Q4 2020 PVH Corp Earnings Call

[music].

Good day and welcome to the P. P. H Q4 2012 earnings call. Today's conference is being recorded at this time I would like to turn the call over to Dana Perlman. Please go ahead maam.

Thank you operator.

Everyone and welcome to the PVH Corp, 's fourth quarter, and full year, 2020 earnings Conference call.

This webcast and conference call is being recorded on behalf of PVH and consist of copyrighted material. It may not be recorded rebroadcast or otherwise transmitted without pvh's written permission your participation and a question and answer session constitutes your consent, having anything you say appear on any transcript or replay of this call.

The information to be discussed includes forward looking statements that reflect pvh's view as of March 30th 2021 of future events and financial performance. These statements are subject to risks and uncertainties indicated and the company's SEC filings and the Safe Harbor statement included in the press release that is the subject of this.

Call. These risks and uncertainties include PVH is right to change its strategies objectives expectations and intentions and its need to use significant cash flow to service its debt obligations.

Significantly at this time the COVID-19 pandemic continues to have a significant impact on the company's business financial condition and cash flow and results of operations. There is significant uncertainty about the duration and extent of the impact of the pandemic. The dynamic nature of these circumstances means what is said on this call could change materially.

And he really at any time, therefore, the operation of the company's business and its future results of operations could differ materially from historical practices and results or current descriptions estimates and suggestions.

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

And really the financial information and projections to be discussed will be on a non-GAAP basis as defined under SEC rules reconciliations to GAAP amounts are included and PVH as fourth quarter 2020 earnings release, which can be found on www dot PVH dotcom and and the company's current report on form 8-K.

Furniture, the SEC and connection with the release at this time I'm pleased to turn the conference over to Mr. Stefan Larsson CEO of PVH.

Yeah.

Thank you Aldo and good morning, everyone. Joining me on the call today are Mike Shaffer, CEO, and CFO and Dana Perlman, our EVP and Chief strategy Officer and Treasurer.

It's a true pleasure to be leading the call. This morning, and and honored to lead this great company as we drive towards and accelerated recovery from the COVID-19 pandemic and.

And at the same time and start to build our next growth chapter to win and the new law.

Pre COVID-19 and there was already an unprecedented amount of change taking place and the apparel industry.

Driven mostly by technology, and the consumer which the pandemic only accelerate.

The new normal wear and most of your stomach, rather and ever increasing rate of change, but we will be ready to compete and win.

<unk> and 'twenty will be remembered as one of the most challenging moments for our industry from a geopolitical.

Mike and public health perspective, due to the comeback.

Our teams not only came together to successfully navigate the crisis relative positions PVH through March and a stronger position.

I would like to thank all our associates for their hard work risks and ability to rise to any challenge, we have and Calvert and pull.

Particular, our dedicated retail store and.

Distribution Center, Russell, who have managed to keep our business running throughout the toughest don't Covid times.

Before the pandemic hit I was fortunate to spend time traveling and visiting and none of our opinions and park and us around the world.

I saw firsthand and many of the underlying strength that we are now focusing in the mall and connect and closer to where the consumer is going and any time before all in an effort to drive sustainable profitable growth.

Our focus is on winning with the consumer driving brand relevance and taking profitable market share and building further strength in our platform capabilities and over time to do that and more efficiently.

To accomplish this.

We will work with a strong consumer focus become even more demand and data with them and create value in a systematic repeatable way, where we will continuously learn and improve.

We have taken this time to proactively evolve our business with special focus on capturing where the consumer is going.

We have been and accelerating our digital businesses.

Re allocating additional resources to drive growth and debt highly important channel.

We also continued to shift our product towards the comfort and cash or categories that are working with customers today and.

Lastly, we double down and our international businesses, where we continue to see a very strong recovery and significant revenue opportunity for both Calvin and Tommy while also contribute there and a higher operating margin.

Our increased our sustained focus on these aspects of the business will drive long term revenue and margin growth for our shareholders and driven by gross margin expansion and SG&A leverage.

And importantly, we've continued to live our strong corporate values, including our unwavering commitment to empower our people and helped drive the fashion industry forward and sustainability, and making a real and lasting positive impact within inclusion and diversity.

I will now share on to you emphasized somehow we drove performance in the fourth quarter and and our first quarter of 2021, so far and how we are progressing towards and accelerated recovery, Mike will then share more financial details.

Even though our fourth quarter results sales greater than expected challenges due to the virus resurgence as lockdowns from multiple regions, we were able to deliver on our expectations.

Top line gross margin and EBIT perspective, we.

We focused our execution around our strategic priorities and drove and above plan performance for the holiday period.

And we are pleased that we have successfully sold through our seasonal inventory, allowing us to enter spring 2021.

And a very clean inventory position.

I would like to share some proof points, demonstrating our progress against the three value creating areas that we have shared with you previously.

First we continue to supercharge our E Commerce channel, we are rapidly growing our overall digital.

A titration by both expanding our DTC digital business as well as deepening our strong relationships with third party digital partners.

Fiscal 2020 are represented our strongest ever digital sales performance up over 40%, including nearly 70%.

Digital growth on our own sites and we doubled our penetration to close to 25% of total company revenue all while driving a significant improvement in the channels profitability.

Looking ahead with robust new user growth, our most significant opportunities to drive continued.

Continued conversion and leverage shower and data capabilities to further engage personalized and simplified the shopping experience.

And secondly, we continued to increase our focus on driving product around the bonds across all brands and regions.

And our teams have taken proactive measures to tighten.

Samsung and refocus the assortments as well as rationalizing unproductive skus to improve overall sell through rates.

We're optimizing our product development processes and leaning further into our key essentials and hero products, which is driving positive initial results including.

Tight generating higher average unit retail prices for Calvin we are building on our global leadership and underwear and intimates with hero products, such as modern cotton program, while growing and cash flow categories, including denim and Tees and sweat shares.

For Tommy we are expanding on the brands.

Five store through our hero products so.

Border by collaborations for each lifestyle, Tommy Hilfiger, and Tommy jeans.

We also have a meaningful opportunity to further advance our supply chain capabilities and react faster of consumers' needs continue to change the itself.

Salting and shortened lead times that will benefit our overall margin structure.

Certainly we are continuing to evaluate our cost structure in the context of a revolving revenue base.

All of this summer, we announced the exit of our heritage brands retail business and a reduction of our North American.

<unk>.

In addition, we will be executing on additional cost reduction efforts and certain international markets. While also right sizing our retail.

Real estate footprint.

We also see a notable opportunity to optimize our internal processes by further scale.

And our digital and data capabilities.

As we realize the benefits from the strategic actions, we will over time enhance our overall profitability, while allowing for investments and our strategic growth areas.

While non regions, they're all in various stages of their recovery. These.

Work force areas continue to guide our teams with clear objectives to operate against to drive and accelerated recovery.

Turning to our regional update let me start with Asia, specifically, China, which has been merged first and the recovery we remain very pleased with outperformance in the market.

Spoke to our D to C sales trends continued to be positive with double digits growth and the fourth quarter and full year. The lack of travel and tourism continues to benefit local spending and the market.

Our teams have been successful in accelerating our performance through a number of initiatives, including.

Alluding to following.

We've supercharged e-commerce sink online and offline initiatives driving conversion and sales growth and full price stores, one online key events were taking place.

We also leaned into our most successful are relevant and cash flow categories and hero.

Products for both Tommy and Calvin.

After matching inventory with demand, which drove higher full price sell throughs and lower Mark Downs.

With respect to the first quarter, we are pleased with our trends to date highlighted by a very successful and Chinese new year, including very strong sell throughs of overseas.

Over 50% for our holiday capsule. We also generated strong performance during the international Women's day generating nearly full sell through some exclusive skus, while modern crop and gift sets sold out. In addition, we are currently experiencing encouraging consumer responses to our spring.

Spring collections.

Overall, while we have seen some virus related headwinds and certain parts of the region specifically in Japan, we remain confident in our Asia region overall.

Moving on to Europe.

Despite the much more aggressive lockdowns.

The region during the fourth quarter and our teams drove impressive execution, which continued to generate profitable market share gains underscoring the strength and Tommy Hilfiger, and Calvin Klein given.

Given the virus resurgence and 70% of our stores and Europe were temporary closed proportionate of the.

The quarter, which was significantly worse than what we had been planning when we spoke with you in early December.

And then we were able to navigate through this difficult time and gain market share through the following.

Driving the digital business, both on our owned and operated sites.

As well as with pure players coupled with our CRM efforts remains an important focus this is especially important. This many stores are closed and we are very well positioned relative to the market.

Total digital sales grew by over 60% for the fourth quarter with even stronger.

Stronger performance on our owned and operated sites.

Given the temporary store closures, our investments and digital and Omnichannel capabilities enabled us to fully leverage our connected retail inventory to serve our digital day Mt.

We also continued to win through products, where we saw.

So a great performance across both brands and key essentials, and casual sportswear with and improvement in AUR.

In addition, as part of Calvin and expansion as a lifestyle brands we.

We are pleased with our newly in House footwear Division, which represents a big long term opportunity for the Bryan.

BJ.

Future order book demand remained strong with fall 2020, one planned up high single digits versus the prior year and up significantly versus fall 2019, coming off strong double digit order books for spring 2020 one.

It's important to note that our customers continue to take in spring 2021 and goes despite extended lockdowns in certain markets.

We also continue to invest in important growth areas and at the same time, we're also controlling discretionary spend and achieving cost efficiencies and Europe.

Lastly, turning to North America during the fourth quarter, we showed strong growth and our digital business, while capitalizing on better traffic trends and stores during the holiday period to sell through seasonal inventory.

And so the international tourism and some wholesale bankruptcies continue.

Continued to challenge, our North America business as I shared with you on our last earnings call. We still have work to do and the region in order to pivot more towards the domestic consumer and operates with the same strength of salary and international businesses. However, we do see positive developments in the region.

Digital remains an important driver of our results with sales from our own sites up 75%, even with increased promotional activity from the competition and are tied to overall inventory position, which partially offset additional and the headwinds in our stores from Lockdowns and Canada.

Similar to international trends consumer continue to gravitate to key hero products and comfort cash flow and Thats nisha categories for both Tommy and Calvin.

Our fourth quarter marketing efforts continued to be focused to support our digital expansion.

We created and interactive virtual holiday.

Being sharp on Tommy Dot Com, which generated significant new consumer acquisition, while Calvin leveraged its global assets and campaigns to reinforce brand relevancy and hero product affinity.

Lastly, I would like to welcome Trish Donnelly, who recently joined the.

Ph team and the newly created role of CEO of PVH Americans true.

<unk> joined PVH following nearly seven years with urban outfitters.

Global steel for urban Outfitters, Trish successfully and that the business to win with the younger consumer.

Rapidly scale E Commerce and.

The previous three leading penetration, while driving very strong connected retail and consumer engagement. We look forward to her leadership and unlocking the region's growth potential and where do we see significant opportunity across consumer engagement products and distribution.

Our teams continue to take a very thoughtful approach to managing our iconic brands and I'd like to share a few brief global bond highlights beginning with Calvin Klein.

Global brands helps remains strong at over 85% aided brand awareness with strong growth across our.

Our social channels.

Responses to our spring 'twenty, one and campaign has been positive with growth and relevancy and consideration continuing the momentum on the hash tag Mike countless platform for creativity and self expression. The campaign featured established and emerging talent and.

And recent Grammy winner, Megan This volume and Euphoria Star Jacob loyalty and.

In addition, the brand partnered with La based P. J line and launched the first of its kind content areas. We don't sent directly engaged which helps them deeply engaged new audience network stuff.

And clearly positively received.

We are excited about the activations that we have planned in the coming weeks.

Calvin Klein will launch a global product collaboration which will be and importantly, first one with more to follow.

And we use counting clients iconic brands and hero products aspect chat and.

Variable creative exploration.

Moving on to Tommy similar to Calvin and Tommy continues to generate strong global brand equity with increases across all key measures, including awareness, which reads reached 78%.

In December we.

Launched Tommy swap shop, our newest platform for pop culture focused on limited edition releases, which has been received very well.

In addition, our Tommy jeans, and so London.

Lucid European brand campaign produced 64 million views.

Thus across multiple forms and influence of channels with very strong double digit increases in brand consideration and purchase intent.

We are pleased with the launch of our first circle and denim collection, a significant milestone and our forward fashion and journey to build towards the more.

A cooler and inclusive fashion industry.

In addition, we continue to build upon our strong Tommy team to bring our global brand vision to life, including welcoming our new Chief marketing Officer.

And finally to our heritage business.

Our heritage.

Our service business continued to face challenge shifts in the fourth quarter, the exit of our brick and mortar retail business remains on track to be completed over the next few months. We are focused on increasingly shifting towards cash utilization with our recent focus on outdoor activity.

We're continuing to act.

It's probably address the business challenges managing inventories lowering our cost base and reviewing additional ways to optimize and streamline the business.

Before I hand, it over to Mike I would like to reiterate that the actions, we're taking now will make PVH and come out even stronger.

Actively compete within the new normal.

We plan and execute in 2021 near term visibility is limited by virus uncertainty, especially within Europe and extended Lockdowns and certain countries. However, we are cautiously optimistic as we continue to lean and what's.

Within our control to drive the business forward.

Specifically intensifying our focus on our core strength and executing against our strategic priorities, including Supercharging ecommerce and leaning further to our product strength to drive revenue growth pricing.

And power and gross margin expansion.

Our international businesses are recovering faster than North America, and we are building on our strong performance in both the Asia and Europe, we remain very confident and the recovery of these regions given the underlying strength and momentum of.

Of our brands and product and distribution and expect revenues to exceed pre pandemic levels in the first half year as we continue to take profitable market share.

We are prudently planning, our North America business, given ongoing pressures from a lack of foreign tourism.

And which we do not expect to return in any meaningful way until the end of the year and.

In the meantime, we're actively focusing on further improving our execution with a local consumer amplifying our digital efforts as well as right sizing, our brick and mortar footprint under the region's new leader.

Sure.

As we further leverage the power of PVH and I'm confident that we will drive brand relevance and cost efficiencies and deliver long term sustainable growth, while driving fashion forward for growth.

And look forward to sharing details with you on the long term plan.

And for PVH next chapter of growth.

Our upcoming Investor day, and later this year.

And with that I would like to hand, it over to Mike.

Yes.

Thanks, Stefan comments are about to make are based on non-GAAP results and are reconciled in our press release and going to.

To begin by discussing 2020, and then move on to 'twenty one.

Overall revenues for the fourth quarter were down, 20% as reported and down 23% and the constant currency basis compared to the prior year and were in line with our prior revenue guidance. Despite significantly more extensive lockdowns in Europe and Canada.

When we when we released our third quarter earnings in early December approximately 10% of our stores were closed and Europe and our guidance anticipated that those stores would reopen soon however, lockdowns in Europe was significantly more extensive than we expected and as a result, approximately 70% of those stores.

And Europe were closed in the fourth quarter, and addition to approximately 75% of our stores in Canada and will close during the quarter as a result of the virus resurgence.

Our total direct to consumer business was down 20% versus the prior year, including a 60% increase and digital commerce.

And all regions and brand businesses continued to experience strong digital growth and we continue to experience positive overall direct to consumer trends in China.

A lack of international tourists coming to the U S continues to challenge, our North America brick and mortar retail business.

Our wholesale revenue was down 19.

19% versus the prior year, which included double digit growth and our sales to digital channels.

Looking at our segments, Tommy Hilfiger revenues were down 16% as reported and 20% on a constant currency basis with international down 10% as reported and 17.

17% on a constant currency basis, which reflects the extensive lockdowns in Europe.

North America was down 28%.

Calvin Klein revenues down, 17% as reported and 20% on a constant currency basis with international down, 10% as reported and down 16% and are constantly.

And currency basis, which also reflects the expense of Lockdowns and Europe.

North America was down 25%.

Our heritage revenues were down 41%, which included a 17% decline, resulting from the sale of our speed on North America business.

Loss per share was 38 on a GAAP.

For the fourth and a non-GAAP basis for the fourth quarter, which reflected the negative impact of the COVID-19 pandemic on our business as well as and unplanned 13th and negative impact due to settlement of a multi year tax audit and.

Gross margin of 53, 9% for the quarter.

Basis was approximately flat to the prior year and in line with our expectations inventories clean and ended the year down 12% compared to the prior year, we're carrying approximately $75 million and basic inventory and for spring 'twenty, one that's a reduction compared to our prior projection of approximately $100 million.

Expenses for the quarter was 52, five percentage of revenue and favorable to our expectation of the mid fifties as we reduced discretionary spending to offset the impact of the store close closures. We ended the full year 2020 with revenue of $7 1 billion and non-GAAP loss per share of $1 90.

Seven which reflected the negative impact of the COVID-19 pandemic on our business, our digital penetration for the year doubled compared to 2019% to 25% in 2020.

Moving onto our outlook for 'twenty one.

And we're providing our 2021 outlook despite the significant uncertainty.

And due to the pandemic and as such it could be subject to material change our outlook doesn't contemplate and new store closures and Lockdowns are extensions of current lockdowns beyond what we know.

Already in addition, our outlook does not contemplate further supply chain disruptions, including any greater impact beyond the minimum.

Minimal and platform, we expected from the shipping disruption occurring as a result of the temporary blockage of the Suez Canal.

Our actual 2021 results could differ materially from our current outlook as a result of the occurrence of any of that and contemplated events disc.

Despite the ongoing store closures in Europe.

We are encouraged by the recovery, we are seeing and our international businesses and expect those businesses to exceed 2019 pre pandemic revenue levels within the first half of the year.

We expect our North America business to remain challenged throughout 'twenty, one as we expect the international tourism.

Prism, which has historically represented 30% to 40% of our regional business will not show improvement throughout the year.

Overall for the full year, we're projecting revenue to approximately 22% to 24% as reported and 19% to 21% on a constant currency basis compared to the.

And year.

We expect gross margin to increase and 2021 versus 2020 due to significantly reduced promotional activity and inventory levels are significantly lower at the end of 2020, and a change and revenue mix with a higher margin international businesses will make up a larger.

Prioritization of our total revenue.

When we think about our operating expenses. Despite an expected increase due to revenue mix as a higher expense international businesses make up a larger portion of our revenue. We expect operating expenses overall to decrease as a percentage of revenue and 20.

One compared to 2020, and we will continue actions that we began in 2020 to reduce costs and reallocate resources to support strategic growth areas of the business. This.

And this includes and 2021 and reducing our workforce and certain international markets, reducing our office space and closing.

Closing select stores, we expect to realize $60 million and annualized savings from these actions, which are in addition to the previously announced actions we took to streamline our North America operations, including reducing our north American workforce by 12% and exiting our heritage brands retail business by mid 2000.

'twenty one.

As a reminder, our outlook for 2021 reflects approximately $20 million of estimated operating losses and the first half of the year associated with the wind down of the heritage brands retail business.

We expect that the increase in gross margin percent in 2021 versus.

As 2020, and the decreasing and operating expenses as a percent of revenue and 2021 versus 2020 will be relatively sigma similar in magnitude with beach worth a few hundred basis points.

For the full year and 2021, we are projecting.

<unk> non-GAAP earnings per share to be approximately $6 versus a loss per share of $1 97 and.

In 2020.

Our tax rate for the year is estimated at $17 five to 19, 5% when we think about our tax rate by quarter. We currently expect that the rate for the first three.

Quarters will be relatively similar with the fourth quarter are expected to benefit from certain discrete items, which bring down the overall rate for the full year.

We expect our interest expense decreased in 2021 to approximately $110 million, we're planning voluntary debt repayments of $700 million for the year.

<unk>, which is equivalent to the incremental borrowings we took on in 2020 to manage through the pandemic.

As of today, we have already made repayments of $400 million, we expect our capital expenditures in 2021 to be $300 million to $325 million and.

And we will include continued investments and plaque.

Forms and systems, including digital commerce, and enhancements and our warehouse and distribution networks for.

For the first quarter, our revenue is projected to increase 42% to 44% as reported and 34% to 36% on a constant currency basis revenue from directly operated digital.

Congress businesses continued to experience strong growth globally.

Our stores continue to face significant pressure as a result of the resurgence of COVID-19 cases, and Europe, and Canada with approximately 75% of our stores and Europe closed early in the quarter and 50% debt currently remain.

Remain closed today.

In addition inventory and sales volume during the first quarter had been impacted by our recent global vessel and container shortage, which is leading to delayed spring 2021 inventories seats and and churn is delayed in deliveries to our wholesale customers and effective product available and then and our direct.

Digital consumer businesses.

First quarter non-GAAP earnings per share is planned and a range of 80 to 83 compared to a loss per share of $3 three and the prior year period.

We expect interest expense to be about $30 million and taxes to be about 40% and.

And the first quarter.

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

Thank you ladies and gentlemen.

And if you would like to ask a question Keith sticking with Mike.

Inspire one other kind of fun.

If you're using a speaker phone. Please make sure. Your mute function is turned off to allow me a signatory equipment and.

And that's again star one to ask a question.

Take our first question from Bob <unk> of Guggenheim Securities. Please go ahead Sir.

Thanks, and good morning, Stefan and good morning.

Mike and Dana I.

And I guess, the first question that I have.

Is.

Can you comment on current trends and China sort of what Youre seeing there and maybe even take us on current trends in Europe, especially relative to the U S.

And so good more involved.

We are feeling good about the current trends in China, and we're feeling good about the current.

Overall and then.

We are impressed as I mentioned in my prepared remarks, we are impressed by our European team's ability to execute so we'll have and a very difficult backdrop.

And Bob I would just add that European.

And transmits system and incredible job of.

Moving.

And as close and shift around and so we ship from store. So they felt digital and a big way on and some other pure plays as well as the customer dot com. So they've done a really great job of moving product and selling it.

Got it Okay and then just a second question if I could.

Mike can you talk about how youre.

Planning for <unk>.

European inventories given the Lockdowns and given the trends and just sort of I think I know you guys said, you're comfortable with your inventory levels and they seem good but and maybe if you could just give us a little more color in terms of that spin.

Civic region that would be helpful for us. Thanks.

Sure look and.

Inventories are down and coming into the year, but as you think about the total company I would say we've made investments in select markets, where we believe there's an opportunity to do more business in Europe, and Asia have really proven that they can deliver.

As you think about the year, we're down to start, but we will continue to see a ramp up and build and working capital as we as we move through the year last year did not reflect the normal year to horrible comparison.

And it's been difficult. So I would also just add that.

Some of the delays on inventories with the Suez.

And the issues around container shortages.

And has a big piece of that will impact Europe, it's reflected in our numbers the Suez seven to 10 days and it's all manageable and we Havent reflected now but that is also going to move inventories around in Europe, and so when they get the ceded.

And Tom.

And process.

Great. Thank you.

Thank you. Our next question comes from Erinn Murphy of Piper Sandler. Please go ahead.

Great. Thank you good morning.

Stefan for you if you laid out 2021, and you talked about the international segment.

Relative to pre Covid levels, North American still below I guess, two part one on the composition of the European Order book for fall and high single digits can you talk a little bit more about how that's composed between physical and digital and new accounts versus existing and then and North America, just given the ongoing pressure you're seeing and it's.

Some markets are there any further distribution changes contemplated and the guy. Thank you.

Good morning, and so to your first part of your question and when it comes to the European Order books, we received the order and the strength and your order book as a result of the overall strength.

And our execution of the.

The strength of our brands and the strength in especially in E. Commerce that we see now and we see the collaboration that we have had since.

A long time back with our European pure players.

Our really.

Working well and.

And Thats, a big part of it.

And Aaron would you mind repeating the second part of the question you broke up here.

Sorry about that yeah, just on North America, obviously that Mark and I think you talked about ongoing pressure in 2021 I was curious if theres any future distribution changes contemplated in the guidance.

No.

And it's what's contemplated in the guidance.

And would be.

And of tourism overtime and that can take time and in parallel we will.

<unk> doubled down on our accelerated recovery efforts, which.

It's very focused on the.

Continuing to drive strength.

And e-commerce, and continuing to drive strength in e-commerce owned and operated and with our partners.

Got it and then if I could just add one just for Mike on the cost reduction plans for 2021 can you just share with us what the kind of net savings that you're expecting in 'twenty and and at the current fiscal year, and if there's kind of deeper and say anything beyond.

Beyond this year for the net savings that Youre seeing and thank you.

Yeah, So look we.

We look solid and we took a charge in <unk> and 'twenty, and then and other Turkey and 21.

And our total gross savings include.

Including the charges related to those.

Reserves as well.

And as discretionary expense cuts is about $250 million of gross expense savings.

We're going to invest about 100 million and so on an annualized basis, we have a planned reduction of about $150 million and about 60% of that will fall into 2020.

Very helpful. Thank you.

Sure.

Thank you next question comes from Mike over the next day of Credit Suisse. Please go ahead.

Hey, guys. Good morning, Thanks for taking my questions here.

And finally.

Mike If we think about the guidance you gave I think it pencils.

And EBIT margin for the year of about 7.2 or seven three.

Maybe 700 5800 basis points above last year, which I know is a tough compare but Mike you described that as about half and half the contribution from gross margin and SG&A to get to that.

Over year improvement I guess that.

Now that could put you.

And our range of gross margin of close to like 57% above where we've seen the business and the past I know, there's some regional differences, but could you help maybe bridge us from the $54. Seven you had in 2019 up to that level and then I think that also would imply SG&A back too.

Maybe $4 $4 billion and.

And 2019 was just over $4 four so and other revenues are guided a little bit lower here. So with the Clos you did cut you did last year, the new ones coming in and you mentioned, maybe you could speak a little bit to what some of the offsets to the to the investments are there are investments to better offset there if you could.

Well I'll.

I'll start and then.

Big question, so on revenue and I look.

And as it relates to the.

The.

Yes.

Yeah.

The gross margin mix and when you think about gross margin, we have and mix component. So the mixed pieces being driven.

Growing fast and the international.

Small businesses. So we are seeing since and Mick.

Part of the year very clean and we are.

<unk> in each region as it relates to gross margin just to less promotion and we are really clean and at this point right on and being down 12%.

So I think those are the real drivers.

We continue to make the business moves towards the digital piece and we get better utilization of inventories wherever we can which I think is also helping and thats part of the systems and the investment piece, we talked about as well.

When you think about the expense.

And it's also being driven by the mix piece.

We are.

International businesses are higher EBIT margin and higher gross margin higher operating expense businesses and as we grow those fast and we do see an increase on the expenses as a percentage.

<unk>.

And Thats a piece of it is while the biggest driver and gross margin and just want to call. It out is is planned improvement and the business really being cleaner and being less promotional.

And we're getting all the fun.

As you said and if I could and ask one bigger maybe bigger picture I realize that.

Cause that our math, but if we take the licensing businesses out of the U S and make some assumptions about how profitable. We think those are the margins and the categories that you do operate directly or are quite low relative to the international markets and North America.

Maybe give us and early thought on what you think medium or longer term, how do you approach the margins in north.

Excluding licenses, where do you see the opportunities.

Those margins and especially if the you know to your point the high margin tourism component could be below the high watermark for a bit.

Yes, so Mike Doyle and cannot.

Stocks to our recovery priority of signal North America, why we see that we have opportunities and work.

And merit to better connect with other domestic consumer and doing that from an e-commerce perspective doing the us with strength and product and get a higher.

Higher pricing power and higher.

And expansion and coming out of them up and then over time and see the store is coming impact.

And recover because what we do see is when and when countries will reach out to recover from the Covid really started yes, we see the consumer going back to shopping.

Physical stores and.

And they keep shopping and and the big growth will continue to be and e-commerce, but we see the consumer.

Yes.

To do it is truly shopping cross channels.

Thanks, a lot guys.

Thank you next question comes from Dana Telsey of Telsey Advisory Group. Please go ahead.

Good morning, everyone, Hello, Stefan Dana and Mike.

Stefan as you think about.

Hi, as you think about channel distribution, we've heard about polls entry and fall of 2021, how do you think about the landscape and North America for your distributions for Calvin what is called Bad do go into all stores and are you looking at other physical channels and digital channels, where you think you could drive sales.

Its market share and Mike and thank you.

Good morning day, and I'm thankful for your question.

And if our distribution strategy and plans and execution with always followed by the consumer goes so when.

And when we look ahead, we are owned and operated e-commerce is going to be increasingly.

And the important.

And our direct to consumer channel. So overall, both ecommerce and brick and mortar it's going to be important that our wholesale.

And e-commerce is going to be increasingly important and.

Our wholesale brick and mortar when we recover all of the Covid is also going to be important so the most.

And importantly, a process to win and the marketplace and how about the approach and when it comes to.

And distribution choices going forward, it's gonna be where our consumer wants to shop, and how they want to shop, and we will follow that.

Okay.

Yes.

Thanks. The next question comes from Jamie Merriman of Bernstein. Please go ahead.

Thanks, very much and.

And finally talking mark about that and quite and can be connected inventory, especially in Europe and clearly that's been.

And as we've navigated through locked down and I think Mike and desktops about and.

Opportunities kill me and commerce to help get better utilization and inventory.

Wondering where are you on that connected inventory and production and others and is that something that.

And so it could be a driver.

Improved inventory utilization and.

And in Canada, and like a marathon, how should we think about that.

Yeah look I would say Europe is the lead on it and we're learning from how they operate we then moved to China, where we see.

And they are starting to make connections with with Tmall and really starting to.

Benefit through those connections and the balance of Asia, as well and North America is the furthest behind but we're making progress we're starting to get connectivity through.

Through our warehouses and some of our stores, where we're able to do some share right. So, it's it's allowing the customer and shop, where they want when they want how they want.

And then Stefan Stefan sales followed the consumers. So we're making those moves, but we're lagging and the U S.

And moving fast to recover.

Okay.

Thank you.

Question comes from Chi Tsang of UBS. Please go ahead.

Great. Thank you so much.

And I just want to follow up on the gross margin.

What expenses foreign exchange could it be up and impact on gross margin. This year also you know when and when you know.

And we talked about inventory being very clean is there our quality of sale initiatives going on.

Intentionally trying to get out of some maybe lower margin business.

Or is it just that the inventories so clean it and the amount of markdowns and will be less and then.

And on SG&A, when you think about the amount of SG&A. That's budgeted this year and interest sort of implied in the guidance. How do you feel about that SG&A in terms of its ability to drive.

The investments that you think are most important for the business going forward versus how much you're.

Short term earnings growth and maybe postponing some of those investments for a later date. Thank you.

So look I think.

As it relates to getting out of low margin product day, we always look to move our business around and.

And prune off low margin and add higher margin product mix.

Mix of business definitely helping drive that.

As we move more towards internationally, it just shows up and our numbers.

And.

Has higher gross margins as a piece of pie grows there.

There is a transaction benefit this year.

And we just caution that it is.

About $40 million over 'twenty.

But it's an apples to Orange comparison is just purchases were so different and the business is so different and timing of receipts.

It's a very hard comparisons to make but it is about $40 million.

And.

I think I zone.

Anything Stephane.

And when it comes to your question about SG&A and if we have the SG&A and needed to drive the growth areas and.

And drive the execution to win with the consumer coming out of Covid and I'm sorry, it's.

Yes.

And Mike mentioned.

And 200.

$50 million of gross savings, we reinvest and 100 million and are integral to area. So we will never compromise long term growth.

For short term savings.

Got it. Thank you and then maybe one more if I can follow up Mike just on the cadence of the sales growth through the year quarters.

And as it is important and the guidance could you just talk about how you see sales trending.

And just say Q1 versus 2019 versus how Q2, Q3, and Q4 might look versus 2019.

So look I guess, what I'd say and the way we guide and is the way we're actually trying.

<unk> and <unk>.

That's really.

And that's how we see trends today.

We're on plan and we feel comfortable with the numbers we've given you.

And what I would say as you think about the year. We I think looking at 19 takes out a lot other noise with the closures and.

Issues around <unk>.

And so if we prove that out for the year, we're planning to be down about 10% and for the first quarter, we're going to be down about 18% and.

And if you. If you then look at the balance of the year debt falls relatively evenly per quarter.

So I hope that helps and some of them.

And the cadence.

That does help thank you Mike Thank you very much.

Thank you next question comes first and then day Greenberger of Morgan Stanley. Please go ahead.

Okay, great fantastic. Thank so much I wanted to follow up on the strength and the momentum you're seeing and.

And last in all markets with first half revenue expected to be above first half 2019 internationally. Obviously, there were a number of headwinds in Europe and decided so we'll see.

Are we.

And so that you read into that but what you're seeing is just absolutely tremendous growth and.

And then add a little more sluggish and Europe, and you expect Europe to catch up and the back half of the year I'm. Just wondering how we should think about their true region relative to one another.

Yeah look at it when you think about this we are planning Europe is 50% close today, we are planning their store.

And as to open the governments have laid out their plan.

That's all day give or take we're not setting this revenge buying these huge spikes and business with plans relatively conservative around the opening day.

Given but Europe has shown incredible incredible resilience, even with the close.

Closures and being able to move goods to channels that they can ship to our firm and it's just been a really good story, coupled with the strength in China. So I wouldn't say Europe is a second half recovery at all I would say that international for the first half is going to be ahead of pre pandemic levels, which we're really excited about.

It's so amazing and Mike and I, just follow up with long term gross margin targets and just looking at what you've laid out here for this year. The gross margin looks extremely encouraging and if you were to look out three to four years is there a gross margin.

Okay. So we should have and mine just given me.

Calling it some other lower profits are areas growth international and anything in mind for that.

Yeah look it's we're putting our arms around trying to gather the information.

And Todd looking forward for Investor day, and the future.

And the balance latter part of this year, where we will walk you guys through our thoughts.

Coming through the pandemic and mix of business by channel and by brand and we just need some farmer puts us together and we will walk you through later in the year.

And so and I guess.

Just how much.

And and.

And just connecting back to your question around Europe, and Asia, and just building on what Mike was just saying.

And we as PVH, we have two of the most iconic brands.

And in the fashion industry, and what we can see and Europe, and Asia and stop the strength of those fronts.

And some of those brands, coupled with execution really really close to where the consumer is going and in terms of e-commerce growth.

Only channel connected retail strength and product so for us internally, it's a very good benchmark.

We have time.

The Red one more question.

Thank you next question comes from Kate Fitzsimons of RBC capital markets. Please go ahead.

Yes, hi, good morning, and thank you for taking my question Stefan.

And you've really reiterated your focus on the more hero casual products I am.

I'm from branches, we come out of Covid, and we potentially see pent up demand and more fashion category. How are you balancing and potential shifts in consumer preferences with your forward and rent inventory buys and perhaps you know refer to your ability to leverage some of the advancements on the supply chain and then just real quick Stefan and you've made a slew of new hires.

Hires more recently, just any other holes and the organization that we should be thinking out thinking about looking out. Thank you.

Thank you and.

And the product side, it's just that that's one of the areas, where it's one of the key value, creating engines and the importance of staying true to their consumer.

It's something we read it and then two and so we're building on our core strength on the categories, where we big categories, where we have the right to play and win and then we follow the consumer as close as we can.

On the team side, just wanted to reiterate what I've said throughout.

Since I joined the team, it's one of the core strength of PVH and and it will it will be one of the key drivers for our ability to execute on the accelerated retail brands coming into a post COVID-19 world, where we are ready to compete and win.

Okay.

With that wish to thank you for joining us and.

Which and you have great day.

Thank you.

Well.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.

[noise].

Good day.

[music].

[music].

Good day and welcome to the P. P. H Q4, 2012 earnings call today's conference is being recorded.

And this time I would like to try and call Oh.

Dana Perlman. Please go ahead mark.

Thank you operator, and good morning, everyone and welcome to the PVH Corp, fourth quarter and full year 2020 earnings Conference call. This webcast and conference call is being recorded on behalf of PVH and consist of copyrighted material.

And it may not be recorded rebroadcast or otherwise transmitted without pvh's written permission your participation and the question and answer session constitutes your consent, having anything you say appear on any transcript or replay of this call.

The information to be discussed includes forward looking statements that reflect PVH.

As of March 30th 2021 are future events and financial performance. These statements are subject to risks and uncertainties indicated and the company's SEC filings and the Safe Harbor statement included in the press release that is the subject of this call. These risks and uncertainties and great PVH is right to change its strategies.

View objectives expectations and intentions and its need to use significant cash flow to service its debt obligations.

Significantly at this time, the COVID-19 pandemic continues to have a significant impact and the company's business financial condition and cash flow and results of operations. There is significant uncertainty.

<unk> duration and extent of the impact of the pandemic.

Dynamic nature of the circumstances means what is said on this call could change materially at any time and therefore, the operation of the company's business and its future results of operations could differ materially from historical practices and results or current.

Descriptions estimates.

And your bathroom and suggestions PVA.

PVH does not undertake any obligation to update publicly any forward looking statement, including without limitation and he estimates or suggestions regarding revenue or earnings generally the financial information and projections to be discussed will be on a non-GAAP basis as defined under SEC rules.

Reconciliations to GAAP amounts are included and PVH is fourth quarter, 2020 earnings release, which can be found on www dot PVH dotcom and and the company's current report on form 8-K furnished to the SEC and connection with the release.

At this time I'm pleased to turn the conference over to Mr. Stefan Larsson.

And CEO of PVH.

Okay.

Thank you and.

Good morning, everyone. Joining me on the call today are Mike Shaffer, CEO, and CFO, and Dana Perlman, our EVP and Chief strategy Officer and.

Treasurer.

It's a true pleasure to be leading the call. This morning, and and honored to lead this great company as we drive towards and accelerated recovery from the COVID-19 pandemic and at the same time and start to build our next growth chapter to win and the new normal.

Pre COVID-19 and there was already an unprecedented amount of change taking place and the apparel industry, driven mostly by technology and the consumer which the pandemic only accelerated.

The new normal will not be a static state rather than ever increasing range from change, but we will be ready.

Okay.

And women.

2020 will be remembered as one of the most challenging moments for our industry from a geopolitical and economic and public health perspective due to the pandemic.

Our teams not only attempt together to successfully navigate the crisis, we also price.

Physician PVH to March and the stronger position.

I would like to thank all our associates for their hard work and resilience and ability to rise up to any challenge we have encountered.

In particular, our dedicated retail store and distribution center associates, who have managed.

Managed to keep our business running throughout the toughest of Covid times.

Before the pandemic hit I was fortunate.

And to spend time traveling and visiting many of our teams and partners around the world.

And I saw firsthand and many of the underlying strength that we are now focusing anymore.

And connect and closer to where the consumer is going and any time before all in an effort to drive sustainable profitable growth.

Our focus is on winning with the consumer debt.

Driving brand relevance and taking profitable market share and building further strength in.

And our platform capabilities and over time to do that and more efficient.

To accomplish this.

We will work with a strong consumer focus become even more demand and data driven and creates value in a systematic repeatable way, where we will continuously learn and improve.

We have taken this time to proactively evolve our business with special focus on capturing where the consumer is going we have been accelerating our digital businesses and reallocating additional resources to drive growth in this highly important channel.

We also continued to shift our product.

Tourists to comfort and cash are categories that are working with consumers today and lastly, we doubled down on our international businesses, where we continue to see a very strong recovery and significant revenue opportunity for both Calvin and Tommy while also contributing a higher operating.

Operating margin.

Our increased and sustained focus on these SaaS breaks other business will drive long term revenue and margin growth for our shareholders driven by gross margin expansion and SG&A leverage.

And importantly, and we've continued to live our strong corporate values.

I'll use including our unwavering commitment to empower our people and helped drive the fashion industry forward, and sustainability, and making a real and lasting positive impact within inclusion and diversity.

And now share some key insights on how we drove performance in the fourth quarter.

And and our first quarter of 2021, so far and how we are progressing towards and accelerated recovery, Mike will then share more financial details.

Even though our fourth quarter results faced greater than expected challenges due to virus resurgence this and Lockdowns trumpf.

Multiple regions, we were able to deliver on our expectations from a top line gross margin and EBIT perspective.

We focused our execution around our strategic priorities and drove and above plan performance for the holiday period.

And we are pleased that we have successfully sold through our.

Seasonal inventory, allowing us to enter spring 2021, and a very clean inventory position.

I would like to share some proof points, demonstrating our progress against the three value creating areas that we have shared with you previously.

First we continue to supercharge our.

Our E Commerce channel, we are rapidly growing our overall digital penetration by both expanding our DTC digital business as well as deepening our strong relationships with third party digital partners.

Fiscal 2020 are represented our strongest ever digital sales performance.

And that's up over 40%, including nearly 70% growth on our own sites and we doubled our penetration to close to 25% of total company revenue.

And while driving a significant improvement in the channels profitability.

Looking ahead with robust.

And just new user growth on our most significant opportunities to drive continued conversion and leverage scale and data capabilities to further engage personalized and simplified the shopping experience.

Secondly, we continued to increase our focus on driving product around the bonds of cross sell and brands.

And some regions.

Our teams have taken proactive measures to tighten and refocus assortments as well as rationalizing unproductive skus to improve overall sell through rates.

We are optimizing our product development processes and leaning further into our key essentials and hero products.

Which is driving positive initial results, including generating higher average unit retail prices for Calvin and we're building on our global leadership and underwear and intimates with hero products, such as a modern cotton program, while growing and cash flow categories, including denim and Tees.

Sweat shirts.

And for Tommy we're expanding on the brands casual lifestyle through our hero products.

Quarter by collaborations for each lifestyle, Tommy Hilfiger, and Tommy jeans.

We also have a meaningful opportunity to further advance our supply chain capabilities and.

A faster as consumers' needs continue to change with something and shortened lead times that will benefit our overall margin structure.

Certainly we are continuing to evaluate our cost structure in the context of a revolving revenue base.

Over this summer we announced the exit.

And we our heritage brands retail business and a reduction of our North American workforce and.

In addition, we will be executing on additional cost reduction efforts and certain international markets. While also right sizing our retail real estate footprint.

We also see a notable opportunity.

Of our two optimize our internal processes by further scaling our digital and data capabilities.

As we realize the benefits from the strategic actions, we will over time enhance our overall profitability, while allowing for investments and our strategic growth areas.

While.

I'll now reagents are all in various stages of the recovery. These focus areas continue to guide our teams with clear objectives to operate against to drive and accelerated recovery.

Turning to our regional update let me start with Asia, and specifically with China, which has emerged first and the retail.

83 <unk>.

We remain very pleased with outperformance and the market where D to C sales trends continued to be positive with double digits growth and the fourth quarter and full year debt.

Lack of travel and tourism continues to benefit local spending and the market our team's husby and success.

<unk> and accelerating our performance through a number of initiatives, including the following.

We've supercharged e-commerce strength online and offline initiatives driving conversion and sales growth and full price stores, one online and key events were taking place.

Ricardo and leaned into our most successful are relevant and cash flow categories and hero products for both Tommy and Calvin better matching inventory with demand, which drove higher full price sell throughs and lower Mark Downs.

With respect to the first quarter, we are pleased with our trends to date highlighted by a very.

The festival and Chinese new year, including very strong sell throughs of over 50% for our holiday capsule. We also generated a strong performance during international Women's day generating nearly full sell through some exclusive skus, while modern corp, and gift sets sold out and additional.

We are currently experiencing encouraging consumer responses to our spring collections.

Overall, while we have seen some virus related headwinds and certain parts of the region specifically in Japan, we remain confident in our Asia region overall.

Moving.

<unk> Europe.

Despite a much more aggressive lockdowns across the region during the fourth quarter and our teams drove impressive execution, which continued to generate profitable market share gains underscoring the strength and Tommy Hilfiger and Calvin Klein.

Given the virus resurgence.

And 70% of our stores and Europe were temporary closed proportions of the quarter, which was significantly worse than what we had been planning when we spoke with you in early December still and we were able to navigate through this difficult time and gain market share through the following.

Driving.

Onto the digital business, both on our owned and operated sites as well as with pure players coupled with our CRM efforts remains an important focus this is especially important. This many stores are closed and we are very well positioned relative to the market.

Total digital.

Driving sales grew by over 60% for the fourth quarter with even stronger performance on our owned and operated sites.

Given temporary store closures, our investments and digital and Omnichannel capabilities enabled us to fully leverage our connected retail inventory to serve our digital day Mt.

And we also continued to win through products, where we saw great performance across both brands and key essentials and casual sportswear with and improvement in AUR.

In addition, as part of Calvin and expansion as a lifestyle brands we.

We are pleased with our newly in House footwear Division.

Mt and represents a big long term opportunity for the Brian and region.

Future order book demand remains strong with fall 2021 planned up high single digits versus the prior year and and up significantly versus fall 2019.

Coming off strong.

We try and digit order books for spring 2021.

It's important to note that our customers continue to take in spring 2021, and goes despite extended lockdowns yourself and markets.

We also continue to invest in important growth areas and at the same time, we're also controlling discretionary.

And doubled and achieving cost efficiencies in Europe.

Lastly, turning to North America during the fourth quarter, we showed strong growth in our digital business, while capitalizing on better traffic trends and stores during the holiday period to sell through seasonal inventory.

And we spent absence of international tourism and some wholesale bankruptcies continue to challenge our North America business.

As I shared with you and our last earnings call. We still have work to do and the region in order to pivot more towards the domestic consumer and operates with the same strength of salary and international businesses.

However, we do see positive developments in the region.

Digital remains an important driver of our results with sales and our own sites up 75%, even with increased promotional activity from the competition and are tied to overall inventory position, which partially offset.

As shown on the headwinds and our stores from Lockdowns and Canada.

Similar to international trends consumer continue to gravitate to key hero products and comfort casual and athleisure categories for both Tommy and Calvin.

Our fourth quarter marketing efforts continued to be focused to support.

And the hotel digits on expansion recreated and interactive virtual holiday themed sharp on Tommy Dot com, which generated significant new consumer acquisition, while Calvin leveraged its global assets and campaigns to reinforce brand relevancy and hero product affinity.

Lastly, I'd like to welcome Trish Donnelly, who recently joined the PVH team and the newly created role of CEO of PVH Americas, Chris joined PVH. Following nearly seven years with urban Outfitters Global CEO for urban Outfitters, Trish successfully and that.

This is to win with the younger consumer rapidly scale e-commerce and industry, leading penetration, while driving very strong connected retail and consumer engagement and we look forward to her leadership and unlocking the region's growth potential and where do we see significant opportunity across consumer.

The bitumen.

Product and distribution.

Our teams continue to take a very thoughtful approach to managing our iconic brands and <unk>.

Mike to share a few brief global brand highlights beginning with Calvin Klein.

Global brand health remains strong.

And we are engaged and 5% aided brand awareness with strong growth across our social channels.

Responses to our spring 'twenty, one and campaign has been positive with growth and relevancy and consideration continuing the momentum on the hashtag Mike countless platform for creativity.

Over expression. The campaign featured established and emerging talent, including recent Grammy winner, Megan This volume and Euphoria Star Jacob <unk> and.

In addition, the brand partnered with La based P. J line and launched the first of its kind content areas we don't.

And south, particularly engaged which al Santa Clara engage new audience network stuff was very positively received.

We are excited about the activations that we have planned and the coming weeks Calvin Klein will launch a global product collaboration which will be an important first one with more to follow.

I'll stand by and we use Calvin Klein's Iconix brand and hero products as the chat and thus for creative exploration.

Moving on to Tommy similar to Calvin and Tommy continues to generate strong global brand equity with increases across all key measures including awareness.

<unk> reached 78%.

In December we launched Tommy swap shop, our newest platform for pop culture focused on limited edition releases, which has been received very well.

In addition, our Tommy jeans, and so London.

We have exclusive European brand campaign produced 64 million views across multiple client forums and influence of channels with very strong double digit increases in brand consideration and purchase intent.

We are pleased with the launch of our first circle of denim collection.

A significant milestone and our forward fresh and journey to build towards a more circular and inclusive fashion industry and.

In addition, we continue to build upon our strong Tommy team to bring our global brand vision to life, including welcoming our new Chief marketing Officer.

And finally to our heritage business.

Our heritage brands business continued to face challenges in the fourth quarter, the exit of our brick and mortar retail business remains on track to be completed over the next few months.

We are focused on increasingly shifting towards cash utilization with a recent.

And give some outdoor activity.

Turning to actively address business challenges managing inventories lowering our cost base and reviewing additional ways to optimize and streamline the business.

Before I hand, it over to Mike I would like to reiterate that the actions we're.

And so being now will make PVH come out even stronger to compete within the new normal as.

As we plan and execute in 2021 near term visibility is limited by virus and uncertainty, especially within Europe and extended Lockdowns and certain countries. However, we are core.

It takes three optimistic as we continue to lean in and what's within our control to drive the business forward, specifically intensifying our focus on our core strength and executing against our strategic priorities, including Supercharging ecommerce and leaning further.

And the product strength to drive revenue growth pricing power and gross margin expansion.

Our international businesses are recovering faster than North America, and we are building on our strong performance in both Asia and Europe.

We remain very confident in the recovery of this.

Given the underlying strength and momentum of our brands and product and distribution and expect revenues to exceed pre pandemic levels in the first half year as we continue to take profitable market share.

We are prudently planning our North America.

Regions, given ongoing pressures from a lack of foreign tourism, which we do not expect to return in any meaningful way until the end of the year.

In the meantime, we're actively focusing on further improving our execution with the local consumer amplifying our digital efforts as well as rights.

Because deicing, our brick and mortar footprint and other regions new leadership.

As we further leverage the power of PVH and I'm confident that we will drive brand relevance and cost efficiencies and deliver long term sustainable growth, while driving fashion forward for growth.

Forward to sharing details with you on the long term plan for PVH next chapter of growth at all.

Our upcoming Investor day, and later this year.

And with that I would like to hand, it over to Mike.

Thanks, Stefan comments are about to make are based on non-GAAP results.

It looks and are reconciled in our press release and going to begin by discussing 2020, and then move on to 'twenty one.

Overall revenues for the fourth quarter were down, 20% as reported and down 23% and the constant currency basis compared to the prior year and then.

We're in line with our prior revenue guidance.

Results significantly more extensive lockdowns in Europe, and Canada, when we when we released our third quarter earnings in early December approximately 10% of our stores were closed and Europe and our guidance anticipated that those stores would reopen soon however, lockdowns and Europe was significantly more extensive than the expense.

As expected and as a result, approximately 70% of the stores in Europe were closed in the fourth quarter. And addition, approximately 75% of our stores and Canada will close during the quarter as a result of the virus resurgence.

Our total direct to consumer business was down 20% versus the prior.

Expense, including a 60% increase and digital commerce, all regions and brand businesses continued to experience strong digital growth and we continue to experience positive overall direct to consumer trends in China.

A lack of international tourists coming to the U S continues to challenge in North America.

Prior to brick and mortar retail business.

Our wholesale revenue was down 19% versus the prior year, which included double digit growth and our sales to digital channels.

Looking at our segments, Tommy Hilfiger revenues were down 16% as reported and 20% on a constant currency basis.

And with international down, 10% as reported and 17% on a constant currency basis, which reflects the extensive lockdowns in Europe.

North America was down 28%.

Calvin Klein revenues down, 17% as reported and 20% on a constant currency basis.

And with international down, 10% as reported and down 16% and the constant currency basis, which also reflects the expense of Lockdowns and Europe nor.

America was down 25% our heritage revenues were down 41%, which included a 17% decline, resulting from the sale of a speed on North America.

Erika business.

Loss per share was 38 on a GAAP basis for the fourth and a non-GAAP basis for the fourth quarter, which reflected the negative impact of the COVID-19 pandemic on our business as well as and unplanned 13th <unk> negative impact due to the settlement of a multi year tax.

Tax audit.

Gross margin of 53, 9% for the quarter was approximately flat to the prior year and in line with our expectations inventories clean and ended the year down 12% compared to the prior year with carrying approximately $75 million and basic inventory and for spring 'twenty one.

The reduction compared to our prior projection of approximately $100 million expenses for the quarter was 52, and 5% of revenue and favorable to our expectation of the mid fifties as we reduced discretionary spending to offset the impact of the store close closures. We ended the full year 2020 with.

Revenue of $7 1 billion and non-GAAP loss per share of $1 97, which reflected the negative impact of the COVID-19 pandemic on our business a day.

Digital penetration for the year doubled compared to 2019% to 25% in 2020.

Moving onto our outlook for 'twenty one.

And we're providing our 2021 outlook despite the significant uncertainty due to the pandemic and as such it could be subject to material change our outlook doesn't contemplate and new store closures Lockdowns are extensions of current lockdowns beyond what we know.

Already.

In addition, our outlook does not contemplate further supply.

Apply chain disruptions, including any greater impact beyond the minimal impact on and we expected from the shipping disruption occurring as a result of the temporary blockage of the Suez Canal or <unk>.

Actual 2021 results could differ materially from our current outlook as a result of the occurrence of any of the uncompensated.

Related events.

Despite the ongoing store closures in Europe, we are encouraged by the recovery, we are seeing and our international businesses and expect those businesses to exceed 2019 pre pandemic revenue levels within the first half of the year, we expect our North America business to remain.

Main challenge throughout 'twenty, one as we expect the international tourism, which has historically represented 30% to 40% of our regional business will not show improvement throughout the year.

Overall for the full year, we're projecting revenue to approximately <unk>, 22% to 24% as reported and nine.

19% to 21% on a constant currency basis compared to the prior year.

We expect gross margin to increase and 2021 versus 2020 due to significantly reduced promotional activity and inventory levels are significantly lower at the end of 2020, and a change and revenue mix.

And with a higher margin and international businesses will make up a larger portion of our total revenue.

When we think about our operating expenses, despite an unexpected increase due to revenue mix as a higher expense international businesses make up a larger portion of our revenue we expect operating expenses.

Expenses overall to decrease as a percentage of revenue and 21 compared to 2020, and we will continue actions that we began in 2020 to reduce costs and reallocate resources to support strategic growth areas of the business. This.

And this includes and 2021 and reducing our work.

Workforce and certain international markets, reducing our office space and closing select stores, we expect to realize $60 million and annualized savings from these actions, which are in addition to the previously announced actions we took to streamline our North America operations, including reducing our north American workforce by 12%.

And exiting our heritage brands retail business by mid 2021.

As a reminder, our outlook for 2021 reflects approximately $20 million of estimated operating losses and the first half of the year associated with the wind down of the heritage brands retail business.

We.

The increase in gross margin percent in 2021 versus 2020, and the decrease in operating expenses as a percent of revenue and 2021 versus 2020 will be relatively cigna.

Similar in magnitude with each worth a few hundred basis points.

So the full year and 2021, we are projecting non-GAAP earnings per share to be approximately $6 versus a loss per share of $1 97 and.

In 2020.

Our tax rate for the year is estimated at $17 five to 19, 5% when we think about our tax rate by quarter.

We currently expect that the rate for the first three quarters will be relatively similar with the fourth quarter are expected to benefit from certain discrete items, which bring down the overall rate for the full year.

We expect our interest expense to decrease in 2021 to approximately $110 million, we're planning voluntary debt repayments.

Of $700 million for the year, which is equivalent to the incremental borrowings and took on in 2020 to manage through the pandemic.

As of today, we have already made repayments of $400 million, we expect our capital expenditures in 2021 to be $300 million to $325 million.

And we'll include continued investments and platforms and systems, including digital commerce, and enhancements and our warehouse and distribution networks.

For the first quarter, our revenue is projected to increase 42% to 44% as reported and 34% to 36% on a constant currency basis.

Revenue from directly operated digital commerce businesses continued to experience strong growth globally, but our stores continue to face significant pressure as a result of the resurgence of COVID-19 cases, and Europe, and Canada with approximately 75% of our stores and Europe closed early in the.

Quarter, and 50% debt currently remain closed today.

In addition inventory and sales volume during the first quarter has been impacted by our recent global vessel and container shortage, which is leading to delayed spring 2021 inventory receipts and and churn is bleed in deliveries to our wholesale customers unaffected.

<unk> product available and then and as direct to consumer businesses.

First quarter non-GAAP earnings per share is planned and a range of 80 to 83 compared to a loss per share of $3 and <unk> in the prior year period.

We expect interest expense to be about $30 million.

And taxes to be above 40% and the first quarter.

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

Thank you, ladies and gentlemen, if you would like to ask a question Keith sticking with my questions, Taiwan, and the kind of fun.

If youre using a speakerphone. Please make sure your mute function is to industrial.

So let me ask statements, reaching our equipment and chicken star one to ask a question.

Take our first question from Bob <unk> of Guggenheim Securities. Please go ahead Sir.

Thanks, Ken Good morning, Stefan and good morning.

Mike and Dana.

The.

The first question that I have.

Is can you comment on.

Current trends in China sort of what Youre seeing there and maybe even take us on current trends in Europe, especially relative to the U S.

And so good more involved.

And we are feeling good about the current trends in China.

China and we're feeling good about the current trends.

Overall and then.

We are impressed as I mentioned in my prepared remarks, we are impressed by our European team's ability to execute so web and a very difficult backdrop.

And Bob I would just add that European business system, and an incredible job of.

Moving.

Things close and shift around so we ship from store so they felt digital and a big way on and some other pure plays as well as the customer dot com. So we've done a really great job.

Moving product and selling it.

Okay, and then just a second question if I could.

And Mike can you talk about how you are.

Planning.

European inventories you given the lockdowns and given the trends and just sort of I think I know you guys said youre comfortable with your inventory levels and they seem good but.

And maybe if you could just give us a little more color in terms of that specific region that would be helpful for us. Thanks.

Sure.

Look the inventories are down and come.

And into the year, but as we think about the total company I would say we've made investments in select markets, where we believe there's an opportunity to do more business in Europe and.

Asia has really proven that they can deliver.

So as you think about the year, we're down to start, but we will continue to see a ramp up and build and working capital as we as we move through the year last year did not reflect the normal year, it's a horrible comparison.

And it's been difficult, but I would also just add that.

And.

Some of the delays on inventory.

The Suez and some of the issues around container shortages. It's just has a big piece of that will impact Europe.

As reflected in our numbers the Suez seven to 10 days and it's all manageable and we haven't reflected now but that is also going.

And then a move inventories around in Europe, and so when they get the ceded and process.

Great. Thank you.

Thank you Allen.

Our next question comes from Erinn Murphy of Piper Sandler. Please go ahead.

Wait out 2021 and you talked about the international segment kind of growing relative to pre COVID-19 levels North America still below I guess two parts one on the composition of the European Order book for fall and high single digits can you talk a little bit more about how that's composed between physical and digital and new accounts versus existing and then.

And in North America, just given the ongoing pressure you're seeing and this market are there any further distribution changes contemplated and the guys. Thank you.

Good morning, and such.

To your first part of your question when it comes to European Order books, we received the order and the strength in your order books as a result of.

The overall strength in our execution and the strength of our brands and the strength.

And especially in e-commerce that we see though and and we see the collaboration that we have had since.

A long time back with our European pure players.

R R.

And are really.

Working well and and.

That's a big part of it.

And Aaron would you mind repeating the second part of the question you broke up here Oh, sorry.

Sorry about that yeah, just on North America, obviously that market I think you've talked about ongoing pressure in 2021 I was curious if theres any future distributions.

And that's contemplated in the guidance.

No.

What's contemplated in the guidance that there would be.

Cover of tourism overtime and that can take time and in parallel we will double down on our accelerated recovery efforts, which.

It's.

Focus on the.

Continuing to drive strength in e-commerce, and continuing to drive strength and ecommerce owned and operated and with our partners.

Got it and then if I could just add one just for Mike on the cost reduction plans for 2021 can you just share with us what the kind of net savings that you're expecting in 'twenty.

And at the current fiscal year and if there's you know kind of deeper phasing beyond this year for the net savings that youre seeing and thank you.

Yeah, So look we.

We will start with we took a charge and in 'twenty and then another truck and 'twenty one.

Our total gross savings include.

Including those charges.

And as related to those.

Reserves as well as discretionary expense cuts is about $250 million of gross expense savings.

We are going to invest about 100 million and so on an annualized basis, we have a planned reduction of about $150 million.

About 60% of that will fall into 2021.

Very helpful. Thank you.

Sure.

Thank you next question comes from Michael Binetti of Credit Suisse. Please go ahead.

Hey, guys. Good morning, Thanks for taking my questions here.

And Mike.

And so think about you know the guidance you gave I think it pencils out to and EBIT margin for the year about 7.2 or seven three.

Maybe 700 5800 basis points above last year, which I know is a tough compare but Mike you described that as about half and half the contribution from gross margin and SG&A.

SG&A and to get to that.

Year over year improvement I guess that you know that.

And that could put you at a range of gross margin close to like 57% above where we've seen the business and the past I know, there's some regional differences, but could you help maybe bridge us from the $54. Seven you had in 2019 up to that level and then I think that also would impair.

Fly SG&A back to maybe $4 $4 billion and.

And 2019 was just over $4 four so and of.

The revenues are guided a little bit lower here. So with the cost you did cut you did last year and anyone's coming in that you mentioned, maybe you could speak a little bit to what somebody offsets to the to the investments.

What's are there.

And it's to better offset there if he could.

Well I'll start and then.

Big question, so on revenue and I look.

As it relates to the.

The.

Yes.

Yes.

The gross margin mix and when you think about gross margin and.

And mix component, so the mixed pieces being driven and we're growing fast and the international businesses. So we are seeing some some mix there and we started the year very clean and we are.

Improved in each region as it relates to gross margin just to less promotion.

And then we are really clean and.

Good point right.

Down 12%. So I think those are the real drivers.

We continue to make the business moves towards the digital piece and we get better utilization of inventories wherever we can which I think is also helping and that's part.

The systems and the investment piece, we talked about as well.

And when you think about the expenses.

It's also being driven by the mix piece.

And international.

International businesses are higher EBIT margin and higher gross margin higher operating expense businesses.

And as we grow those fast and we do see an increase on the expenses as a percentage of revenues and.

And that's a piece of it as well the biggest driver on gross margin and just want to call. It out is discipline and improvement in the business.

Really being cleaner and being less promotional.

Did I get it all and Stefan.

And yes, you said and if I could and ask one bigger maybe bigger picture I realize it's you know, it's our math, but if we take the licensing businesses out of the U S and make some assumptions about how.

Profitable, we think those are the margins and the categories that you do operate directly or are quite low relative to the international markets and North America.

Can you just maybe give us and early thought on what you think medium or longer term. How do you approach the margins in North America, excluding licenses, where do you see the opportunities to improve those margins and especially if the you know to your point the high margin tourism component could be below the high watermark for a bit.

Yes, so Mike is it connects back to our.

Recovery of Prowler signal North America, why we see that we have all contributed to some work to do to better connect with the domestic consumer and doing that from other e-commerce perspective, doing that with strength and products and get them.

Higher pricing power and higher.

And expansion coming out with that and.

And then over time and see the store, it's coming back and recover because what we do see is when and when countries will reach out to recover from the Covid started yes, we see the consumer going back to shopping.

Typical stores and they keep shopping and.

The big growth will continue to be and e-commerce, but we see the consumer.

It is true the shopping across channels.

And sorry, guys.

Thank you next question comes from Dana Telsey of Telsey Advisory Group. Please go ahead.

Good morning, everyone, Hello, Stefan Dana and Mike.

And as you think about that.

Hi, as you think about channel distribution, we've heard about Kohl's entry and fall of 2021, how do you think about the landscape and North America for your distribution for Calvin what is called Bad do go into all stores.

And are you looking at other physical channels and digital channels, where you think you could drive sales and market share and margin. Thank you.

Good morning, and I'm thankful for your question is true.

Our distribution strategy and crowds and execution, there's always followed by other consumer goes so.

When we look ahead we are.

Owned and operated ecommerce is going to be increasingly important.

Our direct to consumer channel. So overall, both ecommerce and brick and mortar is gonna be reported our wholesale and E. Commerce is going to be increasingly important and.

Our.

Wholesale brick and mortar when we recover out of Covid is also going to be important. So the most important here for us is to win and the marketplace and have that approach and when it comes to.

And distribution choices going forward, it's going to be where our consumer wants to shop and how they want.

Wanted to shop, and we will follow that.

Okay.

And.

The next question comes from Jamie Merriman of Bernstein. Please go ahead.

Thanks very much.

And if I can talk to them.

And mark about the importance of the connected inventory position and Europe and clearly that's been.

Really key is we've navigated through Mark Downs, and I think Mike just talked about and.

The opportunities to use ecommerce to help get better utilization of inventory and I'm just wondering.

Where are you on that.

Connected inventory position and other regions is that something that still could be a driver of improved inventory utilization and email and North America, how should we think about that.

Yeah look I would say other real critical lead on expenses.

We're learning from how they operate we then moved to China.

And where we see them.

And they're starting to make connections with few more and really starting to benefit through those connections and the balance of Asia as well and North America is the furthest behind but we're making progress we're starting to get connectivity.

Through our warehouses and some of our stores, where we're able to Bruce.

And some sugar so, it's it's allowing the customer to shop, where they where and when they want and how they want and stuff.

Awesome stuff on sales followed the consumers, so we're making those moves but relaxing and the U S.

And moving fast to recover.

Thank you.

Thank you and.

Next question comes from Chase all of UBS. Please go ahead.

Great. Thank you so much.

And I just want to follow up on the gross margin.

What expense is foreign exchange could it be up and impact on gross margin. This year also.

You know, we talked about inventory being very clean.

Our quality of sale initiatives going on sort.

Sort of intentionally trying to get out of some maybe lower margin business or is it just that the inventories so clean and the amount of Mark Downs will be less and then Stefan on SG&A.

You think about the amount of SG&A, that's budgeted this year and interest sort of implied in the guidance how do you feel about that.

SG&A in terms of its ability to drive the key investments that you think are most important for the business going forward versus how much you're trying to balance short term's, earning stroke and maybe postponing some of those investments for a later date. Thank you.

So look I think.

As it relates to getting out of low margin product that we always look.

To move our business around and.

And pruned off low margin and add higher margin products the mix of business definitely helping drive that.

As we move more towards internationally, it just shows up and our numbers.

And has higher gross margins as a piece of pie grows there.

There is a transaction benefit this year.

No I would just caution you that it is about $40 million over 'twenty.

But it's an apples to Orange comparison is just purchases were so different and the business is so different and timing of receipts.

Is.

It's a very hard comparisons and so it is about $40 million.

I think I'd zone.

Anything Stephane and javelin and Kelsey requests and about SG&A and if we have the CMA and needed to drive the growth areas and.

And drive the execution to win the other consumer.

Coming out of Covid and answer is yes.

And as Mike mentioned, and we've done and $250 million store growth savings.

We reinvested 100 million and in the growth area. So we will never compromise long term growth.

And for short term savings.

Got it. Thank you and then maybe one more if I can follow up Mike just on the cadence of the sales growth through the year quarter to quarter as it is important and the guidance can you just talk about how you see sales trending.

Just say Q1 versus 2019 versus how Q2 Q3 and Q4 it might look versus 2019.

So look I guess, what I'd say is the way we've guided is the way, we're actually trending and and that's that's really.

That's that's how we see trends today.

We're on plan and we feel comfortable with the numbers we've given you.

What I would say as you think about the year we.

I think looking at 19 and takes out a lot of the noise with the closures and.

Issues around last year. So if we prove that out for the year, we're planning to be down about 10% and for the first quarter would be down about 18% and.

If you. If you then look at the balance of the year that falls relative.

We easily for quarters.

So I hope that helps in terms of some cadence.

And that does help thank you Mike Thank you very much.

Thank you next question comes to Kimberly Greenberger of Morgan Stanley. Please go ahead.

Okay great.

Fantastic. Thanks, so much I wanted to follow up on the strength and the momentum you're seeing and international markets with I think the first half revenue expected to be above first half of 2019 internationally. Obviously, there were a number of headwinds and in Europe and decided.

Ooh and Ah.

<unk>.

So.

And if you read into that but what you're seeing and just.

Absolutely tremendous growth and Asia, a little more sluggish and Europe, and you expect Europe to catch up and the back half of the year I'm. Just wondering how we should think about those two regions relative to one another.

Yeah look at it when you think about this.

We are planning and Europe is 50% close today, we are planning those stores to open and the government has laid out the plan.

Good day.

We're not setting this revenge buying these huge spikes and business with planned relatively conservative around the opening dates that day.

And but.

But Europe has shown incredibly incredible resilience, even with the closures and being able to move goods to channels that they can ship to our firm and.

And it's just been a really good story, coupled with the strength in China, and so I wouldn't say Europe is a second half recovery at all I would say that international.

For the first half is going to be ahead of pre pandemic levels, which we're really excited about.

And so amazing and Mike Mike can I, just follow up with long term gross margin targets.

And I'm just.

Looking at what.

And what you've laid out here for that other gross margin looks extremely encouraging.

Encouraging and it.

If you were to look out three to four years.

Is there a gross margin target that we should have and mine just given me.

And the falling at some other lower profits.

And gross international.

Anything in mind for that.

Yeah.

Look it's we're putting our arms around trying to gather the information and looking forward for an investor day and the future.

And the balance latter part of this year, we will walk you guys through our thoughts.

Coming through the pandemic the mix of business by channel and by brands.

And we just need some time puts us together and we will walk you through that later in the year.

Okay.

Understood and then just how much.

And just connecting back to your question around Europe, and Asia, and just building on what Mike was just saying we PVH we have two of the most iconic brands.

In the fashion industry, and what we can see and Europe and Asia is that the strength of those spots the relevance of those brands coupled with execution really really close to where the consumer is going and in terms of e-commerce growth.

Only shallow connected retail strength and product.

So for us can turn of EBITDA very good benchmark.

We have time for one more question.

Thank you next question comes from Kate Fitzsimons of RBC capital markets. Please go ahead.

Yes, hi, good morning, Thank you for taking my question.

And so far and you've really reiterated your focus on the more hero casual products I am curious as we come out of Covid, and we potentially see pent up demand and more fashion categories. How are you balancing and potential shifts in consumer preferences with your board and rents inventory buys and perhaps you know refer to your ability to leverage.

Some of the advancements on the supply chain.

And then just real quick Stefan and you've made a slew of new hires more recently, just any other holes and the organization that we should be thinking out thinking about looking out. Thank you.

Thank you and.

And the product side its shift that's one of the areas where it is.

Leverage and the key value, creating and drugs and and the importance and staying close to their call silver is something we read it and into <unk>.

And so we're building on our core strength.

And the categories, where we have big categories, where we have the right to play and win and then we follow the consumer as close to Africa.

And on the T inside.

And I reiterate what I've said.

Since I joined the team as one of the core strength of PVH and and.

It will it will be one of the key drivers for our ability to execute on the accelerated recovery and coming into a post COVID-19.

And with World, where we are ready to compete and win.

With that wish to thank you for joining us and wishing you a great day.

Thank you.

Yeah.

Thank you ladies and gentlemen, this concludes.

Today's conference call. Thank you for your participation you may now disconnect.