during the fourth quarter due to lower visits from international tourists, especially as we got closer to the lunar new year period. In January this had a particular impact on Tommy Hilfiger retail business, which has about a 40% of itself.

Sales coming from tourists and let us to take deeper discounts and markdowns.

Currently in North America, there are clearly store closures for both our own stores and those of our wholesale partners. These temporary closures are pressuring our business.

And we and weeks that that we will have to deal with some pressure from order cancellations as we move forward, we're working with all of our retail partners to manage that and to manage the inventory flow.

Finally for our results in Asia I like to highlight highlight that China's showed a significant improvement in the fourth quarter relative to third quarter trends.

With Tommy Hilfiger, its fourth quarter comps up double digits, and Calvin Klein fourth quarter constant flat, but in January we saw a significant increases, particularly in China.

Obviously this trend reverse with a cover Corona virus outbreak, where we saw a significant job drop in business in the fourth fourth week of January and then moving to February.

As I mentioned earlier in the majority of our stores in Asia are now open and we have seen a resurgence in business, which will go into more detail. Let me begin we're talking about Tommy Hilfiger first.

How many health and your continued to experience momentum during the fourth quarter brand health remains strong as we continue to deliver differentiated product assortments and engaging consumer experiences.

We had exciting partnerships, including our sponsorship of the 2020 Hakan.

Few races in Austria, where Tommy Hilfiger did a full brand takeover. This wasn't in addition to our new capsule collections, including a joint capsule collection with Lewis Hamilton and grab Grammy Award, winning singer and songwriter her.

From a business position Tommy increased as revenue and impressive 12% in the quarter and 13% on a constant currency basis, which significantly exceeded our revenue guidance I asked by about $75 million.

However earnings declined 13% during the quarter, while armies on Tommy Hilfiger business were up year over year during the quarter.

This was offset by several factors most notably the continued gross margin pressure in North America retail business to clear goods as well as the negative impact of additional inventory reserves that were unexpected at the time of that we gave guidance in anticipation of lower so.

Sales caused by the Corona virus.

By segment, our international business continue to so show strength with revenues up 22% on a constant currency basis, and overall comp stores up 10% with comp store increases, particularly in Europe, and China, which exceeded our guidance.

These European business continued to outperform as an experienced double digit revenue growth, which strength across all channels of distribution in all markets and product categories. We believe that our market leading position is driven by our excellent product are compelling for price value proposition.

Question, and strong brand power, which is allowing us to take share from regional and global competitors.

Our Asia business posted revenue growth during the fourth quarter, China was very strong floors with comps up double digit.

We also experienced strong momentum in our Japan business and had the benefit of the addition of revenues from the acquisitions of Australia, and central and Southern European Tommy businesses.

In North America revenues declined only 2% and margins were down word, but thought margins were down sharply we continue to see very favorable trends at wholesale as all brought brand outperformed competition throughout holiday however results for our business.

Our retail business, which were planned we're extremely challenge as we continue to take heavy markdowns to end the year clean with inventory.

Our global licensing business continued to be very favorable for us, particularly with GE three on our women's business that continues to be an excellent partner for us and continued to exceed all of office sales plans for the Tommy Hilfiger Women's business.

Despite the current pandemic, we continue to have income credible confidence in the long term opportunities for the Tommy Hilfiger brands from category and reached three regional expansion opportunities and the ability to optimize our distribution that network globally.

Let me move to Calvin Klein now, we continue to expand experience brand heat during the fourth quarter.

We deepened dock connections with consumers by delivering compelling product engaging brand experiences and we're providing a platform for self expression for all consumers.

Importantly, we made significant progress to reposition and refocus the brand within enhance product focus.

We recently launched CK, everyone, a clean fragrance alongside the new CK, one underwear in jeans collection, marking our first ever cross category marketing launch that spans both fragrance and fashion.

This was a global launch for us for the brand. We also debuted the spring Calvin Klein jeans, and Calvin Klein underwear campaign, featuring new spring offerings and starring just to be the laser sang among other key talent people.

Moving to the business overall revenues decreased 2%.

Well, 1% on a constant currency basis, if you remove the jeans business, which was transferred to our GE three partner business was up overall, 1%, which beat our guidance by approximately $25 million.

These are the only softness in business that we saw was in Asia in Hong Kong during the fourth quarter driven by the protest that continued which had a major impact on that markets physician sales position overall by region Calvin Klein.

International revenues increased 8% on a constant currency business.

With comp stores, increasing overall by 1% and if you remove the Hong Kong business from that comp store business. So netcomm. So a number comp stores, an increase and X.

Hong Kong by 5%, we continued to see most excellent momentum in our European and our China business consumers responded well to our offerings for holiday and performance was broad based across all channels markets and product categories in Asia, We will.

Seized to see a notable acceleration in China during the quarter, our trends were quite favorable before the Corona visors escalated.

During that when they progress relating to our products and consumer engagement and I think you can see that in the momentum song and sales, particularly in December and January as we started to deliver new spring product.

Digital businesses continued to see excellent growth as the consumer is increasingly shopping online and we added more online activation to drive overall engagement over.

Overall, we were very pleased with Asia is performance outside of Hong Kong, which continued to be on impacted by the protests in the fourth quarter.

In revenue in North America revenues declined 11% largely driven by our decision to license the jeans business to GE three.

Wholesale was a positive story for us, particularly outperformance in the digital channels, our retail business posted a six sequential acceleration with comps up 4% in the fourth quarter. We were quite pleased with this results, which were achieved inc. any country.

Function, we took an improvement in far fewer and less promotional markdowns than last year.

As we look to pass the current global drop backdrop, we continue to see strong long term growth opportunities for the Calvin Klein brand.

Most notably our expansion in Europe, which we believe is out at least a billion dollar sales opportunity florals driving both are.

Driven both through our all channels of distribution as we move forward, we continue to leverage our growth in the digital opportunities and leveraging our growth opportunities across Asia.

Finally, moving to our heritage business, we continue to feel pressure due to the challenging North America retail environment heritage brands that really impact moderate price points, such as our heritage businesses revenues for the business declined 1% with flat.

Comps in our own retail stores operating margins remained under pressure as planned as gross margin expansion in the business was offset by expense de leverage on the extent side. We will continue to look for additional ways to optimize and streamline the heritage business in the future to.

Generate enhanced returns and we remain on track as I mentioned before with the sale of our speedo business, which should occur in April.

Before before I pass things over to Mike I want to highlight the PVH is 140 year history is marked by a strong resiliency, we have overcome countless challenges, including the great Depression tool world was and the great recession in 2008.

As we move forward, we have tremendous opportunities across PVH his business model to capture long term sustainable profit growth from driving meaningful engagements with our consumers to continuous improvement in product that Calvin Klein to capturing the global distribution.

The news for both Calvin Klein and Tommy Hilfiger Theater, and we continue to look for ways to optimize our businessman it.

Business model whether.

Through the supply chain or through efficiencies across the business I believe that our core strengths our talented people our iconic brands and our strong financial fundamentals and off balance sheet.

Conservative balance sheet, we'll continue to service as a key competitive advantages for us as we animal allow us to come out of this crisis stronger than we can make and with that I'd like to turn it over to Mike to talk about the financial results in more detail Mike.

Thanks Manny.

Comments I'm about to make are based on non-GAAP results in a record sub groceries I'm going to briefly touch on the fourth quarter of 29 team then move on to 20 Twond.

Our reported revenues were up 5% an up 6% on a constant currency basis revenues grew much stronger than a previous guidance. Tommy Hilfiger revenues were very strong approach could soon as recorded and 13% on the constant currency basis and far exceeded our previous guidance.

I mean, no pigments international revenues increased 20% as reported and were up 22% on a constant currency basis.

The Tommy Hilfiger International revenue increase was driven by continued outperformance in Europe, and the revenue from our Australia, and Tommy Hilfiger, Central and Southeast Asia acquisitions.

International comp store sales were up 10%.

Tommy Hilfiger, North American revenues declined 2% growth.

Growth in the wholesale business was offset by North America, Commscope them, 6%, primarily due to the load drop within spending enough stores in international tourist locations.

Calvin Klein revenues were down 2% as reported and decreased 1% on a constant currency basis and were better than our previous guidance that required international revenues increased 6% as reported and were up 8% on constant currency basis, given by continued growth in Europe, and the revenue from Australia, Brazil.

Sure, partially offset by softness amazing due to the Hong Kong protests.

Our international comps sales grew up 1% Calvin Klein North America revenue decreased 11% or wholesale business revenues were negatively impacted compared to the prior year, but licensing about women's jeans business to do three.

The Americas comp sales were up 4%.

We are believed to be down 1% to the prior year and below our previous guidance our heritage retail business comp store sales were relatively flat to the prior year.

Non-GAAP earnings per share was $1.88 cents, which was nine cents better than our previous guidance EPS beat versus previous guidance was driven by outperformance in the Tommy Hilfiger in Calvin Klein businesses for approximately 31 cents considerable interest and taxes resets.

These were partially offset by additional inventory reserves, we need to approximately 25 cents could be onset of the virus occurred here at the end of the off.

And our fourth quarter.

The 40, a 29 TV and deal with record revenue of 9.9 billion, an increase of 3% versus the prior year and non-GAAP earnings per share of $9.54.

Moving on to 20, twond or first quarter and full year 2020 results would be cigna significantly negatively impacted by the Kobin Nike brand.

The duration and extends to defend them. It is highly uncertain I know results could be impacted ways, we not able to predict today.

As a result, we're not into position to issue guidance for the quarter of fiscal year 20 Twond.

We're monitoring the situation closely with regard to associates customers business pauses in supply chain.

Feel we're well positioned to manage through these uncertain times.

We ended 2019 with cash advise them through the 3 million and with inventory levels down 7% compared to the prior year.

Taking a number of steps to preserve liquidity of financial flexibility.

We feel very comfortable with our liquidity position as we've drawn down from our revolving credit facility. In addition to suspending share repurchases under our stock repurchase program a mandatory long term debt repayments in 2020 are only 14 million.

It is in addition to suspending Rps dividend beginning with the second quarter of 2020 or pre we see amounts dividends paid on March 31st and was not impacted by the suspension reviewing every opportunity to eliminate discretionary spending we're cutting capital expenditures to approximately 109.

<unk> million from 345 million in the prior year with capital expenditures only for minimum requirements in our retail stores and proposed projects currently in progress related to systems in warehouses.

We were also reducing operating expenses, including fuel opportunities and we do see all non payroll expenses, including creative marketing you travel.

Also tightly managing working capital, we were adjusting inventory levels by canceled or delayed orders were extending payment terms to both merchandise to non merchandise vendor invoices and suspending the payment Brent temporarily and Delever canceling plan new store openings.

Also as a reminder, ourselves you know north American business to Pepped, many new people see the parent company Speedo brand is expected to close in the first quarter of 2020 470 million cash subject to a working capital adjustment.

We will give guidance for future quarters, the new ones, who is more clarity on impacting duration of the cobot 19 and then.

As we work through 2020, a financial discipline will help us take advantage of the opportunities available to us.

Withstand the current pressures on our business in image emerge from the crisis, well position capture long long term sustainable profitable growth.

And with that operator, we'll open it up for questions.

<unk>.

Thanks, Keith ladies and gentlemen, if he would like to ask a question. Please press the star of checks key funded by the teachers run on your telephone.

Okay. So sure it that the mute function on your telephone is fixed often I used to go to reach our equipment.

If they find that your question has already been on stage you may when this yourself from the King by pressing Star 10.

Once again, please press star one to ask a question.

We will take our first question today from top to though I've Guggenheim Securities. Please go ahead.

Good morning, Manny I hope it so while you didn't give us an update today, but hope everything continues to be wells being a family and and and I do have a couple of questions.

I think the first question that I was hoping you guys can expand upon is generally when you look at the channel globally and you know you did talk about the need for some markdowns and cancellations can you just talked to you know exactly where you see the biggest concerns on your inventories in the channel and.

It's coming over you know from you know from Asia, and your sourcing and then the second question and those type and Mike.

Mike can you just talk a little bit about the biggest buckets of expense opportunity. You know as you think about you know where are you couldn't pull the levers whether it is payroll where it is read you know even on the market you side, just sort of how you really approaching it super expand upon those two questions that would be great. Thank you.

[noise] Bobby Thanks for the question I'm, everybody just get underway I feel a five you saw me on TV yesterday.

I'm one of the fortunate once the whatever symptoms I have been unbelievably mild and I've been able to continue to work and operating focus on the business from out what the.

Spring Summer inventory is is to is the biggest issue that everybody's dealing with.

First goods are coming in goods have been ordered.

Prior to the the pandemic and the crisis.

As we ended the year with our our inventories down 7% I could tell you we were going in at the departure at in the child Department stores across the Board North America, Asia, and Europe, and wrote and our own stores, we were going into the year very clean and feeling really good with tremendous and.

I don't momentum I got to tell you we were really feeling great in January before this all hit us in felt we want to be starting to first quarter with the tremendous not all momentum and the ability to continue to grow margins and add to and and add to our topline growth.

Obviously that all changed within a couple of week period of time biggest challenges facing is.

Got we've lost you know we have to assume that stores are gonna be closed at a minimum through April.

Here in North America in Europe, our two biggest small markets and we've lost at least six and fit to eight weeks of spring selling.

And spring selling in the heart of the season. So I mean, you have to think of it that way when you think about Easter. When you think about March April that's the heart of the season as you as you're going into it. That's your biggest areas of doing full price selling as you go in so that losing.

In that you know that that's that anywhere from six to eight to 10 weeks of sales is really where I believe the pressure points going to date.

And what we're looking at and Stephanie.

It's really taken on this with the regions.

And our brands across the board is what we're really looking at that inventory, making some judgments about what we should promote and liquidate through our own stores or through some partner accounts to really go after it.

The other piece that we're really looking hard at there is what should we re purpose and utilize to to sell into the season it to sell through the season as as we go forward and we're looking at the ability to potentially pack and hold some really good merchandise. That's in the warehouse that will that will use.

And maybe half the calorie for a few months to bring it out as we go forward. So we're looking at all those from a child point of view as we think about Im sorry, when we think about inventory for fall. We've got a lot of things for ourselves a step. It has worked with the teams will it with Daniel Grieder in Europe without comps you in Asia and show.

General and Ken Duane here in the United States to really look at the inventory pipeline and with all logistic team logistics teams to really look at how that pipeline would be worth tried to push out with our with our partners to push inventory coming out at least an additional four to five weeks. So we'd have some.

More visibility Westwood, we've been able outcome deep conversations with our retail partners about what makes sense to cancel and what really is necessary as we go forward. So we're trying to balance data as as we looked at it I think it's the risk reward today is to have less inventory and shape.

Later, if if if we need more goods you know the best story, if we're sitting here in the third quarter.

This year and I'm sitting sitting with you telling you know were low on inventory and we're chasing fall that would be a that would be a real excellent problem to have as we go forward.

Mike you're going to take the second part of the question.

Sure.

<unk> expenses, but the big buckets within a very focused on virtually any discretionary expense. So when you think about what their needs for us. It's basically the taking a hard look at payrolls.

The taking a hard look at salary reductions were taking a hard look at marketing any expense that is actually discretionary obviously travel is down to zero now and we're going to clamp down on in trouble moving forward and it'll just be a matter of doing the right things in the short term.

To be in a position that when things do get better and we do open we have the the base ready to move ready to step up and ready to reopen with would be appropriate crews that their availability. So we're making every discretionary don't we can this be renewed its anything discretionary.

Okay, Thanks, and Stephan welcome good though.

Thanks, Bobby.

Thank you, we now move to Erinn Murphy with Piper Jaffray. Please go ahead.

Great. Thanks, Good morning, and hope you all everything at healthy it can be and I guess my first question if I'm digital on it it sounds like it's relatively outperforms, particularly into something that's always a crop I think low key to talk a little bit and went out that you're seeing there and maybe even China. It kind of a large plaintiffs and we've seen a bit more of the country there and.

Then within that 190 million Capex budget for the year I'm going to pick up in pocket fair and Holly digital and data in hand, and I only pipe within the topic I.

I think though.

Sure, Mike I'm going to answer the first part of your they'll take the Capex. So just give me is getting a moment to just respond.

Look the digital transaction has been the bright spot throughout this it's you know even before the Corona virus, we were seeing 20% growth in our digital business and our penetration.

For 2019 with what we've always talked about 10% is has grown to 12% overall digital penetration from the PVH I think this the pandemic is only accelerated that not only in the short timeframe, but I think it's also impacted the way consumers.

They're going to shop going forward I think you know I was on I was on Korea I was on Mad money last night being interviewed and I talked about it is I you Jay I always had a general belief and I think I've spoken a number of course in conferences about that over the next five to six years, we're going to continue to see a consolidation in retail industry.

Great and we're going to seek and wholesale apparel industry and I thought that would be a five six year a path I think this and then it accelerates that accelerates the consumers.

Comfort level with buying apparel online I think it accelerates the potential store closures and you know the C and D and E stores closing as we go forward and we'll get to a healthier store base, we've always talked about that in especially in the U.S.

With various too many stores our sales per cap the sales per square foot per capita of up by far the highest in the world and it would be healthy to see that happened, but obviously, it's also going to be painful as we go through that process I think.

Good what we're seeing in digital and the kind of growth market by market. We're seeing who you know you see anywhere from 20% to 60% growth depending on it on a chat on the channel.

In China, our penetration continues to grow we were somewhere in the neighborhood of about a 15%.

Penetration in China, and I think that this year it wouldn't surprise us if we if that moved to 20% as we see an outsized growth in our digital channel, we're growing digitally between 35, and 40% or digital sales and backs at that's a very high margin. So we're not out there.

Promoting we're out there connecting with our consumers, but we're not doing from a price point basis, we're doing it at a at.

At a very positive level. So I think that that's a bright spot and I think it'll continue to be a bright spot and on the cap site. That's one capital expense side, that's one area, where we haven't backed off continue to make investments to some support that business. Mike you want to talk about the capex.

Yes.

Looking to get you said it its own we took out but down from 390 to one I'd.

And basically we've we've cut out discretionary so what we what we've seen is we've taken out renovations, we've taken anything that doesn't have to happen. The one place. We've left those in this to stabilize expand and grow our digital business.

It includes E. Commerce. It also includes our consumer data efforts I'm. It also includes not just owned and operated E commerce, but gateways pathways and support to work with some of the bigger players in the pure play area. So that's that's still in our plans and we hope that skewed on that this year.

Yeah, I'm trying to direct to the scope and you know the person Besides China matted country management team and the person who is probably closer to this and as though really been working directly with the with team. All in particular is Steffan Steffan, maybe you could just take a few comments about the relationship in some of that.

Things that are happening and we plan to see happening in that channel.

Yes, thank you money in.

Hi, failing.

When it comes to managing through the crisis with the regions and implicate gigabit get them and China, where.

We have all here in North America. So so when it comes to eat called Nice overall, that's managed said, we see strong comps across the board and.

Well good gaming is like they're working in Europe. It takes you did Salaam no real again, it I'm a strong in North America, and you're working they would pay TV people in China on some of the product long shapes that we had planned coming in it for nobody about described so actually we directed even more focused strategic when damage. It's.

Work reading about in the long if something it's the CK one product launch that's many mentioned and the candidates criteria you part that up the team all them how they had a very successful activation very good reception from our concern.

You never know how bad.

Oh no one other thing I would add in North America on a digital point of view is a without t. accounts, particularly Macy's Macy's Dot com business continues to be strong for us and we continue to have you know.

Strong really strong consumer connections that and seeing really strong growth as they've index as I tried to redirect.

Okay.

Next question operator.

Thanks. Kim next question is from Chase, So a few P.S. [laughter].

Great. Thanks, so much in the morning my questions on promotions because you know one feature of the situation is it's not just one company that has an inventory you know challenged to deal with its every company it seems like a global issue.

How much you know do come promotion do you think it's going to get out there and what kind of impact might have on my gross margin generally speaking.

Listen I think that's the that's the big question and I think we had.

Luck honest objectively speaking this is not an industry that has had across the board great inventory control metrics in place.

I know that said I think that I think as we can add up.

As we came out of holiday going into first quarter. There was a tremendous cleanup that went on in the fourth quarter across the board to get inventories back in line. So at the end of January what we saw was I have a bright spot was.

Inventories that were really on the control throughout the channel Department stores, North America, Europe, and then even competitively.

Everyone took advantage of the good selling that was going on overall and everyone saw some level of margin pressure when they reported earnings but I think a big piece of that margin pressure was the the objective to make sure inventories were clean as we went into 2020 I think inventory was bought.

With more discipline, because you you heard us all complaining on our third quarter calls about open to buy dollars being so tight and the retailers are trying to get turned under control. So that's all true, but I also think that there's going to be a significant amount of in sorry, the loss of let's say.

Eight weeks of selling in spring, we'll make the environment promotional and Weve planned for that in all cash flow. We plan for that in all projections and I think it's going to be a reality for a period of time.

Got it and then maybe just one more if I can add onto that.

As far as like the seasonal goods you talked about some of the core and core basic on and they can ship too.

You know how much flexibility is there with those core items to maybe you know.

You know, we limited distribution center until a year from now to the next season and maybe the they have a longer shelf life than than than people realize in this environment. You know how much can you sort of as just assume that if there's not a lot of sales happening you can just hold aren't that inventory for maybe a longer period of time and sell in the future without having to take you know maybe super Big markdowns on those items.

Yeah look I'll give a quick answer and then I'll I'll just ask step into really comment on that inventory management, but I think pack and hold which we have historically not been big believers in Oh, we try to turn the inventory into cash if there is.

The old story is you know in apparel.

You're driving and Emmons, if you're having a sales problem. This is not like wine that gets better with age user inventory gets worse. This is a completely different situation and we have to have a completely different mindset.

And I think a lot will depend on what the off price promotional market looks like about how how aggressive we would have to be in order to clear goods and if it's too aggressive I think we'll do exactly what you said and we were pack and hold core that will then it has that doesn't have a big seasonality to it.

And then core plus the has a level of seasonality to it I could see us packing it up for for a period of time, because there's the goods haven't hit the floor goods arent stay out there I don't believe the goods would be out of cycle or from that point of view. So we will take a hard look at that and balance that with all cash.

Hello, and balance sheet requirements, but given the strength of our balance sheet I think it's something that we will have as a as a tool that a lot of or less.

A lot of our competitors that are not nearly as well capitalized as we are not going to have that the the benefit of carrying goods for six or nine months to get to to get the spring next year and have quality goods to sell so you know that model is being used.

Extensively by the off price channel the T. Jayson need losses, and I think we're gonna have to take out a lesson out of that maybe you have to talks on inventory for a period of time interest rates are very low and we'll take advantage of that as we go forward seven I hope I left or something to comment on [laughter].

Thank you Manny and high Jay when it comes to do the inventory and I'm going to see.

Part of navigating through the crisis, we are starting to the most important first step is that as soon as we sold its coming playing out we froze everything that hasn't been cut so we bought ourselves time to pick the right actuals and then if we look at the inventory that is more today.

Core it's a strange CENTRIA bolting, Calvin and Tommy we had a strong core a lot of essential products that are less seasonal independent and we also have a replenishment system. There that gives us a much better opportunity to react when it comes to the more seasonal part than those who.

No. It's at the time, great take care Bye Bye do we have this decrease is to come true what you're going to redirect and how we adjust flow timing us Monday talk through how we adjust volume. So so we have significant opportunities to in this very difficult situation.

Try to optimize inventory received up to us as much as possible I'm done did the biggest strengthening our core.

Got it thank you some of that.

Next question operator.

Thank you. My next question is from my company <unk> of Credit Suisse. Please go ahead.

Hey, guys. Thanks for taking my question, so with that same nice job over the holiday Emmanuel admin hopes for speedy recovery for you in salmon and stiffen, it's nice to have them call.

And you mentioned last night I see that you think that's because the consolidation in the industry.

That need to retailers.

What do you see the brand starting to emerge and he said you think there's could accelerate some of the structural pressures the industry state. The last few years in the last time, you said that for memory was a couple of years don't approve quite quite crashing.

We saw inventories in the channel step change down a lot lower and hundreds of closures across the department stores. He said that what are you seeing today that drove those comments as you thought then very helpful. In the past.

So so look we're not what we're well there's a personal opinion, but I think it's I.

I think its share by many is the retail industry, the department store and specialty store apparel area.

Fundamentally there's too many stores and I think that you start with that as premise also the consumer getting more and more comfortable shopping online I think the winners are going to be able to those retailers that invested in there.

Online capabilities I believe in the omni channel approach brick and mortar is not going away, but it needs to be coupled and needs to be aligned with your digital strategy and it needs to be a an experience as a consumer has that.

Hi has no disruption in it needs to be clean and it needs to be able to flow directly to them and it needs to be experience. It doesn't have a lot of problems in it and I think a number of our players.

You know in North America, Macy's has made major investments, there and Nordstrom and a couple of other key players, including calls has really started to move in that direction and you know I think you're going to see more of that is seeing a retailers doing curbside pickup.

I think that's only going to continue I think you. So those kinds of things I think are going to accelerate that thought process.

The other thing is there's a reality to this situation and I think balance sheets are going to be stretch valuations are dramatically down from where they were just you know.

Two three months ago, when we opened year and given that I think there is the opportunity there will be the opportunity.

To potentially.

Two acquisitions and bring players together and you know the old story that one plus one equals four where you can we are particularly in a in a retail or situation. There's tremendous leverage did you get from the fixed costs and you back office being able to spread the investments over a larger base that.

Need to make and your digital investments all of those things taking into account into play I.

Hi, I'm sort of the pandemic I felt that we were going to see consolidation in the industry I think the pandemic has done nothing bad accelerate that it's it's no matter what happens here balance sheets will be weekend from where they work prior to this some valuations are going to be lower.

Our and I think given all that dynamic I think there will be opportunity for consolidation and I think you'll probably see an acceleration of store closings. That's my theory and I think it's a good weighed out for us to think about how we have to plan the business and how we added aster can get.

Got it strategically.

Right and if I could follow that.

I would generally agree with that obviously, but the retailers didn't come into those period with model for you know instantly.

Period of zero revenues across the businesses. So we've done some work looking at retail side and just based on T. reasonable snows. It looks like there until we get better visibility on her long stores going to be close in the U.S. in Europe, but there could be some liquidity concerns.

On the retailer side. So I'm just I'm curious what do you how are you thinking about your business and what you're going to have to do to help retailers manage inventory as they think about solvency and liquidity there more turned away. They haven't had two in several years.

[laughter] effects.

But there's no yes. It that's the that's that's a major issue in our thinking as we go forward. It's a major consideration as we plan our inventory buys we look at we look at the North America landscape and these are.

We look at our customer base, which which has historically been hi.

A very financially successful group of companies that are that in normal times are well capitalized and position that we really don't get much thought to credit being a major issue. So these players we've had to deal with you know some levels into it with some weaker players like.

Ceos and whatever that went on years ago, but as we look at our major customers as it has a day, we actually we have to take that or into consideration as we plan to use going forward I think they have plenty of levers to pull including their real estate has a potentially cash generating assets that helped with may help them get through this.

As they move forward and like you said a lot is going to depend you know if the stores open up in May I think it's everybody. It's it's back to getting into business, but if it's but if it's three months. After that I think then there's going to be a real liquidity crisis as we go forward and there's going to be winners and losers.

His and potential financial.

Hardship that comes with that we're going to happen when we're trying to plan accordingly.

Thank you so much as.

Hi, Keith we made to Eyeq five child of Wells Fargo. Please go ahead.

Hey, good morning, everyone and many best wishes to me anything there as well I I guess, maybe maybe to add on to Mike's question and you think about not necessarily your retail business in retail volumes and what happens in stores, we opened but.

The separately on the U.S. wholesale side.

When you mean piece of business together, you think about a recovery into 21.

How do you think about that component in the business do you think about it as you know the lights, which goes on all of the sudden volumes go back to 2019 levels is there a portion of that business that maybe does that put another portion that maybe takes you know a year ago 345 years to get volume back I'm just trying to understand how you think that your from your partners.

No no begin reorder activity and begin to take volumes.

In inventory up again, thank you.

Okay I think there's two questions in there I think there's what do I think how weak what do I think in how we planning the business when stores open.

We're going to use the China model.

Because I think it's the best model. We have it's also the one that makes the most sense to us. So you know just just stood just put that into perspective, if and what that means for us and in China. What we've said we came into December January Comping up 5% business very strong the last week at Janney.

Larry through February when the stores closed and it was all the disruption in China and those could we saw the business go down to not minus 80, 590% basically everything was being done digitally.

Getting into February business opened and for the month of up to the month of March overall, our business in China is.

He is back to about 65% in the last week, it's probably close to being back to 70% of the business digital continues to be very strong what we're seeing is in the major cities.

Like Beijing, and Hong Kong, Beijing, and Shanghai, We're seeing those cities that are driven by in some respect international tourism and we have the controls and store hours, where the controls are tighter on our movement and where the tourism has been a big impact.

Act on that business in those two cities. There is no tourism going on those two cities are feeling it's much more than the rest of China at at launch.

So it just gives you a sense of where we are we're expecting that that as we get in there as we get into the month of April that minus 30% will move to minus 20% and then we got into May minus 20% or move to minus 15, or 10, and what we are assuming it when we get into the second.

In half of the year, we will start to.

Assuming that the pandemic goes the way we hope it does that business will start to get back to a more normal level as we get into the second half of the here. That's how we're planning it I think.

I think it that's a prudent way for us to plan the way North America will come back as well I don't think too I don't think when the when stores open that the first thing consumers are going to do are going to run out to buy apparel and accessories and get online and going to store.

As the immediately I think it's going to be a ramp up as that happens as people get more and more comfortable with the situation and I.

I think that's how we're planning it.

Hope that was helping.

Yes, I mean, maybe it would be helpful. If any to think about the whole I'm also concerned that the wholesale business and the reordering I think all seller, if you're saying is what do I think department store sales trends will be I think they'll be exactly what I just said.

I don't I don't know I I think the Macy's that I think it a retailer that Scott Big urban stores that are just to have a big a tourist.

Component associated with that I think those will ramp ups slower and I think the middle of America I think not just the non mall based retailers. That's there are in you know strip centers or whatever I think the likelihood is I think those will come back stronger.

So I think that's the picture that we're looking that and as we are planning inventories when thinking about.

No I kept the that makes them if anybody's guess.

Right and is there, but you run ups variable.

And I think was that this would be our last question. It's already five to 10, and we're going to try to get back to running the business from all the living rooms.

I can't raise final question from Kimberly Greenberger definitely we will take a final question from Kimberly Greenberger of Morgan Stanley. Please go ahead.

Great. Thank you so much for squeezing me in Manny you mentioned that in aggregate I think your March sales declined to 35% I commit to that global number and I I'm not a man no no minimum commitment, we're pretty far better timber.

35%, we were talking about Asia, we were talking about China 30, United States is close to win so you know.

So what's the question.

Okay. So that's a good clarification. So I thought in your prepared remarks. When you mention March sales were down 35% I thought you were referring to T or global number or to North America not.

Not China that we started the words I was specifically speaking about China and trying to give you a sense of when the stores reopened whether we see.

Okay got it right.

Thanks.

I'm sorry.

Nothing that can do.

Any any way for us to think about.

March or have you worry in March total company Global revenue you know.

Basically where are you quarter to date.

On a global basis, and I think the past, making laid out for China is extremely instructive and we can certainly world that through <unk>.

Geography by geography based on being the virus spread but if you care to shed any light on where you guys are quarter to date that would be very helpful. And then your leverage calculation that you shared with us.

Are you factoring in outdoor operating leases into that leverage or what are the specific metrics that are going into your leverage calculation. Thank you. So much.

Okay, I'm going to Danner will take the question. We after I answer the first one then I'll take the question on the leveraging and display I I don't screw it up.

You know Kimberly, though we're not we're not giving given up when we're not giving guidance. So we're not going to give you an update on sales right now, but let's put but let's put it into perspective. This.

The stores shut down in the middle of March there is no sales going on in brick and mortar in Europe in North America.

In Australia in Brazil up our major markets are the only thing that's opened up bench and I gave you the exact sales trends what's going on in Asia is Asia. That's opened up in Asia, you know, our big markets, China, I talked about in detail up.

Courier has bounced back the strongest for us.

They have.

On watch our March business is is only down about 20% and the last week was only down about 10% and Japan seems to be following pretty closely.

So what's going on in China. Those are three big markets in Asia, and that's what gives us a level of confidence about how we're thinking about planning the business. Once it's open it's very difficult to get to have any sense of what the sales are going to be because I have no crystal ball, that's going to tell me when stores are going to be opened.

I could tell you pre corona virus sales trends comps were very strong throughout and then as the Corona virus start to impact is in February with tourism or whatever we started to see our comps gets get impacted to a degree.

But then.

And then stores close but overall, we were still pretty happy with kind of sales, we were doing and up until the very last week when stores around us for closing and people respond entitling our business was off of probably around 50% overall, which we felt was really good given what was going on.

On a store basis, but that was the kind of trends, we're seeing right before the stores closed for that you know we can track 10 day period prior to that business has been very strong for us. So I hope that helps but you know trying to do trying to do modeling or whatever is really very difficult now Dan you want to talk about the.

Lever yet.

Thanks, Manny and came out I guess I know that they're library that we closed a close I think it does not include leases.

Okay that range, two point can't kind kind of that team it or not that range 1.9 times net debt to EBITDA.

Thank you many I hand, it back him.

Okay, everyone I I. Thank you for the time today I appreciate everybody joining us everybody. Please stay healthy stay safe.

Your all in my thoughts in my press and take carrier families. Thank you for joining us have hopefully we'll be speaking to you our second quarter call and we'll do it will be doing it in a more normal state back in our offices take care.

[noise] Keurig, maybe sometime well can say today's conference call. Thank you for your participation you may now disconnect.

[music].

[music].

[noise] good day, ladies intention.

<unk> lack of TPP hate fourth quarter 2019 earnings call.

Today's call is being the continent.

Safe Harbor statement to put the red tape, but during that time then.

Thank you operator, good morning, everyone and welcome to the PVH Corp. fourth quarter and full year 2019, earning conference call. It's webcast and conference call. It being recorded on behalf of PDH and consistent copyright Didnt.

Carry on it may not be recorded or rebroadcast or otherwise transmitted without PDH. It like international and your participation in the question answer session constitute kept consent to having anything you say appear on any transplant a replay of this calm.

Information being made available includes forward looking statements that reflect PDH and deal as of April 1st Twentytwenty, a future events and financial performance.

These statements are subject to risks and uncertainties indicated in the Companys FCC filing and the Safe Harbor statement included in the press release, and it's a subject and that's com. These risks and uncertainties increase PDH is right to change it strategies objectives expectation then in Cancun and it's me T is significant cash.

Now to service, it's that applications significantly at this time because it Nike outbreak. It's had anything if they can impact on the company is mass financial condition cash flow and results of operations. There are significant uncertainty about the generation and extends the impact of the violence.

Dynamic nature of these circumstances means like I said on this call could change materially at any time acelrx the operation as a company if mats and its future results of operations could differ materially historical Pakistan and results of crank dispatch and asking it any suggestions TV.

It's just not undertake any obligations hockey publicly any forward looking statement, including without limitation any estimates or suggestions recurring revenue and.

Generally the financial information provided if on a non-GAAP basis as defined under FCC launch reconciliation to GAAP amounts are included in pediatric fourth quarter 2019 earnings release, which can be found on www dot PVH Dot Com and then the company's current report on form 8-K.

Furnished to the FCC in connection with its really.

At this time I'm pleased to turn the conference over to Mr., Many trico, chairman and CEO of T D H.

Thank you and good morning, everyone. Joining me on the call is a step and loss in our President Mike Shaffer, Our Chief operating officer in Chief Financial Officer, and Dana Perlman, Treasurer, and senior Vice President of business development and Investor Relations.

We're all working from home today, so I want to thank everyone for joining us on our fourth quarter call.

I must comment that is indeed strange to be sitting in my living room for this call and not in my conference room, but I suppose that is a new normal everywhere and I hope everyone is safe and healthy this morning.

We were extremely Preleased, how we ended the year, we had a strong holiday season with increasing momentum across Tommy Hilfiger, and Calvin Klein in the majority of the regions, where we operate.

We had a significant revenue would be of about $100 million and exceeded our earnings guidance from the on a non-GAAP basis.

Despite the impact from the Corona virus, which was not contemplated in our initial outlook.

If you compare our fiscal year earnings per share results with our guidance of at least $9 in 45 cents, we had a 31 cents deed.

Out of earnings out of our business outperformance from Calvin and Tommy and a three scent bead from lower interest and taxes.

This was offset by a 25 cent hit for the Corona inventory reserves that we booked that we recorded at the very end of the fourth quarter, which was not contemplated in our initial guidance.

I believe the magnitude of our business outperformance, especially our sales outperformance given the backdrop that we were dealing with in the fourth quarter, which truly impressive and speaks to the health of our brands and the momentum in the business that we saw in the fourth quarter.

We were pleased to end the year with very clean inventories overall, our inventory because the position.

Was down 7% year over year, which also was better than the guidance we talked about.

Before I go into our financial results I wanted to take a few moments to talk about the Corona virus, which I'm sure is top of mind, everyone in the investment community.

This is an unprecedented time and is are we rapidly changing situation and our hearts go out to all those impacted by the events that are unfolding.

Our PVH people are demonstrating that passion and dedication to PVH with most of all regions working remotely from home to continuing to operate our business through this uncertain times. It has been inspiring to see our people rallied together and I truly believe there just demonstrates the power of P.

The age.

The spread of the current Corona virus is unfortunately, having a major impact on our business.

Temporary store closings felt across multiple continents, including store closures across Europe, the Americas and Australia.

Our cost of wholesale customers and licensees have been similarly impacted which in turn negative negatively impacts PVH, our digital sites and those of our key partners continue to surface consumers and we are seeing significant growth there.

Pending on the market, we are seeing anywhere from 20% to over 50% growth on the online versus last year.

Which we are balancing with the health and safety of all work is in the distribution center and making sure goods get to consumers.

As a reminder, our digital business in 2019 was up approximately 20% globally and now represents about 12% of our total revenues versus 10% in 2018.

In China, we are seeing some encouraging early signs of recovery.

All of our stores of reopened.

But stores, our operating with shorter hours and approximately 95% of our franchisees stores are also open.

We are seeing some rebound in sales with improvement week over week and for the month of March total business was down only about 35%.

But digital sales are comping up closer to plus 40%.

We know it clearly we'll take some time to return to normalcy and hope that our other regions will follow a similar path to normal business wants to pandemic. It has passed.

Before I go into our business review and forward looking comments I wanted to touch on a few topics, giving the current given the current climate.

The health of our balance sheet remarried remains our core strength.

We recently drew down about $750 million from our revolver, which gives us over $1.2 billion in cash and available borrowings. We ended the fourth quarter with a gross leverage ratio of 2.2 times and a net leverage ratio of one.

0.9 times.

Cash preservation is a critical focus area of us now.

We suspended our stock repurchasing program and also suspended our cash dividend beginning in the first quarter of 20 Twond.

Plus cogent cutting measures have been implemented we have taken a hard to look at expenses and are reducing or canceling discretionary spending and variable expenses.

In many areas to navigate successfully and take the pressure off the business. This includes our marketing expense strays, although we continue to invest.

Digital businesses as this is a critical channel for us to maintain our connection with all consumers and to transact globally with all consumers.

As of now store associates in the U.S., Canada, and Europe continued to be paid through this week and next and we are evaluating aiding any and all payroll opportunities and salary reductions, including looking at with different governments are offering as relief package.

His each region.

We took a hard look at capital expenditures and now expect spend around 190 million in Capex for 2020 about a 45% reduction from 2019.

As we have canceled or delayed capital projects that are not business critical at this time.

On the supply side, our supply chain is one of our key competitive advantages and we have strong relationships with long term partners.

That's where we've been able to reduce our inventory can it's for the fall season, and we are redeploying some inventories, particularly core and core fashion from summer to fall and consolidating some seasons, particularly holiday and spreading which will give us more time to make better decisions about making.

Inventory commitments.

As we operate in so many countries around the world. We have a task force headed up by Stephan loss in our president reviewing all options, including government with relief and support and different inventory programs that we would utilize in each region.

We will take advantage of Eddie government support that's available to us as it is appropriate.

Lastly, as a reminder, in January we announced our transaction to sell our speed all business to Petland.

Which is expected to close in April for this coming month for all business and we will take advantage of that support of about $170 million.

That will come in as cash sometime in April.

Before I go into our financial review I, just want to take a moment and read iterate my confidence in PV age and the stress that we have that will enable us to navigate this crisis.

Our brands, our iconic with incredibly strong brand health across the board.

We have great consumer brand royalty and we are taking this opportunity to deepen our connection with the consumers even further as we leverage our always on digital approach the diversification of our business is a true advantage both from a belief.

Our regional and aged and a brand point of view and we have significant category and regional opportunities to further extend our brands after depend dynamic as subsides.

Well the near term is uncertain I do believe that PVH will emerge from this even stronger given the strength of our brands our people and our strong competitive balance sheet.

Moving onto the business. We are pleased with the fourth quarter results in specially in light of the challenging and volatile global backdrop.

Our revenues rose, 6% on a constant currency basis, which significantly exceeded our previous guidance and exceeded it by about $100 million I think that's clearly demonstrates the momentum that we saw more in the business, particularly in just sit in the December holiday season.

And in the January period, right before before the Corona virus hit.

Outperformance was principally driven by our international businesses, which represented about 75 million of the 100 million dollar be Europe in particular was strong but also China.

In North America, we saw an outperformance against our plans of about $25 million is in sales and that was driven principally by all retail businesses, which comped. The significantly ahead of our initial plans our breast health in the region. All regions is very strong for both Tommy sales.

Figure and Calvin Klein, and we feel we significantly outperformed our competition in the fourth quarter.

Tommy Concedes continued to see an excellent response to its a lifestyle offerings, which enabled us to continue to get Gainshare from regional and global competitors Calvin Klein in Europe continued to see great trajectory of growth and we remain confident in the long term path to 2 billion.

In dollars in revenues, which were just about double our business from today.

As we expand at both category, all food offerings and capitalize on the consumer appetite for the brand.

If we look to the current state of the business in Europe, obviously the region today is quite challenged due to the Corona virus epidemic.

Our stores remain temporarily closed as per government regulations, and so are those although certain of our key wholesale partners.

Before the cold in 19 outbreak our strong order books were for both brands plus 12% for spring and for full all were plus 12% for Tommy and over 20% increase for Calvin Klein.

However in light of the crisis, there will be some pressure from our partners and we need to support them through.

This period and allow for some level of cancellations in order to move goods through and in order to get inventories back in line as.

We'll continue to manage this this situation in order to position on both Calvin Klein and Tommy Hilfiger for long term growth in Europe.

Moving to North America, we had a great holiday season relative to all price plans, a wholesale businesses performed quite well for both Tommy and Calvin, particularly on digital channels, where we continue to grow our penetration.

Well, we remain a key account for a wholesale partners our brands our traffic drivers.

And our North America retail business in North America, Calvin Klein post in the 800 basis points acceleration in comp stores relative to the third quarter, which we were very pleased with comps overall for the quarter came in at plus 4%.

However, we saw a traffic and sales under pressure during the fourth quarter due to lower visits from international tourists, especially as we got closer to the lunar new year period. In January this had a particular impact on Tommy Hilfiger retail business, which has about a 40% of that sale.

Sales coming from tourists and let us to take people discounts and markdowns.

Currently in North America, there are clearly store closures for both our own stores and those of our wholesale partners. These temporary closures are pressuring our business.

And we and weeks effect that we will have to deal with some pressure from order cancellations as we move forward, we're working with all of our retail partners to manage that into manage the inventory flow.

Finally for our results in Asia I like to highlight highlight that China showed a significant improvement in the fourth quarter relative to third quarter trends.

With Tommy Hilfiger, its fourth quarter comps up double digits, and Calvin Klein fourth quarter constant flat, but in January we saw significant increases, particularly in China. Obviously this trend reverse with a cover Corona virus outbreak, where we saw a significant job.

Drop in business in the fourth fourth week of January and then moving to February.

As I mentioned earlier in the majority of our stores in Asia are now open and we have seen a resurgence in business, which will go into more detail. Let me begin with talking about Tommy Hilfiger first.

How many health and your continued to experience momentum during the fourth quarter brand health remains strong as we continue to deliver differentiated product assortments and engaging consumer experiences.

We had exciting partnerships, including our sponsorship of the 2020 Hakan.

Few races in Austria, where Tommy Hilfiger did a full brand takeover. This wasn't in addition to our new capsule collections, including a joint capsule collection with Lewis Hamilton and Grad Grammy Award, winning singer and songwriter her.

From a business to position Tommy increased as revenue and impressive 12% this quarter and 13% on a constant currency basis, which significantly exceeded our revenue guidance I asked by about $75 million.

However earnings declined 13% during the quarter, while armies on Tommy Hilfiger business were up year over year during the quarter.

This was offset by several factors most notably the continued gross margin pressure in North America retail business to clear goods as well as the negative impact of additional inventory reserves that were unexpected at the time of that we gave guidance in anticipation of lower so.

Sales caused by the Corona virus.

By segment, our international business continued to so show strength with revenues up 22% on a constant currency basis, and overall comp stores up 10% with comp store increases, particularly in Europe, and China, which exceeded our guidance.

He is European business continued to outperform as an experienced double digit revenue growth, which strength across all channels of distribution in all markets and product categories. We believe that our market leading position is driven by our excellent product are compelling for price value proposition.

Mission and strong brand power, which is allowing us to take share from regional and global competitors.

Asia business posted revenue growth during the fourth quarter, China was very strong floors with comps up double digit.

We also experienced strong momentum in our Japan business and had the benefit of the addition of revenues from the acquisitions of Australia, and central and Southern European Tommy businesses.

In North America revenues declined only 2% and margins were down would but thought margins were down sharply. We continued to see very favorable trends at wholesale as all brought brand outperformed competition throughout holiday however results for our business.

Our retail business, which were planned we're extremely challenge as we continue to take heavy markdowns to end the year clean with inventory.

Our global licensing business continued to be very favorable for us, particularly when she three on all women's business that continues to be an excellent partner for us and continue to exceed all of off sales plans for the Tommy Hilfiger women's business.

Despite the current pandemic, we continue to have income credible confidence in the long term opportunities for the Tommy Hilfiger brands from category Enrique.

Regional expansion opportunities and the ability to optimize our distribution network globally.

We move to Calvin Klein, though we continue to expand experience brand heat during the fourth quarter.

We deepened dock connections with consumers by delivering compelling product engaging brand experiences and we're providing a platform for self expression for all consumers.

Importantly, we made significant progress to reposition and refocused the brand within enhanced product focus.

We recently launched CK, everyone, a clean fragrance alongside the new CK, one underwear in jeans collection, marking our first ever cross category marketing launch that spans both fragrance and fashion.

This was a global launch for us for the brand. We also debuted the spring Calvin Klein jeans, and Calvin Klein underwear campaign, featuring new spring offerings and starting just to be the laser sang among other key talent people.

Moving to the business overall revenues decreased 2%.

Well, 1% on a constant currency basis, if you remove the jeans business, which was transferred to our GE three partner business was up overall, 1%, which beat our guidance by approximately $25 million.

These are the only softness in business that we saw was in Asia in Hong Kong during the fourth quarter driven by the protest that continued which had a major impact on that markets physician sales position overall by region Calvin Klein.

International revenues increased 8% on a constant currency business.

With comp stores, increasing overall by 1% and if you remove the Hong Kong business from that comp store business. So not council in number comp stores increased and X.

Hong Kong by 5%.

We continue to see most excellent momentum in our European and our China business consumers responded well to our offerings for holiday.

And performance was broad based across all channels markets and product categories in Asia, We will cease to see a notable acceleration in China during the quarter, our trends were quite favorable before the Corona visors escalated.

During that when they progress relating to our products and consumer engagement and I think you can see that in the momentum song themselves, particularly in December and January as we started to deliver new spring product.

Digital businesses continued to see excellent growth as the consumer is increasingly shopping online and we added more online activation to drive overall engagement over.

Overall, we were very pleased with Asia is performance outside of Hong Kong, which continued to be on impacted by the protests in the fourth quarter.

In revenue in North America revenues declined 11% largely driven by <unk> decision to license the jeans business to GE three.

Wholesale was a positive story for us, particularly our performance in the digital channels, our retail business posted a six sequential increase acceleration with comps up 4% in the fourth quarter. We were quite pleased with this results, which which achieved inc. and can you.

Function, we took an improvement in far fewer and less promotional markdowns when last year.

As we look past 30 current global drop backdrop, we continue to see strong long term growth opportunities for the Calvin Klein Brad.

Most notably our expansion in Europe, which we believe is out at least a billion dollar sales opportunity for us driving both are driving driven both through our all channels of distribution as we move forward, we continue to leverage our growth in the digital opportunities and leveraging our growth.

Opportunities across Asia.

Finally, moving to our heritage business, we continue to feel pressure due to the challenging North America retail environment heritage brands that really impact moderate price points, such as our heritage businesses revenues for the business declined 1% with flat.

Comps in our own retail stores.

Operating margins remained under pressure as planned as gross margin expansion in the business was offset by expense de leverage on the extent side. We will continue to look for additional ways to optimize and streamline the heritage business in the future to generate enhanced returns and we remain.

And on track as I mentioned before with the sale of our speed all business, which should occur in April.

Before before I pass things over to Mike I want to highlight the PVH is 140 year history is marked by a strong resiliency, we have overcome countless challenges, including the great Depression tool world was and the great recession in 2008.

As we move forward, we have tremendous opportunities across PVH as business model to capture a long term sustainable profit growth from driving meaningful engagements with all consumers to continuous improvement in product that Calvin Klein to capturing the global distribution opportune.

These for both Calvin Klein and Tommy Hilfiger Theater, and we continue to look for ways to optimize our businessman it.

Business model.

Weather.

Through the supply chain or through efficiencies across the business I believe that our core strengths our talented people our iconic brands and our strong financial fundamentals and our balance sheet.

Conservative balance sheet, we'll continue to service as a key competitive advantages for us as we will allow us to come out of this crisis stronger than we can make and with that I'd like to turn it over to Mike to talk about the financial results in more detail Mike.

Thanks Manny.

Comments I'm about to make are based on non-GAAP results in a reconciled in our press release I'm going to briefly touch on the fourth quarter of 2019, then move on to 20 Twond.

Our reported revenues were up 5% an up 6% on a constant currency basis and revenue grew much stronger than a previous guidance. Tommy Hilfiger revenues were very strong well could soon as reported and 13% on the constant currency basis and far exceeded our previous guidance.

Tommy Hilfiger International revenues increased 20% as reported and were up 22% on a constant currency basis.

The Tommy Hilfiger International revenue increase was driven by continued outperformance in Europe, and the revenue from our Australia, and Tommy Hilfiger, Central and Southeast Asia acquisitions.

International comps themselves were up 10%.

Tommy Hilfiger, North America revenues declined 2%.

In the wholesale business was offset by North America comp sales down 6%, primarily due to the low traffic than spending enough stores in international tourist locations.

Calvin Klein revenues were down 2% as reported and decreased 1% on a constant currency basis.

Better than our previous guidance.

Required international revenues increased 6% as reported and were up 8% on constant currency basis, given by continued growth in Europe and the revenue from Australia acquisition, partially offset by softness in Asia due to the Hong Kong protest okay.

Our international comps so sales grew up 1%, probably probably North America revenues decreased 11% or wholesale business revenues were negatively impacted compared to the prior year, but licensing about women's jeans business to do three.

North American comp sales were up 4%.

Average revenues were down 1% to the prior year and below our previous guidance our heritage retail business come sort of sales were relatively flat to the prior year.

Non-GAAP earnings per share was one dollar and 88 cents, which was nine cents better than our previous guidance EPS beat versus previous guidance was driven by outperformance in the Tommy Hilfiger, and Calvin Klein businesses for approximately 31 cents favorable interest and taxes resets is these were partially offset.

Additional inventory reserves, we need to approximately 25 cents because the onset of the virus occurred in Asia at the end of the off.

End of our fourth quarter.

For the full year 29, TV and to deal with record revenue of 9.9 billion, an increase of 3% moves the criteria and non-GAAP earnings per share of $9.54.

Moving on to 20, Twond or first quarter until you have 2020 results would be signet significantly negatively impacted by the Kobin Nike brand.

The duration and extends to defend them with its highly uncertain I know results could be impacted waves, we not able to predict today.

As a result, we're not in a position to issue guidance for the quarter fiscal year 20 Twond.

We're monitoring the situation closely with regard to associates customers business partners and supply chain.

We feel we're well positioned to manage through these uncertain times.

We ended 2019 with cash with five of them through the 3 million and with inventory levels down 7% compared to the prior year.

Taking a number of steps preserve liquidity of financial flexibility.

We feel very comfortable with our liquidity position as we've drawn down from our revolving credit facility. In addition to suspend these share repurchases under our stock repurchase program, a mandatory long term debt repayments in 2020 or only 14 million.

In addition to suspending Rps dividends, beginning with the second quarter of 2020 or pre we see amounts dividends paid on March 31st and was not impacted by the suspension.

Reviewing every opportunity to eliminate discretionary spending we're cutting capital expenditures to approximately 190 million from 345 million in the prior year with capital expenditures only for minimum requirements in our utility stores and for pro projects currently in progress related.

To systems in warehouses.

We were also reducing operating expenses, including you pay will opportunities and we do see all non payroll expenses, including creative marketing you travel.

We're also tightly managing working capital we were adjusting inventory levels by canceled or delayed orders were extended payment terms for both merchandise to non merchandise vendor invoices, which suspending the payment Brent temporarily and delayed or canceled and claim new store openings.

Also as a reminder, ourselves you know North America business to pet many new people see the parent company Speedo brand is expected to close in the first quarter of 2020 470 million cash subject to a working capital adjustment.

We will give guidance for future quarters. The new wants there was more clarity on new patent duration of the cope with 19 and then.

As we work through 2020, a financial discipline will help us take you back into the opportunities available to us.

Withstand the current proceeds on our business in image emerge from the crisis world position conceptual long long term sustainable profitable growth.

And with that operator, we'll open it up for questions.

<unk>.

Thanks, Keith ladies and gentlemen, if he would like to ask a question. Please press the star off checks key funded by the teachers run on your telephone.

Okay. So sure it that the mute function on your telephone is fixed off to a diagnostic though to reach our equipment.

If they find that your question has already been on stage you may when this yourself from the King by pressing Star 10.

Once again, please press star one to ask a question.

We will take our first question today from Bob <unk>, though of Guggenheim Securities. Please go ahead.

Hi, Good morning, Manny I hope it so while you didn't give us an update today, but hope everything continues to evolve as being a family and and and I do have a couple of questions.

I think the first question that I was hoping you guys can expand upon he is generally when you look at the channel globally and you know you did talk about the need for someone thousand cancellations can you just talked to you know exactly where you see the biggest concerns on your inventories in the channel and.

It's coming over you know from you know from Asia, and your sourcing and then the second question and those probably from Mike.

Mike can you just talk a little bit about the biggest buckets of expense opportunity. You know as you think about you know where you couldn't pull the levers whether it is payroll where it is read you know even on the market you side, just sort of how you're really approaching it seemed to expand upon that those two questions out would be great. Thank you.

[noise] Bobby Thanks for the question I, everybody just to get out of away I feel fine you saw me on TV yesterday.

I'm one of the fortunate ones is the whatever symptoms I have been unbelievably mild and I've been able to continue to work and operating focus on the business from as well.

Spring Summer inventory is is the is the biggest issue that everybody's dealing with a first goods are coming in goods have been ordered.

Prior to the <unk> the pandemic on the crisis.

We ended the year with our our inventories down 7% I can tell you we were going in at the departure and in the child Department stores across the Board North America, Asia, and Europe and wrote in our own stores, we will going into the up very clean and feeling really good with tremendous amount on.

Momentum I got to tell you you know we were really feeling great in January before this all hit US and felt we were going to be starting to first quarter with the tremendous not all momentum and the ability to continue to grow margins and add to and and add to our topline growth.

Obviously that all changed within a couple of week period of time biggest challenges facing is.

That we've lost you know we have to assume that stores are going to be closed at at a minimum through April.

Here in North America in Europe, our two biggest small markets and we've lost at least six and fit to eight weeks of spring selling.

And spring selling in the heart of the season. So I mean, you have to think of it that way when you think about Easter when you think about March April, but that's the heart of the season as you as you're going into it. That's your biggest areas of doing full price selling as you go in so that losing.

In that you know that that's that anywhere from six to eight to 10 weeks of sales is really where I believe the pressure points going to date.

And what we're looking at and Stephanie.

It's really taken on this with the regions.

And all brands across the board is what we're really looking at that inventory, making some judgments about what we should promote and liquidate through our own stores or through some partner accounts to really go after it.

The other piece that we're really looking hard at there is what should we read purpose and utilize to to sell into the season it to sell through the season as as we go forward and we're looking at the ability to potentially pack and hold some really good merchandise. That's in the warehouse that will that will use.

And maybe you have to carry for a few months to bring it out as we go forward. So we're looking at all those from a child point of view as we think about inventory when we think about inventory for fall. We've got a lot of things for ourselves a step. It has worked with the teams really with Daniel Grieder in Europe without comps you in Asia and show.

Arrow and Ken Duane here in the United States to really look at the inventory pipeline and with all logistic see logistics teams to really look at how that pipeline would be work tried to push out with our with our partners to push inventory commitments out at least an additional four to five weeks. So we'd have some.

More visibility, we absolutely have been able outcome deep conversations with our retail partners about what makes sense to cancel and what really is necessary as we go forward. So we're trying to balance data as as we looked at it I think it's the risk reward today is to have less inventory and shape.

Later, if if if we need more goods you know the best story, if we're sitting here in the third quarter.

This year and I'm sitting sitting with your telling you know were low on inventory in with chasing fall that would be a that would be a real excellent problem to have as we go forward.

Mike are you going to take the second part of the question.

Sure.

<unk> expenses, not the big buckets within a very focused on virtually any discretionary expense. So when you think about what their needs for us. It's basically the taking a hard look at payrolls.

The taking a hard look at salary reductions were taking a hard look at marketing any expense that is actually discretionary obviously trial moves down to zero now and we're going to clamp down on in trouble moving forward.

And it will just be a matter of doing the right things in the short term to be in a position that when things do get better and we do open we have the the base ready to move ready to step up and ready to reopen with would be appropriate tools at their availability. So we're making every discretionary guilt weekend at this point.

New it's anything discretionary.

Okay, Thanks, and Stephan welcome good though.

Bye bye.

Thank you, we now move to Erinn Murphy with Piper Jaffray. Please go ahead.

Great. Thanks, good morning, and hopefully all everything and healthy it can be I guess my first question is on digital on it it sounds like it's relatively outperforms, particularly into something that's always a crop I think well can you did talk a little bit more about what you're seeing there and maybe even China. It kind of a large claims and we've seen a bit more of the country there and.

Then within that 190 million pop back I, just for the year I'm going to pick up in topic, there and Holly digital and data.

Hi, or pipe listen the topic I just think though.

Sure, Mike I'm going to answer the first part of Europe will take the Capex. So just give me is getting a moment to just respond.

Look the digits transaction has been the bright spot throughout this it's you know even before the Corona virus, we were seeing 20% growth in our digital business and our penetration or for 2019. We've got we've always talked about 10% is has grown to 12% overall digital <unk>.

Penetration from the PVH I think this the pandemic is only accelerated that not only in the short timeframe. I think it's also impacted the way consumers are going to shop going forward. I think you know I was on I was on Korea I was on Mad money last night being interviewed.

I talked about it is I you Jay I always had a general belief and I think I've spoken a number of course in conferences about that over the next five or six years, we're going to continue to see a consolidation in retail industry, and we're going to seek and wholesale apparel industry and I thought that would be a five six.

We are a path I think this pandemic accelerates that it accelerates the consumers comfort level with buying apparel online I think it accelerates the potential store closures and you know the C and D and E stores closed.

Saying as we go forward and we'll get to a healthier store base, we've always talked about that in especially in the U.S. A week. There is too many stores our sales per cap the sales per square foot per capita about by far the highest in the world and it would be healthy to see that happened, but obviously, it's also going.

To be painful as we go through that process I think.

What we're seeing in digital and the kind of growth market by market. We're seeing you know you seen anywhere from 20% to 60% growth depending on the on a chat omnichannel.

In China.

Our penetration continues to grow.

We were somewhere in the neighborhood of about a 15 per se.

Penetration in China, and I think that this year it wouldn't surprise us if if that moved to 20% as we see an outsized growth in our digital channel, we're growing digitally between 35 and 40% our digital sales and backs at.

Thats, a very high margin. So we're not out they have promoting we're out there connecting with our consumers, but we're not doing from a price point basis, we're doing it at a at <unk>.

Very positive level. So I think that that's a bright spot and Ah I think it'll continue to be a bright spot and on the cap site. That's one <unk> capital expense side, that's one area, where we haven't backed off continue to make investments. This support that business, Mike you want to talk about the Capex.

Yes.

Look I figure that you said it its own we took out but down from 390 to one I'd.

And basically we've we've cut out discretionary so what we what we've seen is we've taken out renovations, we've taken anything that doesn't have to happen. The one place. We've left those in this to stabilize expand and grow a digital business that includes E. Commerce. It also includes a consumer data efforts.

It also includes not just <unk> owned and operated E commerce, but gateways pathways and support to work with some of the bigger players and pure play area. So that's that's still in our plans and we hope to execute on that this year.

You know I'm trying to direct this call and you know the person besides China not his country management team and the person is probably closer to this and as though really been working directly with the with T. Mall. In particular is Steffan Steffan you maybe you could just take a few comments about the relationship and some of that.

Things that are happening and we plan to see happening in that channel.

Yes, thank you money in.

Hi, failing.

When it comes to managing through the crisis with the region. So you could take delayed we get them and in China, where.

We have all here in North America. So so when it comes to E call. Nice overall, that's managed said, we see strong comps across the board and.

Well good gaming is that they're working in Europe, because she did Salaam, though we'll get it I'm a strong in North America and we are working they would take he became ballgame China on some of the product long shapes that we had climbed tell me before knowing about this crisis. We we directed even more focused digital damage. It's.

Work reading about in the wrong, if something afes that CK, one product launch that's money mentioned and the candidates criteria, we parted out the team all than what it had a very successful activation very good reception from our consumer.

Hey, how are you know at.

Thank you know one other thing I would add in North America on a digital point of view is a without t. accounts, particularly Macy's the Macy's Dot com business continues to be strong for us and we continue to have you know.

Strong religious strong consumer connections that and seeing really strong growth as they've index as I tried to redirect.

Well I think like the next question operator.

Thank you Sir our next question is from Chase So a few B.S. [laughter].

Great. Thanks, so much in the morning, you know my questions on promotions because you know one feature of the situation is it's not just one company that has an inventory you know challenge to deal with its every company it seems like a global issue.

How much you pump promotion do you think it's going to get out there and what kind of impact might have on my gross margin generally speaking.

Listen I think that's the that's the big question and I think we had you know look honest objectively speaking this is not an industry that has had across the board great inventory control metrics in place.

That said I think that I think as we came out of.

As we came out of holiday going into first quarter. There was a tremendous cleanup that went on in the fourth quarter across the board to get inventories back in line. So at the end of January what we saw was a as a bright spot was.

Inventories that were really under control throughout the channels Department stores, North America, Europe, and then even competitively.

Everyone took advantage of the good selling that was going on overall in every one source some level of margin pressure when they reported earnings, but I think a big piece of that margin pressure was the the objective to make sure inventories were clean as we went into 2020 I think inventory was born.

With more discipline, because you you heard us all complaining on our third quarter calls about open for $5 being so tight and the retailers are trying to get turned under control.

So that's all true, but I also think that there's going to be a significant amount of inventory the loss of let's say eight weeks of selling in spring, we'll make the environment promotional and we've planned for that in all cash flow, we plan for that in our projections and I think it.

Is going to be a reality for a period of time.

Got it and then maybe just one more if I could add onto that.

As far as like the seasonal goods you talked about some of the core and core basic items they can ship too.

You know how much flexibility there with those core items to maybe.

We limited distribution center until a year from now to the next season, and maybe that they have a longer shop like than than than people realize in this environment. You know how much can you sort of its just assume that if there's not a lot of sales happening you can just hold aren't that inventory for maybe a longer period of time and sell in the future without having to take maybe super big markdowns on those items.

Yeah look I'll give a quick answer and then I'll I'll, just ask Stephens, who really comment on that inventory management, but I think pack and hold which we have historically not been big believers in.

We tried to turn the inventory into cash if there's you know the old story as you know in apparel.

If you're traveling and emmons, if you're having a sales problem. This is not like wine that gets better with age use their inventory gets worse. This is a completely different situation and we have to have a completely different mindset and I think a lot will depend on what the off price promotional market looks.

Like about how aggressive we would have to be in order to clear goods and if it's too aggressive I think we'll do exactly what you said and we will pack and hold core that will then it hasn't that doesn't have a big seasonality to it and then core plus the has a level of seasonality to it I could see us packing it up for.

For a period of time, because there's the goods haven't hit the floor goods are in stay out.

I don't believe the goods would be out of cycle or from that point of view. So we will take a hard look at that and balance that with all cash flow and balance sheet requirements, but given the strength of our balance sheet.

I think it's something that we will have as a as a tool that a lot of or less.

A lot of all competitors that are not nearly as well capitalized as we are not going to have the the the benefit of carrying goods for six or nine months to get to to get to spring next year and have quality goods to sell so you know that model is being used extensively by.

The off price channel the T. Jayson the losses, and I think we're going to have to take out a lesson out of that maybe you have to talks on inventory for a period of time interest rates are very low and we'll take advantage of that as we go forward.

But I hope I left or something to comment on [laughter].

Thank you Manny and high Jay when it comes to do the inventory and I'm going to see.

Pardon navigating through the crisis, we are starting to the most important first step is that as soon as we sold its coming playing out we froze everything that hasn't been cut so we bought ourselves time to pick the right actions and then if we looked at the inventory that is more too.

<unk> core it's a strain stuff, we have bolting Calvin and Tommy we had a strong core a lot of essential products that are less seasonal independent.

We also have a replenishment system there that gives us a much better opportunity to react when it comes to the more seasonal part of those short notice. It's at the time, where it takes a while we have this freeze is to try and true what you're going to read directs and how we adjust flow time.

Yes, Monday talk through how we adjust volume. So so we have significant opportunities to in this very difficult situation and try to optimize their inventory received thus as as much as possible I'm done did the biggest strengthening our core.

Thank you so much.

Next question operator.

Thank you. My next question is from my company <unk> of Credit Suisse. Please go ahead.

Hey, guys. Thanks for taking the questions. So with that same nice job over the holiday Emmanuel that my hopes for speedy recovery for units and then stiffen, it's nice to have them call.

Manny you mentioned last night on T. do you think that's because of the consolidation in the industry.

That means the retailers.

What do you see the brand starting to merge and he said you think there's could accelerate some of the structural pressures the industry's faith in the last few years. The last time, you said that for memory was a couple of years don't approve quite quite crushing.

We saw inventories in the channel step change down a lot lower and hundreds of closures across the department stores.

He said that what are you seeing today that drove those comments is that's been very helpful. In the past.

So so look we're not what we're well there's a personal opinion, but I think it's I.

I think its share by many is the retail industry, the department store and specialty store apparel area.

Fundamentally there's too many stores and I think that you start with that as premise also the consumer getting more and more comfortable shopping online I think the winners are going to the <unk> those retailers that invested in there.

Online capabilities I believe in the omni channel approach brick and mortar is not going away, but it needs to be coupled and needs to be aligned with your digital strategy and it needs to be a an experience to the consumer has that.

Hi has no disruption in it needs to be clean and it needs to be able to flow directly to them and they need to the experience. It doesn't have a lot of problems in it and I think a number of all players.

You know in North America, Macy's is made major investments, there and Nordstrom and a couple of other key players, including calls has really started to move in that direction and you know I think you're going to see more of that is seeing a retailers doing curbside pickup.

I think that's only going to continue I think you. So those kinds of things I think are going to accelerate that thought process.

The other thing is there's a reality to this situation and I think balance sheets are going to be stretch valuations are dramatically down from where they were just you know.

Two three months ago, when we opened year and given that I think there is the opportunity there will be the opportunity.

To potentially.

Two acquisitions and bring players together and you know the old story that one plus one equals four where you can we are particularly in a in a retail outlets situation. There's tremendous leverage did you get from your fixed cost and get back office being able to spread the investments over a larger base that you.

Need to make and your digital investments all of those things taking into play I and hi, it's sort of the a pandemic I felt that we were going to see consolidation in the industry I think the pandemic has done nothing but accelerate that it's it's no matter what happens here.

Balance sheets will be weekend from where they work prior to this some valuations are going to be lower and I think given all that dynamic I think there will be opportunity for consolidation and I think you'll probably see an acceleration of store closings. That's my theory.

And I think it's a good weighed out for us to think about how we have to plan the business and how we either have to think about it strategically.

Right and if I could follow that.

I would generally agree with that obviously, but the retailers didn't come into this period with model for you know it's down to.

Period of zero revenues across the businesses so.

We've done some work looking at retail side, and just based on T. reasonable snowed. It looks like there until we get better visibility on her long steel is gonna be close nuance in Europe, but there could be some liquidity concerns.

On the retailer side. So I'm just I'm curious what are you. How are you thinking about your business and what you're going to have to do to help retailers manage inventory and they think about solvency and liquidity there more turned away that haven't had two in several years.

[laughter] text ads.

Yes, that's the that's that's a major issue in our thinking as we go forward. It's a major consideration as we plan our inventory buys we look at we look at the North America landscape and these are.

We look at our customer base, which which has historically been hi.

A very financially successful group of companies that are that in normal times are well capitalized and position that we really don't get much more to credit being a major issue. So these players we've had to deal with you know some levels and with some weaker players like.

Seals and whatever that went on years ago, but as we look at our major customers as it has a day, we actually we have to take that or into consideration as we plan to use going forward I think they have plenty of levers to pull including their real estate as a potentially cash generating assets that helped with may help them get through this.

As they move forward and like you said a lot is going to depend you know if the stores opened up in May I think it's everybody. It's it's back to getting into business, but if it's but if it's three months after that I think there's going to be a real liquidity crisis as we go forward and there's going to be a winners and losers.

As and potential financial.

Hardship that comes with that we're going to happen when we're trying to plan accordingly.

Thank you so much as.

I can we move to Eyeq five child of less Fokko. Please go ahead.

Hey, good morning, one and then the best wishes dealing with them as well I I guess when it comes out on the.

Mike's question.

I do think about not necessarily your retail business in retail volume in that happens in stores, we opened but I'm specifically on the U.S. wholesale side or maybe new piece of business together and you think about a recovery into 21.

How do you think about that company. The business do you think about it as you know the light switch goes on all of the some volumes go back to 2019 levels is there a portion of our business that maybe does that put another portion that maybe takes you know a year that you know 345 years to get volume back I'm just trying to understand how you think that your from your partners.

In the U.S. will begin reorder activity and begin to take volumes.

In inventory up again, thank you.

Okay I think there's two questions in there I think there's what do I think how weak what do I think in how we planning the business.

In stores open a we're going to use the China model.

Because I think it's the best model. We have it's also the one that makes the most sense to us. So you know just just stood just put that into perspective, and what that means for us and in China. What we've we came into December January Comping up 5% business very strong the last week and Jan.

Larry through February when the stores closed and it was all the disruption in China and those could we saw the business go down to not minus 80, 590% basically everything was being done digitally.

And you're getting into February business opened and for the month of up to the month of March overall business. In China is is is back to about 65% in the last week, it's probably close to being back to 70% of the business digital continues to be.

Very strong.

What we're seeing is in the major cities.

Like Beijing, and Hong Kong, Beijing, and Shanghai, We're seeing those cities that are driven by in Somerset International Tourism, and we have the controls and store hours, where the controls a tighter on our movement and where the tourism has been a big.

In fact on that business in those two cities. There is no tourism going on those two cities are feeling it's much more than the rest of China at at large.

So it just gives you a sense of where we are we're expecting that that as we getting that as we get into the month of April that minus 30% will move to minus 20% and then we get into may minus 20% or move to minus 15, or 10, and what we are assuming it when we get into the second.

In half of the year, we will start to.

Assuming that the pandemic goes the way we hope it does that business will start to get back to a more normal level as we get into the second half of the here. That's how we're planning it I think.

I think it that's a prudent way for us to plan the way North America will come back as well I don't think the I don't think when the when stores open but the first thing consumers are going to do and then our run out to buy apparel and accessories and get on lightning going to store.

As the immediately I think it's going to be a ramp up as that happens as people get more and more comfortable with the situation and I think that's how we're planning it.

Hope that was helping.

Yes, I mean, many would be helpful. If anything about the whole I'm also concerned that the wholesale business and the reordering I think all stellar guidance, but you're saying is what do I think department store sales trends will be I think they'll be exactly what I just said.

Oh, I don't know I I think the Macy's that I think.

A retailer that Scott Big urban stores that are just to have a big a tourist component associated with that I think those will ramp ups slower and I think the middle of America I think not exist.

Non mall based retailers Ah that's there already and you know strip centers or whatever I think the likelihood is I think those will come back stronger. So I think that's the picture that we are looking that and as we are planning inventories that were thinking about.

No I get the that makes them if anybody's guess.

But I understand thank you very much variable.

And I think we're going to this would be our last question. It's already five to 10, and we're going to try to get back to running the business from our living rooms.

I can't think of final question from can be Queen Backer. Secondly, we will take a final question from Kimberly Greenberger Morgan Stanley. Please go ahead huh.

Great. Thank you so much for squeezing me in Manny you mentioned that in aggregate I think your March sales declined to 35% I committed that global number and I I'm not a man are not going to move together. They were 35 that are generally.

35%, we were talking about Asia, we were talking about China 30, United States is close to win ways. So you know.

So what's the question.

Okay. So that's a good clarification, so I thought in your prepared.