Q2 2020 PVH Corp Earnings Call

Yeah.

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But they come to the P.H. Q2, 2020 earnings call.

I would like to turn the conference over to Dana Perlman. Please go ahead.

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Thank you operator.

Good morning, everyone and welcome to the PVH Corp. second quarter 2020 earnings Conference call. This webcast and conference call is being recorded on behalf of PDH and can just to copyrighted material. It may not be recorded rebroadcast or otherwise transmitted without pvhs written permission your.

Your participation in the question and answer session constitutes your consent to having any piece day appear on any transcript a replay of this call.

The information should be discussed includes forward looking statements that reflect pediatric view as of September 2nd 2020, a future events in financial performance.

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

The risks and uncertainties include TV, just right to change it strategies objectives expectations and intention and it's easy to use significant cash flow to service its debt obligations significantly at this time because in 19 pandemic continues to have a significant impact on the company's business financial condition cash flow.

And the results of operations there are significant uncertainty about the duration an extension of the impact of the pandemic the dynamic nature of the circumstances me and what he said on this call could change materially at any time, therefore, the operation of the company's business and its future results of operations could differ materially.

On historical practices in adults or current just friction estimates and suggestions.

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

Generally the financial information and projections, Judy discussed will be on a non-GAAP basis as defined under FCC rules.

Reconciliation to GAAP amounts are included in Pvhs second quarter 2020 earnings release, which can be found in www dot PVH dotcom and in the company's current report on form 8-K furnished to the FTC in connection with the release at this time I'm pleased to turn the conference over to Mr., Manny to Rico, Chairman and Chief.

Ill have PVH.

Thank you very much.

Good morning, everyone. Joining me on the cool or stuff in losses, all person well luxury vehicle, our chief operating officer on Chief Financial Officer, and being in apparel pulled in towards your senior Vice President business development Investor Relations.

Well once I can walk we were drawn he was on second quarter earnings Cool and also opens you and your families a healthy is good.

Well better than expected results reflect the hard work determination flexibility of our talented associates across the world and I can express how grateful I am for their determination and dedication.

I would love to specifically knowledge the incredible boots for the loss War and distribution Center Associates, who are on the fourth long enough kept all businesses running over the last couple of quarters. Despite the challenging times.

On conventional working dynamics.

Cars dog drop has changed how we do all live probably for up.

From the covert 19 pandemic impacts to our everyday lives into the social issues that you own bracing to drive positive changes of course or community.

We continue to live borrow purpose, which is to drive gershenfeld is pretty good.

One of our most note worthy newsroom announcement was the harboring bubble first ever choose diversity officer last month.

Together with our expanded inclusion and diversity to we believe that we do continue to accelerate all work to create an inclusive environment, where every individual value every voices heard.

We also to tee auctions to evolve all business and draws and accelerated recovery.

We accelerated our digital agenda and reallocated additional resources to drive growth in this is critically important channel.

We continue to optimize our brick and mortar presence, including announcing the closure of our heritage retail business.

Need 2021.

We'll continue to review all footprint, what I'll put it looks like post coldest no owns and operates network into our wholesale partners.

We are focused on every expense worn items, including our previous no one else headcount reductions in North America, and we will continue to evaluate frozen measures as we go forward.

We manage our inventories poodle, well also increasing inventory bars towards the copper in casual products that are working exceedingly well with consumers right now.

And lastly, we were opportunistic in capital markets. Your early July and the fishy raised additional capital to further support our already strong financial liquidity position.

We are confident with these actions will position us well to navigate the covert 19, San Dimas and emerge as a stronger organization.

Turning to our second quarter performance.

While our second quarter results continue to reflect a significant disruption from the covert 90 pandemic they exceeded our expectations both from a top and bottom on perspective.

Our revenues declined 33% to $1.6 billion as our own stores and wholesale partner schools were closed for about one month on average during the quarter.

And so our scores are operating at significantly reduced hours and occupancy levels.

We experienced better than expected performance across all markets and channels as the casual brown lifestyles that Calvin and Tommy represent what even more relevant with our consumers spending more time at home.

Digital continues to outperform with total digital sales up 50%, including almost 90% growth you know old.

Commerce sites.

We continue to believe that digital sales can reach 20% of ourselves in the next couple of years.

I'll also contributed favorably to profits.

In our stores, while traffic was down, particularly international tourist locations in North America or conversion was very strong.

Gross margins were up 80 basis points, driven by the mix year benefit to our international markets as well as more favorable walked down right rates compared to what our expectations I did.

As we expected our S T N a de leverage versus last year. However, there was a significant.

The sequential improvement versus the first quarter due to higher the higher revenue growth as well as the full quarterly benefit of all cost initiatives.

All in all you are quite pleased with our second quarter results.

With us delivery as a 13 cents a share.

Before I pass them over the stuff and I'd like to address how we're approaching the second half of the year, particularly holiday.

This will clearly be a unique holiday season, we are.

Hi, this strategic in our approach to be competitive and gain share. During this period. We are also being conservative in our sales outlook for the fourth quarter given all the on certain fees, resulting from the potential impact from the coldest 19 virus. We believe we were on excellent position.

Given our inventory position.

For three days to be able to meet any sales demand as colm will be overall expectations.

While our bread and positioning are strong we expected the second half of the year will present itself with a fair amount of volatility, especially with Kobin 90 cases research.

Our assortments will be focused on relevant categories and we are in a position to chase inventory is better than expected demand materializes.

We expect that brick and mortar traffic will remain under pressure and all looking into creative ways to work around that while also driving people into our stores.

We will burn redirecting resources digital to support strong growth on our own sites as well as a pure play partners and all the whole wholesale partners online.

From a regional standpoint, we expect to see continued outperformance in our international businesses.

China continues to gain momentum for both Calvin and Tommy and we are pleased to see positive growth in in the region, reflecting our brand health and successful consumer engagement initiatives.

Youre, which has been our strongest market over the past few years continues to demonstrate strong recovery and we believe what regions continued to gain market share for holiday with our best seller capsules planned and leverage our compelling brand propositions.

We expect that most pressure the most pressure to continue to be felt in our North America businesses.

For several well telegraphed reasons first resurgence with cold is 19 cases in state significantly impacted consumer shopping is spending patterns. We expect store traffic will be pressures, where the virus researchers secondly, while back to school was never a big.

Business for PV age it was a traffic drivers for outlet centers and department stores.

Then we are not experiencing the same level. This time this year and lastly international tourist traffic to the United States, which typically represents about 30% to 40% of our revenues is down over 90%. So for this year and we do not expected to come back.

During the second half was 20 twond.

That said the domestic consumers shopping our stores and is excited and invigorated we bought Brian.

Our efforts for holiday in U.S. will be focused on engaging with the local consumers in the United States, leading with our hurt you all products and offering compelling price value propositions.

We are also prepared to begin the holiday sales season early as a number of our retail partners, including Amazon Prime.

Which will now be held in October instead of it usually timing issues in the summer all beginning the holiday selling at an earlier time.

Overall I am optimistic about the opportunities ahead for PVH, both for the balances this year and as we look into the next few years.

We have a very powerful business model led by our incredible people, our iconic global brands and our strong business and financial fundamentals and I believe these competitive advantages will position us to deliver long term sustainable growth and with that I'd like to see.

As turn it over the assessment.

To go into some more detailed business.

Perspective.

Thank you Manny good morning, since we spoke love our focus for all browse the regions in the second quarter has increasingly being too lean and today execution towards some accelerated recovery and in doing that to position our businesses to win with the consumer in the new normal coming.

The out of Colby and to drive sustainable profitable market share growth.

Due to the Covance pandemic, just the first quarter, the second quarter and the rest of this year, we're not looks like any other year, having successfully navigated through the immediate first phase of the crisis I will now share some key insights on how we grow performance into second quarter and what our key priorities.

Sorry to drive towards some accelerated recovery.

Just like last quarter, Mike will then share more financial details of our second quarter performance and how we're thinking about the second half of a year.

In the second quarter across the board that's not invention, we were able to drive a stronger than expected recovery, both top and bottom line.

From a from a number of proactive actions.

First we quickly turn to Supercharging E commerce across owned and operated as well as third party digital commerce for both pure players and department stores of call.

The result for the quarter, we growth total digital sales over 50%, including an 87% increase on our own sites, where new user growth continued to be very strong across all regions, particularly within the younger age bracket.

Next we continued to increase our focused on driving product relevant which drove stronger than expected demand and margin in key categories. We continued to experience strong performers in cash or core essentials within underwear loungewear and that leisure we saw phase.

Verbal pricing power in underwear, and we're chasing inventories to be best position to capture demand in the second half.

We also drove a more effective and interactive customer engagement and based on our data insights we were able to better connect the consumer to the product, they're looking for and follow how they're shopping patterns have changed across our channels.

From an inventory management perspective, as a result of stronger than expected sell throughs of spring summer 2020 product where cabin carrying over less than expected product into the spring 2021 season.

Our teams are focused on ending the year as clean as possible and we will continue to liquidate and reliable product. Lastly, we were successful in taking steps to rightsize, our cost structure to better reflect our revenue levels impressed by coated bidding cruise. This includes our decision to streamline our.

North America business by reducing 12% of our workforce and closing our heritage retail business in 2020 wells.

As I provide a regional update.

You will see that the recovery continues to be very strong throughout the quarter in both China and Europe, while in North America, even though our digital channels performed very well, we felt increasing pressure towards the end of the quarter, particularly the brick and mortar channels, where we saw virus resurgence of.

We have significant exposure to international tourist traffic.

Let's just start today shows specifically with China, which shipped the first ahead in terms of the recovery our direct to consumer sales in China increased double digits in the second quarter, and we continue to experienced double digit growth for the third quarter today.

Digital continued to outperform for Hs, a whole with our own business up about 75%. We also experienced strong pmall performers with new livestream events, drawing very strong traffic and new customer growth.

Our marketing events in China focused on maximizing sales around key customer moment, including our 618 digital commerce event with Pmall, where both brands drove over 80% growth versus last year. During the campaign, we performed over 30 live streams and seven.

The percent, 72% of our consumers were new to the brown.

Given continued traffic pressure in brick and mortar locations our promotions in that channel focused on driving conversion and basket size, while limiting discounts on better performing products.

Even though we continue to see virus flare ups impact our business in Japan parts of Australia, Hong Kong and now Korea in the region as a whole we continue to make good progress towards our continued strong recovery.

Moving on to Europe, where we continue to drive a very strong recovery and we experienced performance trends that would meaningfully above expectations, our direct to consumer sales in Europe were down 10% in the second quarter, which was well above our expectations.

Digital Commerce continued to outperform with second quarter sales growing nearly 80% year over year.

The digital growth was driven by higher traffic and conversion, which is driven by strong product and marketing in combination with having the right the inventory availability.

Given our position of brand strength, we narrowed our promotions and managed to maintain similar markdown levels to last year.

And one traffic in brick and mortar remain challenged particularly larger cities conversion was very strong and the team continues to find innovative ways to drive traffic into our stores.

While the virus is seeing some resurgence in Europe, our business in the third quarter to date remains very strong with direct to consumer sales tracking tracking mid single digits.

We're also pleased with our spring 2021 order books, which showed a sequential improvement where both Brasil tracking down high single digits versus tracking down mid teens in fall 2020.

Lastly, our north American business felt the most pressure relative to our other regions our direct to consumer sales in North America were down about 45% in the second quarter and are currently running down in the mid Thirtys in the third quarter to date.

Our biggest challenged the smell dimension is the lack of international tourist which historically represent 30% to 40% of sales of our business, which is down close to 95% as we look ahead, we don't do not anticipate this trend to improve before next year.

As a reminder, less than 30% of our EBIT was generated from the us in 2090.

Despite the challenges for tourism, we're seeing strong engagement with a bit more domestic consumer however, softer as of late in the virus search states.

We experienced very strong digital demand during the quarter as we drove triple digit growth for both Calvin and Tommy dose call, including many new to side consumers.

Our business with Amazon was also highlight as we saw strength in their new Softlines sale in June and outstanding growth in new to brand consumers, which has CUSIP continued into the third quarter.

And as we look to the second half of the year, we will continue to manage our inventories prudently, we will redeploy resources to dose areas of the business that are performing such as digital from a channel perspective, and essential casual products from a category perspective.

A stellar performance across regions demonstrates we have taken a very deliberate approach for each brand to get deeper connected with the crossover and enhance our brand positioning to gain profitable market share now like to share a few brief global brand highlights from the quarter beginning with Calvin.

Calvin Science brand health remains very strong and we continue to see strong customer interaction across Calvin social channels with an average following increase of over 20% year over year.

We're implementing our evolve brand direction, and our products and marketing and already now you can see it and how we drive engagement on Instagram and other social platforms. As you will see even more of it during the holiday season, and the beginning of next year.

In addition, we took steps to gain greater control of the brand with announcement that we will buy back to our European footwear business in spring of 2021, which represents a great opportunity as we leverage our knowledge from Tom is successful footwear platform.

Lastly, we announced that Movado our lives as part of the Tommy Hilfiger will take over the balance watches and jewelry license for spring 2022, and we feel optimistic about the partnership and the business potential.

Moving on to tolerate.

Comments global momentum continued in the second quarter with a brand demonstrating strong awareness visibility and consideration to purchase we continue to convert new customers to the brands, including in growth markets like China, where our lives screens generated over 60% of sales for first time buyers.

In the quarter, we continue to launch limited edition brand collaborations that resonated well with our consumers.

We also recently launched Tom is make it possible campaign, which is a bowl sustainability program that builds on PVH forward fashion strategies, which is set to reduce our negative impacts the Ciro, Inc. So positive impact and improve over 1 million lives across our value chain.

And now to our heritage business, our heritage brands business was under significant pressure during the second quarter to cash utilization trend as being accelerated by cobot mates working very well for us in Calvin and Tommy it's working against us in the more formal wear to work.

Product categories within heritage.

Additionally, the mid tier Department store bankruptcies in North America have negatively impacted this business compared to Calvin and Tommy.

We are addressing the challenges by managing inventory levels more prudency, lowering our cost base and reviewing additional ways to optimize the streamline the business that goes beyond the next year closure of our heritage brands retail business.

And before I hand, it over to Mike I would like to reiterate that we're balancing driving the business here and now which starts with US many mentioned in his introduction, having the plants and execution to win with a consumer during the upcoming holiday season.

It also includes to making sure that we are focused on driving accelerated recovery coming out of cobot, where our main priorities. Our first to continue to drive product strength by focusing on key growth strategies categories and developing strong hero products franchises all connect.

Turning to where the consumers going with special focus on Cashel essentials and at leisure.

Next is to further supercharge, our ecommerce growth and penetration while at the same time evaluating what our optimal brick and mortar precedent looks like both in our own locations and with our wholesale partners and lastly, we will continue to review our cost base and determine where we can often.

Minus our business model and organizational structure to operate them, even leaner and more dynamic organization, while also allocating additional resources tourists our growth areas.

Overall, even though we're still in the early days are driving towards some accelerated recovery as we intensify our focus to build on our core strengths and connect them closer to the consumer than anytime before I feel very optimistic about the forward path ahead for PBH.

Every time, we take steps closer to what the consumer wants and needs. We see the positive performance proof points, whether is it whether it's in product marketing or E commerce distribution.

The global brand power of Calvin Klein and Tommy Hilfiger is the core strength and our diversified multi region multichannel platform positions us to gain market share globally.

And we see examples everyday that our teams are rising up to the challenge to make it happen.

And by that I would like to handed over to Mike.

Thanks, Jeff arm the comments I'm about to make are based on non-GAAP results in the reconciled in our press release.

I'm going to discuss our second quarter 2020 results the move onto the current state of the business and our second half expectations, while our business continued to be negatively impacted compared to last year, where the cobot 19 print and dynamic. Our overall results were an improvement compared to the first quarter and exceeded our expectations.

Overall.

Reported revenues were down 33%, Tommy Hilfiger revenues were down 28% with international down, 14% and North America down, 51% Calvin Klein revenue was down 32% with international down, 16% and North America down 51%.

China showed positive year over year results in both Tommy Hilfiger, and Calvin Klein our.

Our heritage revenues were down 51%, which included a 16% decline as a result of the sale of our speedo business.

Our stores as well as those of our wholesale partners with temporarily closed during the first month as the quarter.

As a result, our revenue in the second quarter reflected a 40% decline in revenue grew our wholesale distribution channel and a 24% decline in revenue from our total direct to consumer business that included an 87% increase in sales towards digital commerce businesses, driven by strong growth across all.

All brands in all regions.

While we continue to be negatively impacted by the pandemic earnings exceeded our expectations in our earnings per share was 13 cents on a non-GAAP basis for the second quarter, our gross margin for the second quarter benefited from a favorable mix of business is our international businesses, where a larger portion of our total revenue versus the prior.

The year and generally carry higher gross margins going on North American businesses.

Additionally earnings in the second quarter has the benefit.

Of expensive reduction initiatives, including salary reductions temporary furloughs, and lower discretionary spending including marketing travel consulted in creative in design costs as well as onetime benefits from covered related government payroll subsidy programs in our international jurisdictions and rent abatements, where we negotiate.

It is a certain of our landlords.

So salaries and most furloughed employees were reinstated at the beginning of this third quarter.

Partially offsetting these savings were additional expenses associated with the implementation is health and safety measures to protect our associates customers in business partners. These safety measures are expected to continue in the cost of that will be greater in the second half of the year.

Moving on to the current stated the business currently almost all of our stores in the U.S. and around the world are open although they are operating on reduced hours and reduced occupancy levels.

Third quarter to date for our direct to consumer business, we are running down low single digits for total Asia with China up.

We are running up mid single digits in Europe, and down 30 to about 35% for North America.

Our owned and operated digital commerce businesses for the third quarter to date has continued to show strong growth.

Regarding wholesale both our traditional on pure play wholesale customers as seen strength in the digital Commerce channel and this trend has continued into the third quarter with the counseling inventory to accommodate the strong trend.

However, we expect.

Expect wholesale accounts to buy conservatively to their store base businesses through the balance of the year and the revenue declined in the North America wholesale business will be more significant than in Europe and Asia. The expected revenue decline in North America includes the impact of recent bankruptcies.

We continue to be proactive in our response to the pandemic with ongoing focus on operational efficiencies and liquidity such as streamlining our North America operations by exiting our heritage brands retail business by mid 2021, and reducing our North America workforce by 12% with.

Tightly managing inventories decreased 12% from this time last year, we've reduced inventory commitments consolidated future season collections in negotiating extended payment terms of suppliers as at the end of fiscal 220 20, we're now projecting to carry approximately $125 million.

Basic inventory into spring 2021, which is a reduction compared to prior projection of about $250 million.

Also during the second quarter, we issued 500 million influenced by the person senior notes due for 2025 and ended the quarter with $2.7 billion liquidity, including cash of approximately 1.4 billion at 1.3 billion of avails available borrowings under our revolving credit facility.

These.

And now moving on to our expectations for the second half.

We expected our second half revenue and earnings will continue to be negatively impacted by the code 90 pandemic.

We currently expect revenue in the second half to be down 25% versus last year.

When we think about gross margin, we expect that our second half gross margin will be relatively flat compared to the first half as we project heavy promotional activity across the industry in order to clear inventories, particularly in the United States.

Well, we think about second half expenses and when you compare to the second quarter, we expect our expenses as a percentage of revenue to be slightly higher in this second half than in the second quarter.

The second quarter expenses benefited from salary reductions for was government payroll subsidy programs in rent abatements, which will not materially continue into the second half although in North America. We will continue to have payroll savings as result of the recently announced reduction in our workforce.

We also expect to incur in greater expenses for health and safety measures in the second half as opposed to the second quarter.

We're not in a position to issue more detailed guidance at this time due to the uncertainty related to the duration and severity of the dynamic.

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

Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

If you are using the speakerphone. Please make sure your mute function is turned off Hello, Your said luxury car equipment.

Again, Please press star one to ask a question.

My first question.

Bob Therefore with Guggenheim.

Good morning.

Nice job you want advancing through Mike.

I guess I'm.

My next question for you really so when you think about the business performing really well internationally. At this point you think about the opportunities that are that you see ahead in North America in the second half.

Where do you think you're sort of upside could come from or where you think you're being most conservative in North America and follow up question afterwards.

Sure I think Bob.

The fundamental issue in North America is the lack of control of the virus compared to the rest of the world.

And I think thats, having an impact on consumer spending so that that's just a consumer spending, particularly in apparel as it moves.

In addition, I think the fact that we are.

As a company really focused and be part of our businesses is tourism driven international tourists in particular.

And that businesses or both gone away and we were anticipating that that international tourists tourists will not be back.

This in the second half of two on each one so that's what we're seeing the pressure on our own retail stores.

Yeah.

Anywhere from 30% to 40% of our sales are driven by international tourism. So that's where I think it is I think the opportunity lies in continuation of some of the trends we've seen and moving forward seems to have sequential improvement over that.

As we go forward and from a bottom line point of view I think our biggest opportunity is gross margin. We are anticipating a highly promotional environment for the third and fourth quarter, particularly holiday and.

Is that where the backlog.

Similar to how we saw in the second quarter, we were much more conservative about Martin ways.

We are facing.

That being materialized. So I think there's an opportunity both on these top line, but there's also an opportunity there may be more significant on gross margin.

Okay, and then just just like.

Quick follow up Manny.

When you think about the trend to casualization, you think about sort of how do you guys are position within the business.

That is still have I think what you call that neckwear business and your and your Drescher business. The ties in AMC tailored business can you size up for US sure where that business is today as percentage of your total business and how you're thinking about it going forward in a more casual environment. Thanks.

Obama with businesses you talked about was Roche a dress shirt business on met with the Houston ceilings as old as a percentage of sales. This is less than 5% probably approaching 4% for 2019, so even though we're the largest addressing company in the world as a component of our business.

This is smaller and I think we've been able to really focusing on the casual nature those components of both Calvin Klein and Tommy Hilfiger.

Really take advantage of those businesses key categories are intimates business or men's underwear business on lounge wear business our performance businesses gene active sportswear as clearly a vast majority of the business.

Reasonable capture that as we going forward.

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Next question.

Thanks.

Thank you guys question from Michael Binetti with credits.

Hey, guys, congrats on a nice quarter and tough backdrop.

I wanted to ask one clarification and then I had a question for you Manny just fee.

Roughly 30%, 40% of sales in North America business comes from tourists down over 90%.

And the negative mid Thirtys total DTC trends in North America today.

It does that imply that you're down low single digits with the domestic consumer versus last year. So.

That's a better number than we've heard heard elsewhere. So I just wanted I just want to make sure that.

I'm reading that correctly, if you feel that that underlying strength was domestic consumer.

The short answer is yes.

During the numbers you calculated are right in the ballpark.

And I think it so testament to the strength of the brands and how that resonate with the.

Yeah.

The with the US consumer so what we're seeing what's our domestic consumer it's always hard with the cash component of is trying to factor that in but that's not a big is it's kind of flattish to down slightly.

What we're seeing now owned stores with the consumer.

Okay very high in the back component of it given the backdrop.

Okay, yes, it sounded like it I just wanted me should a map is looking at ways I think somebody other.

Retailers are reported domestic only consumers are a little lower sets, especially here I guess then.

Well I know on US order books aren't as strong as indications is there for Europe users dynamics around cancellations and such but I guess would really be helpful for us to hear how you're seeing that in North America business.

They'll business rebuild the past from here connecting maybe the second half of this year and enter next spring.

[noise] anecdotally what are what are the wholesale partners talking to you about.

So there is look I guess fundamentally and maybe seven for a little more color on this.

But fundamentally the being very cautious on the open to buy.

And our and with the belief that inventory will be there demand picks up as they go forward. So.

We are trying to be smart about.

Taking positions in categories that we see our accelerate even though they're not might not be buying back up and we're also not looking to get ourselves each level. He categories that are softer images. So I think theres opportunities develop and we'll have to the consumer will have to go.

Obviously go forward and there.

That being very cautious on the open the Bonnie I think you even here in a relatively short period of time.

When I look at some of my key customers inventory levels, they've done a good job again inventory levels down in the short end of really short period of time relative to demand as they move into second half of the year. So I think there is opportunity of business.

That's net of back so I, just would want to remind everybody that for us.

US how do you at wholesale we have no account was up there represents close to 5% of our total sales as a company and our exposure in that Department store segment that keeps coming up is about the late in 2000 idea about 12% and anticipate the through this year.

It will be closer to 8% to 9%.

I guess, then severance for little bit more color on department stores and hold also thought bottoms buying.

Just flex is just a bill Mcmahon a managed just share my goal.

And there is that the us.

Hold our us wholesale partners such Manisha, there that they take a cautious approach. However, we see strong demand as strong recovery and on the where the big Cashel essential product categories. So we see stronger demand there and we see.

Quite strong are very strong demand in their ecommerce business.

[noise] Assortments comp I appreciate it guys. Thanks.

Well take our next question from Erinn Murphy with Piper Sandler.

Great. Thanks, good morning.

To build on the digital agenda I think in the prepared remarks, you referenced the channel contributed favorably to profit over time, maybe just walk away from the initial pickup there and then specifically in North America I think you see in terms of profitability for digital in the second quarter. Thank you.

This is Michael talked about an hour, yes, I guess a couple things around I think we're seeing with a significant increase in revenues were obviously getting them really great leverage on fixed expenses were also focused on the variable and just really keeping that expense base under control.

I also see some improvement you ours as as the product is in such demand so spring selling at great with great performance on gross margins.

In addition to that we continue to focus on a for the balance of the year.

There's been a lot of discussion about create rates move on assets on processes. This point, but overall it would definitely starting to see improvement and and as the move towards profitability in that business.

And Thats North America, Matt as the rest of the World is highly profitable Plaza.

I would just going to say that here that the internationally the our E commerce businesses as profitable as our full price business.

Thank you.

And our next question will come from Jay So.

Great great. Thanks, so much.

Just a question about job.

Thanks, and how you're thinking about hedging right now I mean could potentially change.

The company's traditionally thought about hedging foreign exchange.

So if the dollar it seems to be week.

Like the timing of when that impacts will be different based on it or whatever you might be doing different things abandoning thank you.

So I guess just wondering when we think about hedging we really don't please that's where we try and keep it consistent policy of this call.

The percent of our inventory purchases being has any point in time, so we keep moving for forward.

And I know, we've had that 80% on the books so.

That is where we are today and look at the dollar continues.

Would be a benefit on purchases as we did this is the weakening of the dollar continues we would see a benefit next year.

On those currencies that appreciated against the dollar.

2021 inventory purchases and gross margin.

Got it thank you.

And we'll take our next question Dana Telsey with Telsey Advisory group.

Good morning, everyone, a nice to see the progress how are you thinking about the marketing budget in the second half of the year compared to last year, and especially given pepper throughout the conversation. So far has been a big focus on new customers sounds like in all regions. What are you seeing from those new customers what are they buying it fine.

And what do they informing you about the product go forward by each brand. Thank you.

Dan Good morning.

From a consumer facing perspective, what what we have done from the from the get go when we got into their covert crisis to pivot.

Our resources towards E commerce, and and that has really paid off for us.

And that's what we will cause we will continue to follow where the consumer is going and what the consumers' behavior is informing us about is that they from a product perspective that we come back to the cast Cashel essential products that leisure products performing very strongly across all regions.

Yes, Hi, Dana deal, we add to that I would make is that in the second the first half when the pandemic it and in each of the regions. We did pull back on marketing and never door, but we did pull back and as we move into the second half we will be accelerating spend back to more normal levels. So you will see an increase on a percent sales base.

As for the second half and what we're doing that I noticed a connection we're strengthening the connection between the product offering with the distribution channel. That's a consumer is shopping app.

Good thing gauge meant that we are driving as we're connecting those three.

Stronger and stronger and steffan likes to say the focus is really on here all product is driving the business because that's where the connection with the consumer is happening in those categories.

Cost about on this call working so well.

Thank you.

Thank you Dan.

Well take our next next question Jamie Merriman.

Thanks, very much and so finally in your prepared remarks, he made a comment about supercharging that does it on E commerce.

Thank you didn't get you can just getting up a little bit more color engine.

What that means enactment investment perspective capabilities that you're trying to supply or is it really.

Thank you.

Yes, yes, so so let let this starts with where it's it starts with following whether consumers going so we see the demand we see the consumer during the cold bid.

I am increasingly shopping E commerce, so what would drive it what we have been driving and we'll continue to drive.

Yes.

Growth in owned and operated and third party E Commerce and the key drivers there is.

The key product categories. The casual categories and then within those categories is to not as pointed to the hero products and then it's all the different components relating from product relating to the experience.

All the way to fulfillment and logistics so.

And what's really exciting to see is that the period that we made is really paying off.

And all I would add he is.

Obviously, the more on marketing budget spending by type is really continues to shift greater and greater to digital marketing.

Away from some doing a lot of more traditional areas and the investments in the Bakken on logistics with you on the numbers that Mike is shared with the goal of view is.

It is also bearing.

Well, we're not spending as much capital is in our own stores in new Fixturing in those areas because were really spending where the consumers shopping and there we do not the most impact and to make those investments and I would just that it's not just on was that.

Just stick side, we are also spending on the Amit I see sites. We've we've implemented a consumer data platform that gives us better understanding of our customer access to our customer and the ability to communicate with that customer, which we've never been able to due to this level before.

I think NIM cheap.

And we drive those again, it's the we're trying to get to fly wheel more and more going from product strength to showing up in the E. Commerce channel such a consumer wants to shop and engage with our brands and then adding on the marketing strength. So thats just the product E Commerce channel with.

Marketing strength, if not slightly we are working to get going more and more.

And we'll take our next question from Kimberly Greenberger with Morgan Stanley.

Great. Thank you so much Manny I wanted to get follow up on a point you made earlier you indicate your in excellent condition to deliver on sales opportunities if they come your way here through the second half a year and.

It sounds like you were taking some sort of selective.

Inventory.

Onboard where you feel really confident about the product I'm wondering if there's also an element here of supply chain agility, where you think you might be able to chase the business I'm. Just wondering if you can talk about the multi pronged approach to maximizing sales opportunity, particularly since it looks like many of your.

Wholesale partners are coming into the back half in a pretty lean inventory position. Thanks much.

Yes. This is Vince this is where all in science come together.

Trying to make a determination.

You know seeing what what's working right now.

Some of the key core categories, where there's minimal inventory fashion risk.

In willing to take much more of the was there to continue to service that business and to keep our customers consumers.

Satisfied we're making those I don't want to call the best making those investments as we go forward and continue we adjust our supply chain as we move forward.

But I am I also don't want to acute anyone is yaki you've heard the disruptions that are going on supply issues with China and new wells, even if we're not sourcing directly from China again raw materials out of China on cotton in other categories. You know, it's it's a bit of a puzzle, but I think you know.

Given our it's an area of expertise to PVH, a scenario, where we are great capabilities and I think on drugs on the ground presence with the teams and our offices there allow us to really be on top of the to react to the market stay in product categories in services.

This is so with we're trying to do is thoughtfully into being a physician.

If we are projecting somewhat into our numbers that were projecting conservative, especially the fourth quarter. If that's the case, we want to be able to capture those incremental sales and stuff and was there.

And the core is the focus on our core essential for US as we have mentioned both that and I are also unlocking supply chain sourcing capabilities, because focusing on those essentials enables us to climb capacity to platform the fabric and to have much much faster lead times on on the.

So thats, thus and added benefits with following whether consumers going.

Great. Thank you so much.

And we'll take our next question from Ike Boruchow with Wells Fargo.

Hey, good morning.

Larry I want to ask you about that the trajectory of both brands in North America, Tommy and Calvin I'm, just sort of high level. It seems like Calvinist piece of recovery.

In North America should be much smoother than Tommy just because it's got better product mix for what's working.

Right now and they don't have the tourism exposure, but I'd love to kind of share your thoughts on on the PC of recovery by brand North American up and how that could workout puts and takes.

Well I think.

We don't see much of a difference I guess I would say and I think if you think about it is Calvin has a tremendous.

As you know intimates underwear business lounge wear business that is drives offices was positive performance component to them.

And a big jeans business that really plays into the casualization, but the Tommy is probably as a brand.

Much more of a casual brand much more of an active bland. So our sportswear, they're really transcends valent and works extremely well for US Tom has always had a big Jews component to their sportswear business almost a similar size to accounting issues. So both both brands I think going in a strong.

Position Calgary does by the nature of its been just having this huge designer underwear in women's intimate business Tommy's businesses is probably about a third is the size.

Still very soft in substantial.

But I think two brands really are able to take advantage of there is the are you talking about two of the you know probably hub five brands by size in the world. So they have.

A very diversified product offerings that plays across the spectrum I think if we can manage the inventories by components, we should be able to really do well style.

Got it thank you.

And we'll take our next question from Matthew Boss with Jpmorgan.

Great. Thanks on a gross margin in the back half and in your forecast year over year.

To get a sense is that based on actual elevated promotional activity that you're seeing in the landscape today or is that your anticipation of mark down do you think necessary to work through inventories and then assuming you do exit the year clean on inventory I'm, just curious how you'd rank gross margin drivers multiyear.

Okay. It's clearly the anticipation we're not seeing anything in the business and in fact, we've been as you can see in second quarter, we've been really pleasantly surprised with the level of clearance and promotion that's gone on we were anticipating more.

It's more of a clearance aspects when stores, we opened particularly in North America and we just haven't had to do that promotional nothing is changed in August.

The from that perspective.

So it so it's clearly just us anticipating that there will be a level of activity as we as we as potentially with me here in the market and much more in the United States is back to schools not happening at the same level for all the reasons that everyone can imagine and the fact.

Okay.

Uncertainty around the holidays. So I think is partially about to be prudent in how we're projecting the business. So thats the real opportunity as we go forward. There's nothing from a cost me point of view product the mix of product. The only thing I would say in the second quarter the mix of into.

Nationals, probably skewed a little bit more than it will be for the balance of the year, but absent that there's no real difference.

Yes.

And we'll take our next question from Omar Saad with Evercore ISI.

Good morning, Thanks for taking my question, great job executing through all those guys.

Manny I wanted to ask.

Kind of a follow up on the inventory and promotional environment for the second half you're talking about help me reconcile.

Your your expectations for heavy promotions, but at the same time. Your your inventories are clean and then we're looking at off prices are down 20 to 30.

Apartment store inventories are down big is it that you.

You do you think that's all these come the channels planning inventories to significantly ramp up in the back half you know about demand or do you expect the demand levels to remain lower than even those reduced inventory levels, just kind of help me piece together that framework for the landscape in the back half. Thanks.

Look as I don't know how close to savings.

I don't know personnel.

Retailers are not buying extra inventory than not ramping up I think they're open to buys vacancy.

Dave.

Is it would have reported for anything it's that were being too conservative on our gross margin expectations. If that's the case.

Then then we'll we'll we'll do better on the gross margin I think thats, a potential big opportunity for second half of the year.

You know and the key will be you know how much goods are out there that needs to be cleared from the fashion point of view or whatever we don't see any real build up as Mike talked about we were planning to carry out as much as $250 million of goods that number has already been cut in half.

And it's factored into all of our.

Second quarter numbers and into third quarter numbers and I think we'll continue to get that number down compared to where we lived through store. So I think it's really for US gross margin is a big opportunity.

But given all the uncertainty in the business. We're just trying to be cautious about how we think about margin going forward.

I totally I can add robot.

Okay.

Operator, we will make this the last question. Please.

And we'll take our last question from John Kernan with Cowen.

Alright, Thats just take a man.

Congrats on managing the business or it at a difficult times here just wanted to go back to the revenue guidance for the back half the year, how we should think about.

The international pieces of business, which does seem to have.

Momentum right now both in Tommy and Calvin you just look at a.

Run rate of decline in Q2.

And.

Both Calvin and Tommy.

I'm wondering if that's hydroelectric continue or are things going it are you planning a little bit weaker trends internationally.

And the balance between domestic and international backlog I think it okay. It's a fair question on the sales I think is.

Fourth quarter there.

So if business continues to improve sequentially and when we look out and see how some other has passed a number of our retail partners.

Department stores and others are talking about second half of the year, particularly fourth quarter I think they're being more bullish about their fourth quarter sales projections and then we are.

As we go forward.

So I think from that perspective, there sales opportunities potentially potentially in the fourth quarter, both internationally and potentially domestically as we move forward.

And right now I think we talked about.

Both Stephanie Mike mentioned that our direct to consumer business globally is running about down 15%, which is running ahead of where we would have planned the business at this point. So no. We haven't seen anything that discourages us at all and actually creates a lot of opportunity.

Yes.

Yes, Chinese now there is.

Just on all of them on Q4 adjusted below what's known as saying there is a.

And we flagged it in our prepared remarks, it's not going to look like any other Q4 and holiday season. So there is a big shift from brick and mortar to E commerce.

Which and or is this overhang from the resurgence of the virus risk then in China just to mention we have the Chinese new year moving out from this year to next year. So.

It's a different kind of holiday season with with more risk.

Understood. Thank you are right.

Thanks, John.

Okay, everyone. Thank you very much.

Everyone stay healthy insane.

Joining me in the United States North America enjoy the holiday weekend is coming up in the end of summer and we look forward to talking too.

Third quarter press release banking.

And that does conclude today's conference. Thank you for your participation you may now disconnect.

[noise].

[music].

[music].

[music].

Today I'll come to the PVH Q2, 2020 earnings call.

Hi, I would like to turn the conference over to Dana Perlman. Please go ahead.

Thank you operator.

Good morning, everyone and welcome to the PVH Corp. second quarter 2020, earning conference call. This webcast and conference call is being recorded on behalf of PDH and consist of copyrighted material. It may not be recorded rebroadcast or otherwise transmitted without pvhs written permission.

Participation in the question and answer session constitutes your consent, having anything you say appear on any transcript a replay of this column.

Makes sense you may discuss includes forward looking statements I reflect PDH a deal as of September 2nd 2020, a future events and financial performance.

These statements are subject to risks and uncertainties indicated in the company that you see filing and the Safe Harbor statement included in the press release that at the subject for desktop.

The risks and uncertainties into teenagers right to change of strategies objectives expectations and intention and if he is significant cash flow to service its debt obligations.

Significantly at this time it Kevin 19 pandemic continues to have a significant impact on the company's business financial condition cash flow and results of operations. There is significant uncertainty about the duration and extends and the impact of the 10 dynamic the dynamic nature of the circumstances means when you said on this call cuts.

Range materially at any time, therefore, the operation of the company does Nash and its future results of operations could differ materially and historical practices and without a current inspections estimates and suggestions.

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

Generally in a financial information and projections city discussed will be on a non-GAAP basis as defined under FCC rules.

Conciliation to GAAP amounts are included in Pvhs second quarter 2020 earnings release, which can be found on www dot PVH dotcom and in the company time report on form 8-K furnished to the FTC in connection with the release.

At this time I'm pleased to turn the conference over to Mr., Manny Draco, Chairman and CEO of PDH.

Thank you very much good morning, everyone. Joining me on the call our stuff and loss in our president.

Mike Shaffer, our Chief operating officer, and Chief Financial Officer, and Dane or Pal problem, and Treasurer, and senior Vice President business development Investor Relations.

I want to thank you all for joining us on second quarter earnings call and also hoping you and your families a healthy as thing.

Our better than expected results reflect the hard work determination and flexibility of our talented associates across the world and I can express how grateful I am for their determination and dedication.

I would love to specifically of knowledge the incredible efforts from our store and distribution Center associates, who are on the front lines and I've kept all businesses running over the last couple of quarters, Despite the challenging times and unconventional working dynamics.

The current backdrop has changed how we will all live probably forever.

The covert 19 pandemic and its impacts to our everyday lives and to the social issues that you are embracing to drive positive changes across our communities.

We continue to live by all purpose, which is to drive fashion. So we feel good.

One of our most note worthy recent announcements was the hiring of our first ever Chief diversity Officer last month.

Together with our expanded inclusion and diversity team, we believe that we continue to accelerate our work to create an inclusive environment.

Every individual is valued in every voices heard.

We also took key actions to evolve our business and drive an accelerated recovery.

We accelerated our digital agenda and reallocated additional resources to drive growth in is critically important channel.

We continue to optimize our brick and mortar presence, including announcing the closure of our heritage retail business. We made 2021, new will continue to review our footprint what I'll put it looks like post coated owned and operated network into our wholesale pot.

Yes.

We are focused on every expense line items, including our previously announced headcount reductions in North America, and we will continue to evaluate further measures as we go forward.

We manage our inventories prudently, while also increasing our inventory buys towards the comfort in casual products that are working exceedingly well with consumers right now.

And lastly, we were opportunistic in the capital markets in early July and efficiently raised additional capital to further support our already strong financial liquidity position.

We are confident that these actions will position us well to navigate the covert 19 pandemic and emerge as a stronger organization.

Turning to our second quarter performance, while our second quarter results continue to reflect a significant disruption from the covert 90 pandemic they exceeded our expectations both from a top and bottom line perspective.

Our revenues declined 33% to $1.6 billion as our own stores and wholesale partner stores were closed for about one month on average during the quarter.

And so our stores operating at significantly reduced hours and occupancy levels.

We experienced better than expected performance across all markets in channels as the casual brand lifestyles that Calvin and Tommy represent we're even more relevant with our consumers spending more time at home.

Digital continues to outperform with total digital sales up 50%, including almost 90% growth in our own.

Commerce sites.

We continue to believe the digital sales can reach 20% of ourselves in the next couple of years.

I'll also contributed favorably to profits.

In our stores, while traffic was down, particularly international tourist locations in North America, our conversion was very strong.

Gross margins were up 80 basis points, driven by the mix shift benefit to our international markets as well as more favorable markdown rates compared to what our expectations Benson.

As we expected our SGN a de leverage versus last year. However, there was a significant.

The sequential improvement versus the first quarter due to higher the higher revenue days as well as the full quarterly benefit of our cost initiatives.

All in all we were quite pleased with our second quarter results.

With us delivering EPS of 30 cents a share.

Before I pass them over the stuff and I'd like to address how we're approaching the second half of the year, particularly holiday.

This will clearly be a unique holiday season, where we are.

Highly strategic in our approach to be competitive and gain share. During this period. We are also being conservative in our sales outlook for the fourth quarter, given all the uncertainties, resulting from the potential impact from the coldest 19 virus. We believe we there are an excellent position.

Given our inventory position.

Our sourcing days to be able to meet any sales demand that comes that will be overall expectations.

While our brand positioning our strong we expected to second half of the year will present itself with a fair amount of volatility, especially with Cowen 90 cases research.

Our assortments will be focused on relevant categories and we are in a position to chase inventory is better than expected demand materializes.

We expect the brick and mortar traffic will remain under pressure and are looking into creative ways to work around that while also driving people into our stores.

We will be redirecting resources to digital to support strong growth on our own sites as well as a pure play partners and other whole wholesale partners online.

From a regional standpoint, we expect to see continued outperformance in our international businesses.

China continues to gain momentum for both Calvin and Tommy and we are pleased to see positive growth in early in the region, reflecting our brand health and successful consumer engagement initiatives.

Youre, which has been our strongest market over the past few years continues to demonstrate strong recovery and we believe what regions continue to gain market share for holiday with our best seller capsules planned and leverage our compelling brand propositions.

We expect that most pressure the most pressure to continue to be felt in our north American businesses.

The several well telegraphed reasons first resurgence of coated 19 cases in state significantly impacted consumer shopping spending patterns. We expect store traffic will be pressures, where the virus. We saw urges secondly, while back to school was never a bit.

Is the PVH was a traffic driver for outlet centers and department stores.

Then we are not experiencing at the same level. This time this year and lastly international tourist traffic to the United States, which typically represents about 30% to 40% of our revenues is down over 90%. So for this year and we do not expected to come back.

During the second half of 20 Twond.

That said the domestic consumers shopping our stores and is excited and invigorated with Bob Lyons.

Our efforts for holiday in the U.S. will be focused on engaging with the local consumer in the United States, leading with our hurt your oil products and offering compelling price value propositions.

We are also prepared to begin the holiday sales season early.

As a number of our retail partners, including Amazon Prime.

Which will now be helping October instead of it usually timing in the summer all beginning the holiday selling at an earlier time.

Overall I am optimistic about the opportunities ahead for PVH, both for the balance of this year and as we look into the next few years.

We have a very powerful business model led by our incredible people, our iconic global brands and our strong business and financial fundamentals and I believe these competitive advantages will position us to deliver long term sustainable growth.

And with that I'd like to.

Ill turn it over to step in.

To go into some more detailed business.

Perspective.

Thank you, Matt and good morning, since we spoke love to our focus from browse the regions in the second quarter has increasing to be into leading into the execution towards some accelerated recovery and in doing the up to position our businesses to win with a cultural Murray into new normal coming.

Out of Colby and to drive sustainable profitable market share growth.

Due to the cobot pandemic, just the first quarter and the second quarter and the rest of this year, we're not looks like any other year, having successfully navigated through the immediate first phase of the crisis I wouldn't I'll share some key insights on how we grow performance in the second quarter and what our key priorities.

Sorry to drive towards some accelerated recovery.

Just like last quarter, Mike will then share more financial details of our second quarter performance and how we're thinking about the second half of the year.

In the second quarter across the board that's not invention, we were able to drive a stronger than expected recovery, both top and bottom line.

From a from a number of proactive actions.

First we quickly turned to Supercharging E commerce across owned and operated as well as third party digital commerce for both pure players and department stores up call.

As a result for the quarter, we growth total digital sales over 50%, including an 87% increase on our own sites, where new user growth continued to be very strong across all regions, particularly within the younger age bracket.

Next we continued to increase our focus on driving product relative of which drove stronger than expected demand and margin in key categories. We continued to experience strong performance in Cashel core essentials within underwear launch where I'm absolutely sure we saw state.

Troubled pricing power in underwear, and we're chasing inventories to be best position to capture demand in the second half.

We also drove a more effective an interactive customer engagement and based on our data insights we were able to better connect the consumer to the product, they're looking for and follow how they're shopping habits have changed across our channels.

From an inventory management perspective, as a result of stronger than expected sell throughs of spring summer 2020 product, where cap carrying over and less than expected product into the spring 2021 season.

Our teams are focused on ending the year as clean as possible and we will continue to liquidate the any libel product lastly, we were successful in taking steps to rightsize, our cost structure to better reflect our revenue levels impressed by coated bidding cruise. This includes our decision to streamline our.

North America business by reducing 12% of our workforce and closing our heritage retail business in 2020 well.

As I provide a regional update.

You will see that the recovery continues to be very strong throughout the quarter in both China and Europe, while in North America, even though our digital shallows performed very well, we felt increasing pressure towards the end of the quarter, particularly in the brick and motor channels, where we have sold virus resurgence and.

We have significant exposure to international tourist traffic.

Let's just start today shows specifically with China, which just a further ahead in terms of the recovery.

Our direct to consumer sales in China increased double digits into second quarter, and we continue to experienced double digit growth for the third quarter today.

Digital continued to outperform for Asia, the whole with our own business up about 75%. We also experienced strong pmall performance with new livestream events, drawing very strong traffic and new customer growth.

Our marketing events in China focused on maximizing sales around key culture moment, including our 618 digital commerce event with Pmall, where both browse drove over 80% growth versus last year. During the campaign, we performed over 30 live streams and 70.

So 72% of our consumers when new to the Brown.

[noise] given continued traffic pressure in brick and mortar locations.

Promotions in that channel focused on driving conversion a basket size, while limiting discounts on better performing products.

Even though we continue to see virus flare ups impact our business in Japan parts of Australia, Hong Kong and now Korea in the region US a whole we continued to make good progress towards our continued strong recovery.

Moving on to Europe, where we continue to drive a very strong recovery and we experienced performance trends that were meaningfully above expectations I would direct to consumer sales in Europe were down 10% in the second quarter, which was well above our expectations digital commerce comp.

The news outperformed with second quarter sales growing nearly 80% year over year.

The digital growth was driven by higher traffic and conversion, which it's driven by strong product and marketing in combination with having the right inventory availability.

Given our position of Brown strength, we narrowed our promotions and managed to maintain similar markdown levels to last year.

And one traffic in brick and mortar remained challenged particularly larger sidus conversion looks very strong and the team continues to find innovative ways to drive traffic into our stores.

While the virus is seeing some resurgence in Europe, our business in the third quarter today remains very strong with direct to consumer sales tracking tracking mid single digits.

We're also pleased with L. spring 2021 order books, which showed a sequential improvement where both Brasil tracking down high single digits breadth of tracking down mid teens in fall 2020.

Lastly, our north American business felt the most pressure relative to our other regions our direct to consumer sales in North America were down about 45% in the second quarter and are currently running down into mid Thirtys in the third quarter to date.

Our biggest challenge that's not to mention is the lack of international tourist which historically revpas, some 30% to 40% of sales of our business, which is down close to 95% as we look ahead, we don't do not anticipate this trend to improve before next year.

As a reminder, less than 30% of our EBIT was generated from the us in 2019.

Despite the challenges with tourism, we're seeing strong engagement with the more domestic customer however, softer asked of late in the virus search states.

We experienced very strong digital demand during the quarter as we drove triple digit growth for both Calvin and Tommy dose call, including many new to sized customers.

Our business with Alasone, what's also highlight as we saw strengthened our new salt life sale in June and outstanding growth in new to brand consumers, which has calcium continued into the third quarter.

And that's we look to the second half of the year, we will continue to manage our inventories prudently, we will redeploy resources to those areas of the business that are performing such as digital from and shallow perspective, and essential casual products from a category perspective.

That's our performance across regions demonstrates we have taken a very deliberate approach for each brand to get deeper connected with the crossover and then have held brand positioning to again profitable market share now like to share a few brief global brand highlights from the quarter beginning with Calvin.

Calvin Klein sprouting health remains very strong we continued to see strong customer interaction across Calvin social channels with an average following creates of over 20% year over year.

We are implementing our evolve broaden direction, then I'll products and marketing and already now you can see it didn't how we drive engagement on the industrial gotten another social platforms, you will see even more of it during the holiday season at the beginning of next year.

In addition, we took steps to gain greater control of the brands with announcement that we would buy back to our European footwear business in spring of 2020 Watt, which represents a great opportunity as we leverage our knowledge from Tom its successful footwear platform.

Lastly, we know step Movado our lives as part of the Tommy Hilfiger will take over the bugs watches and jewelry line those for spring 2022, and we feel optimistic about the partnership and the business potential.

Moving on to tolerate.

Comments global momentum continued in the second quarter with a brand demonstrating strong awareness visibility and cost iteration to purchase we continue to recover new culture has to the Brian including in growth markets like China, where our lives screens generated over 60% of sales for first time buyers.

In the quarter, we continue to launch limited edition brand collaborations that resonated well with our consumers.

We also recently launched Tom is make it possible campaign, which is a bold sustainability programs that build some PVH full that fashion strategy, which is set to reduce our negative impacts the cereal in so positive impact and improve over 1 million lives across our value chain.

And now to our heritage business, our heritage brands business, what's under significant pressure during the second quarter, the cash utilization trend us being accelerated by Cobot made is working very well for us in Calvin and Tommy it's working against us in the more formal wear to work.

Product categories within heritage.

Additionally, the mid tier Department store bankruptcies in North America have negatively impacted this business compared to Calvin and Tommy.

We are addressing the challenges by managing inventory levels more prudency, lowering our cost base and reviewing additional ways to optimize the streamline the business that goes beyond the next year closure of our heritage browse retail business.

And before I hand, it over to Mike I would like to reiterate that we're balancing driving the business here and now which starts with US many mentioned in his introduction, having the plants and execution to win vertical similar during the upcoming holiday season.

It also includes to making sure that we're focused on driving accelerated recovery coming out of cold It where our main priority is our first to continue to drive product strength by focusing on key growth strat categories and developing strong hero products franchises all connecting.

Whether consumers going with special focus on cash on the essential and athleisure next if the further supercharge, our ecommerce growth and penetration while at the same time evaluating what our optimal brick and mortar precedent looks like both in our own locations and with our whole set apart.

Lastly, we will continue to review our cost base and determine where we can optimize our business model and organizational structure to operate them, even leaner and more dynamic organization, while also allocating additional resources towards our growth areas.

Overall, even though we're still in the early days, but driving towards some accelerated recovery as we intensified our focus to build on our core strengths and connect them closer to the consumer than anytime before I feel very optimistic about the forward path ahead for PBH ever.

Retiring we take steps closer to what the consumer wants and needs with fee. The positive performance proof points, whether it's weather events in product marketing or E commerce distribution.

The global brand power of Calvin Klein and Tommy Hilfiger is the core strength and our diversified multi region multichannel platform positions us to gain market share globally.

We see examples to everyday that our teams are rising up to the challenge to make it happen.

And by that I would like to handed over to Mike.

[noise], Thanks, Jeff arm the comments I'm about to make are based on non-GAAP results in the reconciled in our press release.

I'm going to discuss our second quarter 2020 results the move onto the current state of the business and our second half expectations, while our business continued to be negatively impacted compared to last year, where the cobot 19 print and demick, our overall results when improvement compared to the first quarter and exceeded our expectations.

Overall.

Reported revenues were down 33%, Tommy Hilfiger revenues were down 28% with international down, 14% and North America down, 51% Calvin Klein revenue was down 32% with international down, 16% and North America down 51%.

China showed positive year over year results in both Tommy Hilfiger, and Calvin Klein our.

Our heritage revenues were down 51%, which included a 16% decline as a result of the sale of Speedo business.

Our stores as well as those of our wholesale partners with temporarily closed during the first month as the quarter.

As a result, our revenue in the second quarter reflected a 40% decline in revenue grew a wholesale distribution channel and a 24% decline in revenue from our total direct to consumer business that included an 87% increase in sales to a digital commerce businesses driven by strong growth across all.

All brands in all regions.

While we continue to be negatively impacted by the pandemic earnings exceeded our expectations and our earnings per share was 13 cents on a non-GAAP basis for the second quarter, our gross margin for the second quarter benefited from a favorable mix of business as our international businesses, where a larger portion of our total revenue versus the prior.

The year and generally carry higher gross margins in our North American businesses.

Additionally earnings in the second quarter has the benefit.

Of expensive reduction initiatives, including salary reductions temporary furloughs and load discretionary spending, including marketing travel consulting and creative in design costs as well as onetime benefits from covert related government payroll subsidy programs in our international jurisdictions and rent abatements, where we negotiate.

Due to certain of our landlords.

So salaries and most furloughed employees were reinstated at the beginning of the third quarter.

Partially offsetting these savings were additional expenses associated with the implementation of health and safety measures to protect our associates customers in business partners. The safety measures are expected to continue in the cost of them will be greater in the second half of the year.

Moving on to the current stated the business currently almost all of our stores in the U.S. and around the world are open although they are operated on reduced hours and reduced occupancy levels.

Third quarter to date for our direct to consumer business, we are running down low single digits total Asia with China up.

We are running up mid single digits in Europe, and down 30 about 35% for North America.

Our owned and operated digital commerce businesses for the third quarter to date have continued to show strong growth.

Regarding wholesale goto traditional and pure play at wholesale customers as seen strength in the digital Commerce channel and this trend has continued into the third quarter with the counseling inventory to accommodate the strong trend.

However, we expect.

Expect wholesale accounts to buy conservatively for their store base businesses through the balance of the year and the revenue declined in the North America wholesale business would be more significant than in Europe and Asia you expected revenue decline in North America includes the impact of recent bankruptcies.

We continue to be proactive in our response to the pandemic with ongoing focus on operational efficiencies and liquidity such as streamlining on North America operations by exiting our heritage brands retail business by mid 2021, and reducing our North America workforce by 12% with.

Tightly managing inventories the decreased 12% from this time last year, we've reduced inventory commitments consolidated future season collections and negotiate extended payment terms of suppliers as at the end of fiscal 220 20, we're now projecting to carry approximately 125 million.

Basic inventory into spring 2021, which is a reduction compared to prior projection of about $250 million.

Also during the second quarter, we issued 500 million influenced by the 8% senior notes due for 2025 and ended the quarter with 2.7 billion of liquidity, including cash of approximately 1.4 billion, a 1.3 billion of avail available borrowings under our revolving credit facility.

These.

And now moving onto our expectations for the second half we expected our second half revenue and earnings will continue to be negatively impacted by the cold in 19 pandemic.

We currently expect revenue in the second half to be down 25% versus last year.

When we think about gross margin, we expect that our second half gross margin will be relatively flat compared to the first half as we project heavy promotional activity across the industry in order to clear inventory, particularly in the United States.

And we think about second half expenses and when you compare to the second quarter, we expect our expenses as a percentage of revenue to be slightly higher in this second half than in the second quarter.

The second quarter expenses benefited from salary reductions for government payroll subsidy programs and rent abatements, which will not materially continue into the second half although in North America. We will continue to have payroll savings as a result of the recently announced reduction in our workforce.

We also expect to incur even greater expenses for health and safety measures in the second half as opposed to the second quarter.

We're not in a position to issue more detailed guidance at this time due to the uncertainty related to the duration and severity as of today.

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

Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

If you're using the speakerphone. Please make sure your mute function is turned off to allow your said luxury to our equipment.

Again, Please press star one to ask a question.

Our first question.

Bob double with Guggenheim.

Good morning.

Nice job you want to managing through marketers.

Yes.

Matt maybe a question for you really so when you think about the business performing really well internationally. At this point you think about the opportunities that are that you see ahead in North America in the second half.

Where do you think you're sort of upside could come from or where you think you're being most conservative in North America and the follow up question actors.

Sure I think Bob.

The fundamental issue in North America is the lack of control of the virus compared to the rest of the world.

And I think thats, having an impact on consumer spending so that that's just a consumer spending particularly in apparel as it moves. So in addition, I think the fact that we are.

As a company really focus a big part of our businesses is tourism driven international tourists in particular.

And that business has also gone away and we were anticipating that that international tourists tourists will not be back.

This new second half of 2020, so that's what we're seeing the pressure on our own retail stores.

Our.

Anywhere from 30% to 40% while sales all driven by international tourism. So that's where I think it is I think the opportunity lies in continuation of some of the trends, we've seen and moving forward to sequential improvement over that.

As we go forward and from a bottom line point of view I think our biggest opportunity is gross margin. We are anticipating a highly promotional environment for the third and fourth quarter, particularly holiday and.

Is that with a backhaul.

Similar to how we saw in the second quarter, we were much more conservative about markdown ways.

We are facing.

That being materialized. So I think there's an opportunity of both on the topline, but there's also an opportunity that may be more significant on gross margin.

Okay, and then just just like a quick follow up Manny Hum. So when you think about the trend. The casualization you think about sort of how do you guys are positioned within the business.

You still have I think what you call that.

Neckwear business and your your dress shirt business the tie isn't a some tailored business can you size up for us sure where that business is today as percentage of your total business and how you're thinking about it going forward in a more casual environment. Thanks.

Obama businesses, you talked about large Roche a dress shirt business on neckwear busy.

Shootings level as a percentage of sales. This is less than 5% is probably approaching 4% for 2019, so even though we're the largest jointly company in the world as a component of our business is smaller and I think we've been able to really focusing on the cash.

As you all major those components of both Calvin Klein and Tommy Hilfiger yet.

To really take advantage of those businesses key categories are intimates business or men's underwear business or lounge wear business. Our performance businesses gene active sportswear as clearly a vast majority of the business.

And we've been awarded capture that as we going forward.

[music].

Next question.

Thanks and I'll.

Thank you guys question from Michael Binetti with credits.

Hey, guys congrats on a nice quarter and tough backdrop I'm just I wanted to ask one clarification and then I had a question for you Manny just fee.

Roughly 30%, 40% of sales in North America business comes from tourists down over 90%.

And the negative mid Thirtys.

Total D to C trends in North America today.

It does that imply that you're down low single digits with the domestic consumer versus last year.

That's a better numbered and we've heard heard elsewhere. So I just want to I just want to make sure that I'm I'm reading that correctly, if you feel that that underlying strength was domestic consumer.

The short answer is yes.

Does the numbers you calculated or right in the ballpark.

And I think it so testament to the strength of the brands and how that resonate with the.

Yeah.

With the us consumer so what we're seeing with our domestic consumer it's always hard with the cash component of is trying to factor that in but that's not a big is it's kind of flattish to down slightly.

And what we've seen no stores with the consumer.

Okay very high in the back component of it given the backdrop.

Okay, yes, it sounded like it I just want to make sure to map is looking at ways. It takes some of the other.

Retailers are reported domestic only consumers are a little lower so that's especially here I guess then I.

Well I know you asked order books aren't as strong as indications is there for Europe users dynamics around cancellations and such but I guess would really be helpful for us to hear how you're seeing that North America business wholesale business rebuild the pass from here connecting maybe the second half of this year and that enter next spring.

Anecdotally what are what are the wholesale partners talking to you about.

So there is look I guess fundamentally and maybe stepping in for a little bit more color on this.

But fundamentally the being very cautious on will open to buy.

And our and with the belief that inventory will be there demand picks up as they go forward. So.

We are trying to be smart about.

Taking positions in categories will we see our accelerate even though they might not be buying back up and we're also not looking to get ourselves each level.

Categories that are softer in nature, So I think theres opportunities inside of that we'll have to the consumer last devoted to go forward and there.

That being very cautious on the open the body I think you even here in a relatively short period of time.

When I look at someone like key customers inventory levels, they've done a good job again inventory levels down in the short really short period of time relative to demand as they move into second half of the year. So I think there is opportunity with business.

That back so I, just would want to remind everybody that for us or us whole viewers Wholesaled, yes, no account reps that represents close to 5% of our total sales as a company and our exposure in that department store segment that keeps coming up is that.

Now, let in 2000, I'd about 12% and audiences of businesses this year will be closer to 8% to 9%.

I guess, then severance for little bit more color on department stores, and our whole also thought bottoms volume.

Just like is just to build on what on a managed just share my goal.

And there is that the us.

Hold our us wholesale partners such Manisha, there that they take a cautious approach. However, we see strong demand as strong recovery and on the where the big cash old essential product categories. So we see stronger demand there and we see.

Quite strong are very strong demand in their ecommerce business.

Consolidated comp I appreciate it guys. Thanks.

Well take our next question from Erinn Murphy with Piper Sandler.

Great. Thanks, good morning.

To build on the digital agenda I think in the prepared remarks, you referenced the channel contributed favorably to profit over time, maybe just walk away from the initiative pick up there and then specifically in North America, but did you see in terms of profitability for digital in the second quarter. Thank you.

This is Michael talk about an hour, yes, I guess a couple things around I think we're seeing with a significant increase in revenues were obviously getting really great leverage on fixed expenses were also focused on the variable and just really keeping that expense base under control more.

I also see some improvement you ours as as the product isn't such demand. So in summary, as great with great performance on gross margins.

In addition to that we continue to focus on it for the balance through the year.

There's been a lot of discussion about freight rates and whatnot. That's all in process at this point, but overall it would definitely starting to see improvement in it and and as the move towards profitability in that business.

Thats North America as the rest of the world was highly profitable.

I would just going to say that two of the internationally the our ecommerce businesses as profitable as our full price business.

Thank you.

And our next question will come from Jay So.

Great great. Thanks, so much.

A question about job.

Actually I, you're thinking about hedging right now I mean could potentially change.

The company's traditionally thought about hedging foreign exchange.

And if so if the dollar it seems to be reach.

The timing of when that impacts would be and I'll be different based on whatever you might be doing differently as of end Barry. Thank you.

Sure I guess system, debuting when we think about hedging we really don't put is that's where we try and keep it consistent policy of let's call. It 80% of our inventory purchases being has any point in time, so we keep moving.

Forward.

And always have that 80% on the books so.

That is where we are today and look at the dollar continues that would be a benefit on purchases as we did this is the weakening of the dollar continues we would see a benefit next year.

On those currencies that appreciated against the dollar.

2021 inventory purchases and gross margin.

Got it thank you.

And we'll take our next question from Dana Telsey with Telsey Advisory group.

Good morning, everyone, a nice to see the progress how are you speaking about the marketing budget in the second half of the year compared to last year, and especially given pepper throughout the conversation. So far has been a big focus on new customers sounds like in all regions. What are you seeing from those new customers what are they buying it fine.

And what do they inform you about the product go forward bite span. Thank you.

Dan Good morning.

From a consumer facing perspective, what what we have done from the problem to get goal when we got into their covert crisis to pivot.

Our resources towards E commerce, and and that has really paid off for us.

And that's what we would have cut we continue to follow where the consumer is going and what the consumers' behavior is informing us about is that they from a product perspective that we come back to the cast Cashel essential products that leisure products performing very strongly across all regions.

Yes, and then of the only add to that I would make is that in the second the first half when the pandemic it and in each of the regions. We did pull back on marketing and never dark, but we did pull back and as we move into the second half we will be accelerating the spend back to more normal levels. So you will see an increase on a percent sales base.

As for the second half and what we're doing damage. The connection we are strengthening the connection between the product offering with the distribution shallow about the consumer is shopping up witnessed engagement that we are driving as we're collecting those three.

Stronger and stronger.

Stepping likes to say the focus is really on here all product is driving the business because that's where the connection with the consumer is happening in those categories that you talked about on this call well work themselves out.

Thank you.

Thank you Dan.

Well take our next next question Jamie Merriman.

Yes.

Thanks, very much and chiffon in your prepared remarks, he made a comment about supercharging that does it on E commerce.

And I can you can you just getting up a little bit more color engine.

What that means that from an investment perspective capabilities that you're trying to supply or is it really.

Thank you.

Yes, yes, so so let let this starts with where it's it starts with following whether consumers going so we see the demand we see either consumer during the cold bid.

Hi, I'm increasingly shopping E commerce, so what we have drive it what we have been driving and we continue to drive.

Yes.

Growth in owned and operated and third party E Commerce and the key drivers there is.

The key product categories, the cash on categories and then within those categories is to not as pointed to the hero products and then it's all the different components relating foam product relating to the experience.

And all the way to Fulfillments and logistics so.

What threed exciting to see is that the periods that we made its really paying off.

And all I would add is is obviously the more on marketing budget spending by type is really continues to show greater and greater to digital marketing.

Away from some of the a lot of more traditional areas and the investments in the Bakken on logistics, we feel on the numbers that Mike is shared with the goal of view is.

He is also there and what we're not spending as much capital is in our own stores and extreme lows areas, because we'll really spending where the consumer shopping and there we do not the most impact and to make those investments and I would just that it's not just on was that the logistic side. We are also spend.

Turning on the on the IP sites, we've we've implemented a consumer data platform that gives us better understanding of our customer access to a customer and the ability to communicate with that customer, which we've never been able to due to this level before.

And I think cheap.

And we drive the.

It's the we're trying to get the flywheel more and more going from product strength to showing up in the E. Commerce channel tepid consumer wants to shop and engage with all brands and then adding on the marketing strength. So thats just the product E Commerce channel with the marketing strength this about fly wheel.

Working to get going more more.

And we'll take our next question from Kimberly Greenberger with Morgan Stanley.

Great. Thank you so much Manny I wanted to get follow up on a point you made earlier.

You indicate your in excellent condition to deliver on sales opportunities if they come your way here through the second half of the year and.

It sounds like you were taking some sort of selective.

Inventory onboard why you feel really confident about the product I'm wondering if there's also an element here of supply chain agility, where you think you might be able to.

Chased the business I'm just wondering if you can talk about the multi pronged approach to maximizing sales opportunity, particularly since it looks like many of your wholesale partners are coming into the back half in a pretty lean inventory possession. Thanks much.

Yes. This is Ryan this is where art and science come together.

Trying to make a determination.

We'll see what what's working right now.

Some of the key core categories, where there's minimal inventory fashion risk.

Any willing to take much more risk there to continue to serve as that business and to keep our customers consumers.

Satisfied we're making those I don't want to Colby bets, but we're making those investments as we go forward and continually adjust our supply chain as we move forward.

But I am I also don't want to acute anyone is looking you've heard the disruptions that are going on supply issues with China and the new wells, even if we're not sourcing directly from China again war materials out of China like cotton in other categories. You know, it's it's a bit of a puzzle, but I think.

Given our it's an area of expertise to PVH, a scenario, where we are great capabilities and I think on good on the ground presence with the teams and our offices there allow us to really be on top of the to react to the market to stay in product categories and service those big.

This is so with we're trying to do with thoughtfully and to be in a position you know if we're projecting somewhat.

Our numbers that were projecting conservative, especially the fourth quarter. If that's the case, we want to be able to capture those incremental sales and stuff and what there.

Under core in the focus on our core essential to us as we have mentioned both that and I are also unlocking supply chain sourcing capability is because focusing on those essentials enables us to plywood capacity to platform the fabric and to have much much faster lead times from.

So thats, thus and an added benefit with following whether consumers going.

Right. Thank you so much.

And we'll take our next question from Ike Boruchow with Wells Fargo.

Hey, good morning.

Many of a little bit asking about that the trajectory of both brands in North America, Tommy and Calvin I'm just at a high level. It seems like Calvinist piece of recovery.

In North America should be much smoother than probably just because it's got better product mix for what's working.

Right now and they don't have the tourism exposure, but I'd love to kind of share. Your thoughts are on the PC of recovery by brand North American and how that could workout puts and takes.

Well I think and.

We don't see much of a difference I guess I would say and I think if you think about it is Calvin has a tremendous.

As you know intimates underwear business lounge wear business. They just drive will produce was positive performance component to it.

And a big jeans business that really plays into the casualization, but the Tommy is probably as a brand.

Most of all the casual brand much more of an active bland. So our sportswear, they're really transcends value and works extremely well for Tom has always had a big genes components to their sportswear business almost a similar sized will kalvenes use so both both brands I think going in in a strong.

On physician Calvin does by the nature of its Brian just after you. This huge design our underwear in women's intimate business Tommy business is probably about two thirds of size.

Still very sub is substantial.

But I think the two brands really are able to take advantage of there is no you're talking about two of the you know probably top five grams by size in the world. So they have.

A very diversified product offerings that plays across the spectrum I think if we can manage the inventories by components, you should be able to really do well with that.

Got it thank you.

I'll take our next question from Matthew Boss with Jpmorgan.

Great. Thanks on a gross margin in the back half and your for past year over year.

To get a sense is that based on actual elevated promotional activity that you're seeing in the landscape today or is that your anticipation of mark down do you think necessary to work through inventories and then assuming you do exit the year clean on inventory I'm, just curious how you'd ranked gross margin drivers multiyear.

Okay. It's clearly anticipation, we're not seeing anything in the business and in fact, we've been as you could see in second quarter, we've been really pleasantly surprised with the level of clearance and promotion that's gone on we were anticipating more.

It's more of a clearance aspect when stores, we opened particularly in North America and we just haven't had to do that promotional nothing is changed in August.

The from that perspective.

So it so it's clearly just us anticipating that there will be a level of activity as we as we as potentially with me here into the market and much more in the United States is back to schools not happening at the same level for all the reasons that everyone could imagine and the fact.

Today, the uncertainty around the holidays. So I think it's partially above the prudent in how we're projecting the business. So thats the real opportunity as we go forward. There's nothing from a cost me point of view of product the mix of product. The only thing I would say in the second quarter.

The mix of International's, probably skewed a little bit more than it will be for the balance of the year, but absent that there's no real difference.

Yes.

And I'll take my next question from Omar Saad with Evercore ISI.

Good morning, Thanks for taking my question great job executing through August guys.

Manny I wanted to ask.

Kind of a follow up on the inventory and promotional environment for the second half you're talking about help me reconcile.

Your your expectations for heavy promotions, but at the same time. Your your inventories are clean and then we were looking at off prices are down 20 to 30 Department store inventories are down big is it that.

You do you think that fit thats. All these kind of the channels planning inventories to significantly ramp up in the back half above demand or do you expect the demand levels to remain lower than even those reduced inventory levels, it's kind of help me.

These together that framework for the landscape in the back half. Thanks.

Look as I don't know how close to say it is there I.

I don't know personnel.

Retailers not buying extra inventory, they're not ramping up I think they're open to buys vacancy.

I think is if we're going to be halted for anything that would be too conservative on our gross margin expectations. If that's the case.

Then then we'll we'll we'll we'll we'll do better on the gross margin I think thats, a potential big opportunity for a second half of the year.

You know and the team will be you know how much goods are out there that need to be cleared from the fashion point of view or whatever we don't see any real build up as Mike talked about we were planning to carry out as much as $250 million of goods that number has already been cut in half.

And it's factored into all of our.

Second quarter numbers them into third quarter numbers, and I think we'll continue to get that number down compared to where we lived before so I think it's really for US gross margin is a big opportunity.

But given all the uncertainty in the business. We're just trying to be cautious about how we think about margin going forward.

I totally I can add robot.

Okay.

Operator, we will make this the last question. Please.

And we'll take our last question from John Kernan with Cowen.

Alright, Thanks, just take a man.

Congrats on managing the business or it at a difficult times. There just wanted to go back to their BRAF and your guidance for the back half a year and how we should think about.

The international piece of that business, which doesn't seem to have.

Momentum right now both in Tommy and Calvin you just look at a.

Run rate of decline in Q2.

And.

Both Calvin and Tommy.

I'm wondering if that's hydrology continue or are things going it are you planning a little bit weaker trends internationally.

And the balance between domestic and international back I think it okay. So it's a fair question on the sales I think is the fourth quarter.

So if business continues to improve sequentially and when we look out and see how some other has house a number of our retail partners.

Department stores and others are talking about them to second half of the year, particularly fourth quarter I think they're being more bullish about their fourth quarter sales projections and then we are.

[music].

As we go forward.

So I think from that perspective, there sales opportunities that could potentially in the fourth quarter, both internationally and potentially domestically as we move forward.

And right now I think we talked about as both step in and Mike mentioned that our direct to consumer business globally is running about is down 15%, which is running ahead of where we would have planned the business at this point. So no we haven't seen anything that discourages.

US at all and actually creates a lot of opportunity.

No Chinese now there is.

Just on all of them on Q4, adjusted EBITDA, what mounted saying there is a.

And we flagged it in our prepared remarks, it's not going to look like any other Q4 and holiday season. So there is a big shift from brick and mortar to E commerce.

Which and or is this overhang from the resurgence of the virus risk then in China just to mention we have the Chinese new year moving out from this year to next year. So.

It's a different kind of holiday season with more risk.

Understood Thank are right.

Thanks, Joe.

Okay, everyone. Thank you very much.

Everyone staying healthy and safe.

Joining me in the United States in North America enjoy the holiday weekend is coming up in the end of summer and we look forward to talk into.

Third quarter press release, thank you.

And that does conclude today's conference. Thank you for your participation you may now disconnect.