Q3 2022 PVH Corp Earnings Call

Please standby your program is about to begin if you need assistance during the conference today. Please press star zero.

Good day and welcome to the PVH third quarter 2022 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Cheryl Freeman Senior Vice President of Investor Relations. Please go ahead.

Thank you operator, good morning, everyone and welcome to the PVH Corp, third quarter 2022 earnings conference call, leading the call today will be Stefan Larsson, Chief Executive Officer, and Zach Coughlin Chief Financial Officer. This webcast and conference call is being recorded on behalf of PVH and consist of copyrighted material it may not be record.

Rebroadcast or otherwise transmitted without pvh's written permission your participation constitutes your consent to having anything you say appear on any transcript or replay of this call. The information can you discuss includes forward looking statements that reflect pvh's view as of December one 2020 to future events and financial performance. These statements are.

To risks and uncertainties indicated in the Companys SEC filings and the Safe Harbor statement included in the press release that is the subject of this call. These include Pvh's right to change its strategies objectives expectations and attention and the companys ability to realize anticipated benefits and savings from divestitures restructuring and similar plans such as the planned.

Cost efficiency actions announced in the second quarter earnings release, and its 2021 sale of assets and exit from its heritage brands business to focus on is Calvin Klein and Tommy Hilfiger businesses.

Typically the COVID-19 pandemic global inflationary pressures the strength of the U S dollar against most of the foreign currencies in which PVH dismissive of the war in Ukraine continue to have impact on PVH business cash flow and results of operations. There is significant uncertainty about the duration and extent of these impacts as a result would have said on this call.

Change materially at any time, therefore, the operation of the Companys business and its future results of operations could differ materially from historical practices and results or current descriptions estimates and suggestions.

<unk> does not undertake any obligation to update publicly any forward looking statement, including without limitation any estimates regarding revenue or earnings Gen.

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 in Pvh's third quarter 2022 earnings release, which can be found on www dot PVH dot com and in the company's current report on form 8-K furnished to the SEC and <unk>.

Connection with this release at this time I am pleased to turn the conference over to Stefan Larsson.

Thank you Cheryl good morning, everyone and thank you for joining our call today.

We're pleased to share that we delivered financial performance in the third quarter ahead of the guidance, we provided for both the top and bottom line on a non-GAAP basis.

Top line results exceeded our expectations on a reported and constant currency basis.

Underlying growth, excluding the impact of currency of the Russia, Ukraine exit was plus 9% in the third quarter driven by better than expected growth rates for both Tommy and Calvin.

Delivering this strong performance in the face of ongoing macroeconomic challenges is a testament to our disciplined execution of the PVH plus cloud and the strength of our two global brands.

We managed our business in a prudent and disciplined manner and underlying revenue growth combined with an increased cost focus drove the outperformance of non-GAAP EPS.

Our international businesses continued to execute very well across both brands with increased product strengths and strong customer engagement driving performance even in the face of a challenging macro backdrop in Europe and ongoing COVID-19 restrictions in China and with respect to North America.

We are encouraged that our business is starting to show green shoots although we recognize that we still have work to do to win more with the domestic customer.

We have doubled down on improving our own execution and this quarter, we delivered double digit growth for Tommy and Calvin led by our D to C stores, even against the soft consumer backdrop and intense promotional environment.

Given that we are in the middle of the very important holiday season, I've been traveling extensively with our leaders around the world. This past Thanksgiving week I was with our North American leaders in several of our U S markets.

Before that I spent a week in Asia with our leadership team visiting both Korea and Japan.

In a week's time I'm heading to Europe to spend time with our lead us there.

Being out in the markets. This holiday season, I feel very good about our performance and the hard work our teams put in to make the PVH plus plan come to life with the consumer there is a lot of progress being made and I want to take the opportunity to say a big thank you to our leaders and teams.

Your work is making a big difference.

One market visit that stood out to over the past few weeks once our visit to Korea. This was my first time, returning to Korea, after Covid, where I could in person experience the strong execution of the PVH plus club and our Calvin Klein brand in the market.

Kelvin and Korea is a great example for how executing the PVH plus plan will drive strong impacts over time across all regions and markets.

In Korea, we have taken the key growth drivers of the PVH plus cloud amazing come to life in a uniquely strong way driving year to date revenue growth of plus 22% in local currency.

We have accomplished this by leaning into our key product growth categories like underwear denim outerwear big categories, where we have the right to play to win within each of these we have them focus on winning with the best hero products in the market. One concrete example, being the modern cotton underwear program.

We have then connected this strong product focus with some of the strongest talent in the market like Jenny Kim wholly owned Joan song Young men to name a few.

Finally, we make all of these parts come to life on social media and in the consumer experience both online and in stores. The results from executing this both brand and financial have been outstanding generating increasing brand relevance double digit growth in revenue with Cigna.

Difficult to pricing power and gross margin expansion.

Since the PVH plus plan growth drivers are the same across our brands and all regions. This Korea example is so valuable because it shows how we deliver results through disciplined execution of the plan.

As a reminder, our PVH plus plan, it's about connecting our two global brands closer to where the consumer is going down anytime before through five growth drivers winning with product winning with consumer engagement, winning in the digital AD marketplace, developing a demand and data driven.

Operating model and driving efficiencies, while investing in growth, let me share a brief update on where we are within each of these.

And winning with product our hero product strategy continues to be key to our plan and we have seen a strong response to our product assortment from both Calvin and Tommy consumers.

Tell me, we are globalizing, our strong product assortment developed by Thomas Global product engine based in Europe building capabilities that deliver products that meet unique local demand across the world for spring 'twenty three nearly 90% of the assortments as our stores in north.

<unk> will be aligned with global best sellers.

At the same time for Calvin we remained focused on doubling down on the key essential products to brand is known for is staying true to the brand DNA.

We are connecting our hero products through winning with consumer engagement, we're connecting our brands together with hero products with culturally relevant talent.

For Tommy we continue to build on our ongoing partnership with Shawn Mendes is a big fan of the Tommy brand and coupled that with brand heat driving moments such as Thomas recent fashion show at New York Fashion week for.

For Calvin we're continuing to drive strong consumer engagement through clear product stories centered around hyper relevant talent.

We are executing our strategy to win in the digital AD marketplace by building direct to consumer connections led by our own digital business to drive engagement for example, CK Dot Com in North America recently successfully launched this new platform, we didn't hansman, including.

Faster site speed a strong product inventory. In addition, we are focused on fueling high quality growth by working with best in class Digital partners.

With David Solomon, having just joined the PVH team as our chief supply chain Officer, we are actively working to improve our supply chain and build a demand and data driven operating model.

Our investing in important building blocks to enhance our end to end planning capabilities to better match inventory to consumer demand.

Lastly, we remain focused on driving efficiencies and investing in growth as we continue to proactively managing what is within our control we increase our focus on ensuring that our cost structure matched external demand environment through disciplined execution, we control our cost which has.

Translated into solid operating margin performance at the same time enabled us to invest in the PVH plus growth drivers.

PVH plus execution and investments we are making today are building the foundation for long term growth. This is why we remain intensely focused over time the macro challenges. We are navigating today will abate and we will then be in a strong position to further capitalize on improved external conditions.

During the third quarter, despite the challenging consumer sentiment, which has become further challenged over the last few months, particularly in North America, we feel good about our team's execution and how well we delivered a theme we expect to continue for the fourth quarter.

So looking ahead based on our underlying performance trends, we are reaffirming our revenue and EBIT margin guidance and increasing our EPS guidance for the full year, which incorporates our planning for a more promotional environment in the fourth quarter and continued focus on prudently managing our.

<unk>.

Our guidance is based on our current view on the macroeconomic environment and we continue to carefully monitor developments and potential impacts on the consumer for each of the regions in which we operate.

We also feel good about the start of the holiday through the Black Friday weekend performance has been in line with our expectations and we are on plan.

In Europe , where black Friday has become increasingly irrelevant, we drove strong performance across all channels for both Tommy and Calvin which include a strong increases in traffic more than ever great brands, such as our stand out during this important shopping period.

And for North America against the backdrop of soft consumer sentiment and a highly promotional environment, we executed well, we have significantly better in stock levels versus last year, and we saw better conversions in our stores along with some improvement in international traffic we.

<unk> that the strength of our product and better in stock levels of hero product will continue to support performance in Q4.

With respect to leadership for our North America businesses, and the Calvin Klein Global brand, we're making strong progress on the respective searches and look forward to sharing an update shortly.

Now turning to our regional performance and how we are executing our PVH plus plan across each region.

Starting with Europe .

Both our brands remained strong and continued to resonate with the European consumers with both Calvin and Tommy showing improvements in relevance and consideration compared to last year.

Adjusting for the impact of our exit from the Russian market and FX, we generated mid single digit growth on an underlying basis consistent with our growth in the second quarter and achieved a record 1 billion euros and revenue for the third quarter. This is on top of very strong growth the prior year.

Product elevation remains a key priority with a positive impact on Asps for Tommy and for Calvin we remain focused on growing the CK lifestyle through elevated commercial collections connected to a strong consumer experience and marketing campaigns.

Even as we build on our brand strength, we continue to closely monitor the headwinds in the macro environment and the related impacts to consumer spending, particularly in the UK and Germany, where the precious of high inflation and the energy cost are the greatest.

Southern Europe continues to perform very well.

Demand in our future order books across brands continue to hold with the spring 2023 see some firming up to be high single digit growth on top of double digit growth in spring this past year.

Moving on to Asia Pacific This past quarter, we continued to see strong momentum with all markets demonstrating solid local currency growth, excluding China. The region demonstrated nearly 30% year over year growth inclusive of a 15% headwind from <unk>.

And currency.

Sales growth was driven by double digit growth in Australia, Japan, Korea, and southeast Asia. Despite restrictions, we drove mid single digit local currency growth in China.

In addition, e-commerce delivered solid double digit growth led by China, Korea, and Australia as we continue to expand our presence on the most important digital growth platforms in the region.

As I shared in my Korea example, earlier across the region, we're connecting our PVH plus products and consumer engagement initiatives all the way to the stores, where we meet the consumer we saw strong performance for our fall collections and we continue to build brand heat and strong engagement, particularly around key holiday.

<unk>.

We are delivering strong hero products, coupled with ongoing locally relevant product collaborations. These efforts are driving strong growth in underwear led by new silhouettes. Some functionality outerwear driven by buy now wear now transitional products as well as denim fits that resonates with the Gen Z consumer.

During the quarter, we drove strong e-commerce performance for key consumer moments such as the Chinese Valentine's day.

Most recently, we delivered double digit GMB and comp growth during China, 11, 11 activation outperforming the industry importantly, both Tommy and Calvin gave the market share and moved up to rank in some T. Mall. In addition, both brands live streaming events achieved a record 10.

Million views and each also delivered a record 100 million RMB GMB, which very few brands to achieve our collaborations with Tmall with product development led by our innovation center on the platform continue to fuel our results we are leveraging data and insights in these collaborations.

<unk> to quickly be able to read and react and replenish these products to maximize sales.

We've also continued to rationalize our assortment to improve SKU productivity and inventory efficiency, while simultaneously, enabling the region to activate near an onshore product supply chain for speed and margin expansion.

We remain excited about the progress and underlying performance in the region and the future white space opportunity, particularly digital which remains underpenetrated.

Lastly for North America, we remain in the early phase of our multiyear journey to unlock the significant opportunity in the region. We are doubling down on driving improved execution through our PVH plus plan.

Most importantly, we are seeing positive performance indicators, especially in our D to C stores underscoring the effectiveness of the PVH plus execution.

As we have moved through the year, even with external challenge shifts we have driven sequentially improved domestic consumer comps, which returned to pre pandemic levels in the third quarter.

In the third quarter D to C stores delivered double digit positive comps driven by higher traffic, we continue to make step by step progress starting with product in our assortment.

As we shared with you last quarter, we have been allocating more inventory to select doors to showcase the full assortment of our most important hero products. This past quarter referred to scaled our learnings to additional stores with significantly improved inventory levels in these hero product pro.

<unk> and improved in store experience to generate stronger results.

This select group of stores continue to show a very strong sales lift against control doors with higher transactions and AUR.

For Tommy our number one category men's polo significantly improve to achieve 2019 levels. During the third quarter, we are seeing a lift as traffic and inventory positioning improves our global best seller initiative, which puts the best products from our global design Center in.

North America continued to grow its impact in the third quarter up from 50% in the second quarter and we're seeing strong performance from these products.

In wholesale we are deepening the work we do together with our key wholesale partners. We are re merchandising doors with improved stock levels, and we will intensify field team coverage and create clearer product presentation.

In addition, we are seeing good improvement in on time delivery a significantly larger portion of spring orders are projected to be on time compared to the fall and holiday season.

Lastly, as we just announced we're extending our licensing agreement with G. III in North America, and we're doing that in a way that over a multiyear time period step by step we will transition our business back in house, we are grateful to <unk> for their partnership and long term commitment to Calvin Klein.

And Tommy Hilfiger, and they will continue to be a key partner as we work together over the next few years to internalize the direct operation of these businesses. This is an important long term step to unlock the full potential of our brands in North America by bringing these core product categories in house over time.

We will be able to draw on the power and expertise of our global brand teams and have them fully connected to the demand driven supply chain we are developing.

Next I'll share a few key global brand highlights on how we are bringing both brands to life for the consumer beginning with Calvin Klein.

We have continued to drive strong brand relevance through our exciting brand campaigns, featuring maturation of talent for the millennial and Gen Z consumer in.

In September we launched Calvin or nothing new underwear campaign, starring actor Maya Hawke and Belgium professional footballer raw melodious Costco the campaign channels. The brand's iconic impactful aesthetic and featured the latest underwear offerings on Instagram, where Calvin has over <unk>.

22 million followers, the campaign exceeded our expectations and outperformed our engagement rates benchmarks.

Most recently, our head of the World Cup Calvin Klein Taps soccer players trends Alexander Arnold Anthony Robinson <unk> <unk>.

Charlotte and virtual van Dyke and the latest installment of the campaign expanding on the strategy of working with culturally relevant of the moment talent for global appeal.

In addition, Calvin Klein jeans launched a capsule collection in campaign in partnership with leading European online retailers Salon, though the campaign launched first for Solander plus members a loyalty program that gives consumers early access to new releases before becoming available on Salado Calvin Klein Dot com.

And Calvin Klein retail stores in key European countries.

In Asia as I mentioned earlier, we leverage Mega talent to drive brand relevance by featuring Jenny Kim Jessica Xiong <unk> Xiong Park, So John and others in images that captures the versatile nature of <unk>, Calvin Klein offerings across the region and increasingly globally.

Turning to our holiday, we recently launched our curated gift guide, which includes iconic styles of underwear and apparel focused on elevated classics for going out super soft layers. So staying in an addition to our brand driven holiday campaign through our brand ambassadors and collaborators we will.

Pulse, our holiday content to drive relevance and engagement throughout this important shopping period.

Moving on to Tommy Hilfiger.

Our marketing initiatives in the third quarter delivered brand heat brand campaigns and immersive experiences where the highlights will sell returned to New York fashion week, which kicked off with a multi versus Tommy factory runway experience that launched our new Tommy Hilfiger Monogram collection and included a star studded guest.

List generated global visibility and strong consumer engagement, we generated approximately $6 2 billion impressions from August to October and approximately 27 million social engagements over the same period.

The Tommy factory runway show ranked number two on the list of the most talked about shows in New York generating significant media interest with the most Brian mentioned surround inclusivity American sustainable compared to other top participating brands into New York fashion week.

Brand campaign. This fall generated $1 1 billion, social media impressions and $44 million inorganic reach the tick Tock video featuring Tommy Hilfiger is our best performing video on the platform to date. In addition, we generated strong consumer engagement, reaching 14 million followers.

On Instagram and drove strong engagement on the platform.

The brand has seen strong consumer demand following the launch of Tommy Hilfiger monograph in Europe to campaign, featuring celebrities such as Kate and Leila Moss Travis Barker Jamba test.

Tony Ramos drove a higher sell through rate twice that of the rest of the fall collection range with double digit increases in ASP and very strong retail activations, we saw incredibly strong impressions and share of voice in Asia, and North America as well.

In addition, as part of the Tommy Hilfiger Monogram collection, the brand's collaborated with British design of Richard Quinn on a limited edition capsule, which highlights the refreshed logo and received exclusive tier one retail distribution globally, including French premium retailer Prentice Hall.

We're excited about our upcoming holiday campaign and collection featuring American iconic styles with distinctive modern aesthetic inspired by Andy Warhol factory paying tribute to Warhol famous parties and the joy of gift, giving during the holiday.

The collection is available at <unk> Dot Com, Tommy Hilfiger stores globally, and key wholesale partners and.

For Tommy Jeans, the label is collaborating with Martin Rolls for now I'm, recalling I inspired capsule collection with modern wardrobe Essentials Fusing Street <unk> prep details. It's currently available on <unk> Dot com and Tommy Hilfiger stores globally.

For both brands, we're looking forward to an exciting holiday season.

In closing I feel very good about the strong underlying performance we delivered in the quarter that enabled us to beat both our top and bottom line expectations and I am confident in our ability to deliver our full year commitments.

And we are delivering this despite the macro challenges some volatility we're all navigating through.

Looking forward I'm incredibly optimistic for how in a very disciplined manner through the PVH plan every quarter, we will unlock more and more of the full potential of our two iconic brands Calvin Klein and Tommy Hilfiger across all our regions leveraged by PVH US a high performing global.

Gross platform, we will be relentless in our execution of this.

Before I turn the call over to <unk> I would like to again, thank all our associates around the world for your hard work.

Portland contributions this year and I wish everyone, a happy healthy and safe holiday season.

I'll now turn the call over to <unk> to discuss the financials in more detail.

Thanks, Stefan and good morning.

My comments are based on non-GAAP results and are reconciled in our press release.

As Stefan discussed we are pleased to report strong third quarter results, which exceeded our topline guidance by 2% delivering underlying revenue growth of 9% versus last year and significantly exceeding our earnings guidance with earnings per share of $2 60.

We remain laser focused on what is within our control as we continue to navigate a challenging and increasingly complex macroeconomic environment and that discipline is reflected in our performance for the quarter.

Our underlying revenue growth was driven by strong growth across all regions and both our Tommy Hilfiger and Calvin Klein brands. We delivered continued solid performance in our international businesses and sequential improvements in North America, driven by the direct to consumer business.

And just a reported basis revenue was down 2%, which reflected a 9% negative impact from exchange and a 2% negative impact from the war in Ukraine.

We continue to focus on driving performance in our direct to consumer business, where we have the closest connection to our consumer and DTC was up high single digits on an underlying basis on a reported basis DTC revenue was down 5% compared to last year, which reflected a 10% negative impact from exchange and a two.

Negative impact from the war in Ukraine.

From a regional perspective, we drove underlying growth across all markets third quarter revenue for our international businesses was up 7% versus last year on a constant currency basis, continuing to significantly exceed 2019 pre pandemic levels.

Within our international business, our European business had a record quarter exceeding 1 billion euro revenue for a quarter for the first time ever.

Our Asia Pacific business, excluding China grew nearly 30% compared to last year, even with a negative impact of exchange of 15%.

And importantly, we drove mid single digit growth in China in local currency as COVID-19 restrictions, there lessened compared to the first half of the year, but we remain optimistic about our business in China. It continues to be a challenging environment as restrictions are once again intensified in the fourth quarter.

In North America revenue in the third quarter was up 10% overall for Tommy Hilfiger, and Calvin Klein and above our plans. Despite the inflation and interest rate pressures that continue to weigh on consumer sentiment in the region.

Our North America retail store business was up double digits versus last year, even as we continued to be impacted by the lack of international tourism from Asia.

And we drove sequential improvement versus the second quarter as we improved inventory levels in store and grew sales to domestic consumers with our comp base now back to 2019 levels.

Our wholesale business was also up double digits versus last year.

Our global brands also continued to deliver strong underlying growth with Tommy Hilfiger revenues up 7% on a constant currency basis, and Calvin Klein revenues up 9% on a constant currency basis reported revenues were down 4% for Tommy Hilfiger and up 1% for Calvin Klein.

In the third quarter, we delivered gross margin of 55, 9% up approximately 130 basis points compared to pre pandemic levels, but down approximately 180 basis points compared to last year. This.

This includes a 40 basis point negative impact of exchange, while gross margin reflected planned price increases that benefit was more than offset by higher costs and increased promotional selling as inventory levels are elevated across the industry.

SG&A expense as a percentage of revenue for the third quarter was better than planned at 46, 2% and nearly flat to last year. We continue to take a disciplined approach to managing expenses driving cost efficiencies, while making targeted investments in strategic areas to fuel growth in.

In line with the fifth growth driver of the PVH plus plan.

We also took actions this quarter to drive initial progress under the plan, we announced last quarter to reduce people costs in our global offices by approximately 10% by the end of 2023.

As a reminder, we expect that once completed these reductions will generate annual cost savings of over $100 million.

With a small benefit to 2022 and increased savings as we move through 2023.

In total our EBIT for the quarter exceeded our guidance due to strong revenue performance and lowered expenses operating margin was nine 6% as reported and 10% excluding the negative impact of approximately 40 basis points due to exchange.

On a GAAP basis, we also took a non cash goodwill impairment charge of $417 million, which was nonoperational and driven by significant increases in discount rates.

Earnings per share was $2 60, compared to $2 67 in last year's third quarter and exceeded the top end of our guidance by 45.

Almost entirely driven by the improvement in EBIT.

Earnings per share for the quarter also included a <unk> 35 negative impact compared to the prior year related to the exchange and an <unk> 18 negative impact due to the war in Ukraine.

Inventory was up 32% at the end of the quarter compared to the prior year period due to a combination of factors first inventory levels were abnormally low last year in all regions and consistent with second quarter, we are normalizing to levels that support our planned growth.

As we've discussed previously we have increased our inventory investment in core product to mitigate supply chain and logistics disruptions and ensure that we have the right product at the right time.

While supply chain and logistics disruptions have not eased entirely we have begun to see improvements in on time delivery and decreases in in transit times.

And lastly inventory levels remain elevated in North America wholesale due to lower than expected demand at the end of Q2 I mentioned that this was worth about $65 million of the increase in inventory versus the prior year at.

At this point, we have reduced that amount by nearly a third and are on track with our plan to normalized inventory levels in North America.

Additionally, we delivered on our commitment under the PVH plus plan to return excess cash to shareholders returning over $100 million to shareholders during the quarter through the repurchase of $1 9 million PVH shares and our dividend.

Moving on to our outlook.

To start with we are reaffirming the top end of our projected revenue guidance up 4% on a constant currency basis, and our EBIT margin outlook of approximately 9% and we are raising our full year EPS projection to $8 25.

We continue to work relentlessly to drive results, even in the face of the challenging macroeconomic environment and trends within the retail industry. Our strong third quarter performance is a testament to our ability to react quickly in the short term, while continuing to be laser focused on strategic actions to support the long term growth of our business powered by our <unk>.

<unk> brands, Calvin Klein and Tommy Hilfiger.

For the full year, we continue to project underlying high single digit revenue growth in line with our previous guidance on a reported basis revenue is projected to be down approximately 3% as reported compared to 2021 and reflects a 7% negative impact from exchange and a 4% reduction resulting from the <unk>.

<unk> brands transaction, the exit from the heritage brands retail business and the war in Ukraine.

We expect total digital penetration as a percentage of revenue to be nearly 25%.

We expect our full year gross margin rate to remain significantly above pre pandemic levels. The approximately 130 basis points below record levels in 2021, which includes the negative impact of exchange of approximately 30 basis points.

We continue to expect pressure on our gross margin for the remainder of the year due to promotional selling.

Overall, we expect gross margin in the fourth quarter will reflect a similar year over year decline versus what we reported for the third quarter as we offset the negative impact of the increasingly promotional environment by driving our higher margin direct to consumer channel is a greater share of the business versus last year.

We continue to take a disciplined approach to manage expenses across the business in light of increased macro pressures weighing on our gross margin and we are accelerating cost efficiencies, while prudently investing in the core pillars of the PVH plus plan.

SG&A expense as a percentage of revenue for the full year reflects an approximately 60 basis points improvement compared to our previous guidance and is now expected to be approximately 40 basis points higher compared to 2021.

Our full year operating margin projection continues to be approximately 9% and reflects a negative impact compared to last year of approximately 40 basis points due to exchange.

Our interest expense projection is unchanged at approximately $85 million and we continue to expect our corporate tax rate will be approximately 24%.

Compared to our previous guidance of $8 the increase versus our previous guidance is primarily due to our strong Q3 performance.

Our planned stock repurchases in 2020 to remain at approximately $400 million.

With approximately $330 million of repurchases completed year to date.

For the fourth quarter, we are projecting mid single digit revenue growth in our underlying business on a reported basis revenue is projected to be down approximately 4% as compared to 2021 and reflects an 8% negative impact from exchange and a 2% negative impact from the war in Ukraine.

Fourth quarter earnings per share is expected to be approximately $1 65.

Which reflects the negative impacts of approximately 27 due to exchange and approximately 15 from the war in Ukraine compared to the prior year.

We expect our tax rate in this year's fourth quarter will be an expense of approximately 25%, which is relatively in line with our full year rate expectation.

As a reminder, in last year's fourth quarter, we benefited from noncash tax rate relief tied to our purchase of the Calvin Klein brand back in 2003. This benefit ran out in 2021.

As a result, our tax rate in the fourth quarter of last year was a benefit of approximately 33%.

We expect our interest expense for the fourth quarter to be approximately $24 million.

Before we open it up for questions I want to reiterate that we're pleased with our strong third quarter results and that we were able to continue to drive strong underlying growth across the business even in the tough macroeconomic environment.

We remain focused on driving our strategic priorities. Despite the continued volatility through.

Through the PVH plus plan, our global brands and businesses are well positioned to drive long term value creation and deliver sustainable profitable growth and shareholder returns.

And with that operator, we would like to open it up to questions.

Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing star can you. Once again that is star one to ask a question.

Thank you our first question will come from Bob <unk> with Guggenheim. Your line is now open.

Alright.

I guess the question that I'd actually like to spend some time on if you could is.

One can you just talk us through the strategic rationale for taking the G III licenses back and sort of how you're structured on them and why now.

How you're really approach this I think that would be pretty helpful. Thanks.

Absolutely. Thank you Bob so as we communicated.

Yesterday, we are extending the licensing agreement with <unk> in a way that over a multiyear period will bring these categories packing house and the rationale for that is very much connected to the PVH plus plan and what that is about because.

In essence, the PVH plus plan, if a growth client, it's a brand driven growth cloud, it's about unlocking the full potential of our brands.

And the brands, both Calvin and Tommy and the brands are the most valuable assets. We have so when we look at overtime over the next few years in housing. This it's about giving US complete control of those fronts. So when you look at the PVH class plan, we have five growth drivers needs very much cannot.

Next to what creates value.

Unlocking those fronts, so product design, the product assortment and the pricing.

Market channel mix.

Enabling us to connect to a demand driven supply chain. So all those parts are value, creating growth drivers and that's what we would be able to be in control of and.

It will help.

It will help unlock more of Calvin and Tommy.

Yes.

The bigger value creation over time, but it also help us build Calvin and Tommy to truly global cohesive aspirational lifestyle brands.

And then maybe Bob I can give a bit of context from an economics perspective.

To complement the strategic element to this so first of all I think is useful to size the current business impact.

These are predominantly U S womens wholesale categories for Calvin Klein and Tommy Hilfiger and today. These licenses make up approximately one third of our global licensing revenue.

And from a profit perspective, the profit comprised less than 10% of our 2021 EBIT.

I think also important to note is that due to the structure of the agreement we do not expect any material impact to our financial results between now and the end of our PVH plus plan commitments in 2025.

Beyond that in 2026 and beyond we do expect the impact to become more material.

We expect the intake of this business will be accretive to our financial results as we take advantage of the scale of what the rest of the business has.

Great. Thank you very much.

Thank you. Our next question will come from Michael Binetti with Credit Suisse. Your line is now open.

Hey, guys. Thanks for all the detail and congrats on a nice quarter in a tough backdrop.

I've got a quick one on the model.

For the EBIT guidance and fourth quarter.

It seems like it implies a decent step up relative to two third quarter on both a year over year and a three year basis, maybe you can unpack that a little bit how much that cost savings are mixed dynamics that help us understand that a little and then I guess.

What I found interesting was the U S. DTC comments the stores define I know this has been a focus for you. It seems like there's a bigger unlock emerging there.

I know you said I think you said domestic consumer traffic cross it back above 2019 levels for the first time, it's great to hear I know you've been citing that hard.

You told US 30% of sales in those doors or at least in the outlet doors as tourist volume maybe talk a little bit about how far below 2019 levels. Those doors are today in productivity and margins and what you think are some realistic.

Medium term.

Expectations for how much those can progress back to pre COVID-19 levels.

Okay. Thanks, Michael so before for either Sac unpack more detailed financials and the outlook for Q4, so what excites US with Q3 is that we were able to compete to win in.

In a difficult macro backdrop, and we continue to outlook for Q4.

It's based on that we will continue to do that in Q4, and we had a planned start of the holiday and then we compete continue to compete to win through Q4 and Thats.

That's the underlying driver of the Q4 outlook, but feel free to give more texture I think as we saw as we move through the third quarter.

Overall August and September strong and then some of the macroeconomic backdrop as Stefan mentioned, we began to see some softening in consumer sentiment in October we fought hard and we believe.

<unk> for our fair share there as we look forward, we've incorporated that sort of outlook as we sort of work through the third quarter into the fourth quarter results or into the fourth quarter outlook and expect that to sort of be the underlying dynamic that we're competing in more broadly from a gross margin perspective, we.

Our gross margin impact versus last year to be approximately the same as the third quarter. The composition of that obviously a little bit different is we do expect that higher level of promotional environment to continue through the fourth quarter. We saw at the end, but we get the lift there from <unk>.

Heavier DTC retail focus quarter, but the overall margin impact from there and then I think from a SG&A perspective, we expect to see continued efficiency as we work our way through being really disciplined and focused on the spending.

From an outlook for the fourth quarter heading into their Seattle incorporated into the guidance that we've provided.

And Michael to your question about North American the Green shoots we are seeing in D to C stores, yes, it's exciting because we've worked really hard to double down on the execution of starting with.

Our hero products and making sure we have dosed.

Best Essentials, we are known for in both France, but we have them in stock. So what we saw in Q3 was that we were able to navigate through most of the supply chain issues. So we had better in stock levels in more of our hero products and then we were really focused on the channel execution than we saw.

We saw that drive this double digit growth in our stores and we saw the comps coming up with the domestic consumer so still early days, but very encouraging if we take told me as an example, where we increasingly connect our products to the global design Center of.

The brand.

And have those best sellers, even for the North American market, we see that being category a slight men's knits, which is our number one category for Tommy we were up 42% versus last year, So polo's iconic essential best sellers.

Are driving significant growth in led by global best seller. So we were able to get more of the hero products in stock better product execution leveraging.

The global brand design higher AUR summed up and then we see that we are starting to come off and came up again.

Against 2019, so early days in North America, and Thats very encouraging.

Very helpful. Thanks, a lot guys congrats.

Thanks, Mike.

Thank you. Our next question will come from Jay sole with UBS. Your line is now open.

Great. Thank you so much I don't want to follow up on some of the comments you made about SG&A.

SG&A control as part of the PVH plus plan, but can you help us understand how much of the really strong SG&A control in the quarter was sort of a response to the consumer environment versus how much is sort of identifying opportunities to streamline costs and get more efficient, which will sort of continue into next year and really beyond thank you.

Thanks, Jay so.

Sac has really done a great job coming in.

And helping us execute on the fifth growth driver of the PVH platform, which is about driving efficiencies and freeing that up to invest in growth drivers. So what you see now in Q3 and going forward increasingly you received that we are step by step.

Becoming more cost competitive.

Of course 111 aspect of that is even more important when we operate and compete to win in a tough.

Macro, but this is something that second I will drive.

Throughout the whole PVH plus.

Germany and beyond yes.

I think just more specifically there was really no one single item driving <unk> SG&A efficiency and instead the efficiency was across the board as our disciplined focus on spending.

On only the most impactful elements of the PVH plus I'm really paid off this is about focus and prioritization and we actually are confident we can both invest in growth and deliver SG&A efficiency. So we also continue to invest in those areas. Most important for growth that was included in we're spending so digital as we re platform of our U S.

As Calvin Dot Com site and continue to build out our European digital ecosystem supply chain as we're building the technology infrastructure across Asia, and logistics capability in Europe , and increasingly moving forward Youll see spending in the U S retail network and global marketing. So we believe that we actually do have the ability to do both to invest in.

Those things most important and really driving those efficiencies as well.

Got it thank you so much.

Thank you. Our next question will come from Chris <unk> with Bank of America. Your line is now open.

Mark Yes.

Hi, yes.

There we go we got you now.

Okay perfect.

Can you provide an updated state of the Union on your performance in some of your major Western European markets and then how some of those trends have evolved quarter to date relative to <unk> and then just as a quick follow up into some of your vacancies for head of Americas, and how does the Calvin.

G III announcement change.

How youre looking at the attributes to fill some of those roles.

Yeah, Thanks, Chris So starting with Europe .

We had a record quarter, we never made a quarter before in Europe over $1 billion. It's the first time, we did over 1 billion euros for the first time in a quarter, so very strong execution by our European team.

Drove underlying growth of mid single digit again, we were able to do this despite the tougher macro for sure. There is a tougher macro situation I would say globally.

Europe .

A good example of when we were able to navigate through that successfully.

And then we go into the start of holiday, where Black Friday has become increasingly relevant in Europe increasingly irrelevant and big.

And we just came out of that and drove strong performance across both brands all channels. So feeling good about.

How how our teams continue to execute really well.

Yes, I think Ben if we take a look and just more broadly on the European performance is to fund mentioned continued to see strength there.

As we look forward, there's all important order books.

Our fall order book, holding well spring order book as we've talked about in prior quarters lending at high single digits and in fact, some of the supply chain global supply chain challenges of loosens product is showing up on time or a little bit early and reconfirming. The strength of the brand as those accounts are eager to take that product I think moving.

Moving forward as well we feel good about the strength that Europe is continuing to drive.

And then Chris when it comes to the leadership.

Searches we have I'm.

Im excited to share that we're making really strong progress. So within the next few weeks I look forward to update you all on what that means both for the Calvin Klein Global brand for our North America businesses and to your question about how this connects to.

The talent choices to leadership choices connect to the transition of the G. III categories definite it connects to the PVH plus clients. So we are.

About two land leaders, who will bring some different forms of best in class experience that.

<unk> helps us unlock both Calvin and Tommy So, yes, very excited and looking forward to in a few weeks' time to just give you an update we have time for one more question.

Thank you our last question will come from Ed <unk> with Piper Sandler Your line is now open.

Hey, good morning, guys. Thanks for taking the questions I guess, one short term question as you think about these decent licensing I know you said Theres no near term financial impact, but how do you think about building talent in preparation for taking those licenses and $25 27, and then Stefan is a longer term question. It seems like U S. Wholesale one of your competitors has kind of advocating.

Some of these more premium price points. So can you talk about the white space you think.

That you have given that youre able to kind of reposition some of your brands as a more premium product. Thank you.

Yes, definitely so starting from your question about white space or opportunities. So as I mentioned in my prepared remarks, there will be now traveling extensively at this past weekend Thanksgiving weekend, we will see in a number of our U S markets and just seeing the love for both Calvin and Tommy that consumers love in the North America market.

And the opportunity we have to in a more disciplined way tap into that so we have great partnership with our wholesale partners, we have great locations within.

Those stores and we have an end consumer that loves <unk>, So where we have opportunity. It connects to the PVH plus focus which is better disciplined on the product categories that <unk>.

Really matters that are big for the consumer essential end, where we have the right to play to win and that.

Build the best hero products within those.

When we do today, it's early days, but where we do that today, we see that we win we win immediately is one to one as soon as we play in the right category with the Reits hero products, We drive the revenue and we drive we don't we don't see any price resistance. So it's so it's very it's very exciting to see that.

Being getting closer to <unk>.

Excellent Siem product and then combining that with our consumer engagement and the talent that then the product and the consumer engagement that shows up in social media shows up in ecommerce and increasingly in our stores, it's just exciting potential everytime im out walking stores.

<unk>.

It's so concrete.

And then I think Ed Im sure. Its the final want to comment on the build out of the talent capability for the categories coming in but just to sort of start a little bit I think if you think about from a financial perspective on that we already do great product creation, all around the world and we've got great supply chain capabilities as well and so I think we.

Believe that we've got.

A good amount of the infrastructure in place from a financial perspective that we've talked about not seeing a material impact to the financials over this medium term period, that's what gives us the confidence as Stefan I'll talk about how we go about building out some of that the actual capabilities themselves.

Yes, we have both both the time the time plan is setting ourselves up in a very good way to.

As Sam mentioned step one is to leverage the capability, we already have because we have a lot of these capabilities.

We see that with those leaders and teams and capabilities, we're able to drive winning and winning big in both Europe and Asia. So we see that one is tapping into that and two is to complementing our team strength leadership strength here. So we're doing both.

Having this time to ramp that up.

Okay.

And with that.

Thanks, you very much.

And with that.

We want to thank all of you who are following us and wish you a really good restful holiday and looking forward to catching up into the new year.

Thank you.

Thank you ladies and gentlemen. This concludes today's event you may now disconnect.

Okay.

Okay.

[music].

Thank you.

[music].

Okay.

Yes.

[music] inbound.

[music].

[music].

Good day and welcome to the P V. H third quarter 2022 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Cheryl Freeman Senior Vice President of Investor Relations. Please go ahead.

Thank you operator, good morning, everyone and welcome to the PVH Corp, third quarter 2022 earnings conference call, leading the call today will be Stefan Larsson, Chief Executive Officer, and Zach Coghlan Chief Financial Officer. 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 constitutes your consent to having anything you say appear on any transcript or replay of this call. The information can you discuss includes forward looking statements that reflect pvh's view as of December one 2022 of future events and financial performance. These statements are subject to.

Risks and uncertainties indicated in the Companys SEC filings and the Safe Harbor statement included in the press release that is the subject of this call. These include Pvh's right to change its strategies objectives expectations and attention and the company's ability to realize anticipated benefits and savings from divestitures restructuring and similar plans such as the planned cost.

Efficiency actions announced in our second quarter earnings release, and its 2021 sale of assets and exit from its heritage brands business to focus on is Calvin Klein and Tommy Hilfiger businesses.

Significantly the COVID-19 pandemic global inflationary pressures the strength of the U S dollar against most of the foreign currencies, which PVH just met them and the war in Ukraine continue to have impact when PVH with business cash flow and results of operations. There is significant uncertainty about the duration and extent of these impacts as a result would've said on this call.

It could change materially 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 any estimates 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 in Pvh's third quarter 2022 earnings.

Release, which can be found on www dot PVH dot com and in the company's current report on form 8-K furnished to the SEC in connection with this release at this time I am pleased to turn the conference over to Stefan Larsson.

Thank you Cheryl good morning, everyone and thank you for joining our call today.

I'm pleased to share that we delivered financial performance in the third quarter ahead of the guidance, we provided for both the top and bottom line on a non-GAAP basis.

Topline results exceeded our expectations on a reported and constant currency basis, and the underlying growth excluding the impact of currency on the Russia, Ukraine exit was plus 9% in the third quarter driven by better than expected growth rates for both Tommy and Calvin.

Delivering this strong performance in the face of ongoing macroeconomic challenges is a testament to our disciplined execution of the PVH plus cloud and the strength of our two global brands.

We managed our business in a prudent and disciplined manner and underlying revenue growth combined with an increased cost focus drove the outperformance of non-GAAP EPS.

Our international businesses continued to execute very well across both brands with increased product strengths and strong customer engagement driving performance even in the face of a challenging macro backdrop in Europe and ongoing COVID-19 restrictions in China and with respect to North America.

We are encouraged that our business is starting to show green shoots although we recognize that we still have work to do to win more with the domestic coal silver.

We have doubled down on improving our own execution and this quarter, we delivered double digit growth for Tommy and Calvin led by our D to C stores, even against a soft consumer backdrop and intense promotional environment.

Given that we're in the middle of the very important holiday season, I've been traveling extensively with our leaders around the world. This past Thanksgiving week I was with our North American leaders in several of our U S markets before that I spent a week in Asia with our leadership team visiting.

Both Korea, and Japan and in.

In a week's time I'm heading to Europe to spend time with our lead us there.

Being out in the market. This holiday season, I feel very good about our performance and the hard work our teams put in to make the PVH plus plan come to life with the culture of our there is a lot of progress being made and I want to take the opportunity to say a big thank you to our leaders and teams.

Work is making a big difference.

One market visit that stood out to over the past few weeks, whilst our visit to Korea. This was my first time returning to Korea after Covid.

I Couldnt person experience the strong execution of the PVH plus plan and our Calvin Klein brand in the market.

Kelvin and Korea is a great example for how executing the PVH plus plan will drive strong impacts over time across all regions and markets.

In Korea, we have taken the key growth drivers of the PVH plus cloud amazing come to life in a uniquely strong way driving year to date revenue growth of plus 22% in local currency.

We have accomplished this by leaning into our key product growth categories like underwear denim outerwear big categories, where we have the right to play to win within each of these we have them focused on winning with the best hero products in the market. One concrete example, being the modern cotton underwear program.

We have been connected this strong product focus with some of the strongest talent in the market like Jenny Kim wholly owned Joan song Young men to name a few.

Finally, we make all of these parts come to life on social media and in the consumer experience both online and in stores. The results from executing this both brand and financial have been outstanding generating increasing brand relevance double digit growth in revenue with Cigna.

Difficult to pricing power and gross margin expansion.

Since the PVH plus plan growth drivers are the same across our brands and all regions. This Korea example is so valuable because it shows how we deliver results through disciplined execution of the plan.

As a reminder, our PVH plus plan, it's about connecting our two global brands closer to where the consumer is going down anytime before through five growth drivers winning with product winning with consumer engagement, winning in the digital AD marketplace, developing a demand and data driven.

Operating model and driving efficiencies, while investing in growth, let me share a brief update on where we are within each of these.

And winning with product our hero product strategy continues to be key to our plan and we have seen a strong response to our product assortment from both Calvin and Tommy consumers at Tommy We're globalizing, our strong product assortment developed by <unk> Global product engine based in Europe building.

<unk> that deliver products that meet the unique local demand across the world for spring 'twenty three nearly 90% of the assortment as our stores in North America will be aligned with global best sellers.

At the same time for Calvin we remained focused on doubling down on the key essential products to brand is known for is staying true to the brand's DNA.

We are connecting our hero products through winning with consumer engagement, we're connecting our brands together with hero products with culturally relevant talent for Tommy we continued to build on our ongoing partnership with Shawn Mendes is a big fan of the Tommy brand and coupled that with brand heat driving moments such as.

Thomas recent fashion show at New York Fashion week.

For Calvin we're continuing to drive strong consumer engagement through clear product stories centered around hyper relevant tallo.

We are executing our strategy to win in the digital AD marketplace by building direct to consumer connections led by our own digital business to drive engagement for example, CK Dot Com in North America recently successfully launched this new platform, we didn't have <unk>.

Adding faster site speed as strong product inventory. In addition, we are focused on fueling high quality growth by working with best in class Digital partners.

With David <unk>, having just joined the PVH team as our chief supply chain Officer, we are actively working to improve our supply chain and build a demand in data driven operating model. We are investing in important building blocks to enhance our end to end planning capabilities to <unk>.

Better match inventory to consumer demand.

Lastly, we remain focused on driving efficiencies and investing in growth as we continue to proactively managing what's within our control we increase our focus on ensuring that our cost structure matched external demand environment through disciplined execution, we control our costs, which.

Has translated into solid operating margin performance at the same time enabled us to invest in the PVH plus growth drivers.

The PVH plus execution and investments, we're making today are building the foundation for long term growth. This is why we remain intensely focused over time the macro challenges. We are navigating today will abate and we will then be in a strong position to further capitalize on improved external conditions.

<unk>.

During the third quarter, despite the challenging consumer sentiment, which has become further challenged over the last few months, particularly in North America, we feel good about our team's execution and how well we delivered a theme we expect to continue for the fourth quarter.

So looking ahead based on our underlying performance trends, we are reaffirming our revenue and EBIT margin guidance and increasing our EPS guidance for the full year, which incorporates our planning for a more promotional environment in the fourth quarter and continued focus on prudently managing our <unk>.

Fences.

Our guidance is based on our current view on the macroeconomic environment and we continue to carefully monitor developments and potential impacts on the consumer for each of the regions in which we operate.

We also feel good about the start of the holiday through the Black Friday weekend performance has been in line with our expectations and we are on plan.

In Europe , where black Friday has become increasingly irrelevant, we drove strong performance across all channels for both Tommy and Calvin which include a strong increasing traffic more than ever great brands, such as our stand out during this important shopping period.

And for North America against the backdrop of soft consumer sentiment and a highly promotional environment, we executed well, we have significantly better in stock levels versus last year, and we saw better conversions in our stores along with some improvement in international traffic, we expect that.

The strength of our product and better in stock levels of hero product will continue to support performance in Q4.

With respect to leadership for our North America businesses, and the Calvin Klein Global brand, we're making strong progress on the respective searches and look forward to sharing an update shortly.

Now turning to our regional performance and how we are executing our PVH plus plan across each region.

Starting with Europe .

Both our brands remained strong and continued to resonate with the European consumers with both Calvin and Tommy showing improvements in relevance and consideration compared to last year.

Adjusting for the impact of our exit from the Russian market and FX, we generated mid single digit growth on an underlying basis consistent with our growth in the second quarter and achieved a record 1 billion in revenue for the third quarter. This is on top of very strong growth the prior year.

Product elevation remains a key priority with a positive impact on Asp's for Tommy and for Calvin we remain focused on growing the CK lifestyle through elevated commercial collections connected to a strong consumer experience and marketing campaigns.

Even as we build on our brand strength, we continue to closely monitor the headwinds in the macro environment and the related impacts to consumer spending, particularly in the UK and Germany, where the pressures of high inflation and the energy cost are the greatest.

Southern Europe continues to perform very well.

Demand in our future order books across brands continue to hold with the spring 2023 season firming up to be high single digit growth on top of double digit growth in spring this past year.

Moving on to Asia Pacific This past quarter, we continued to see strong momentum with all markets demonstrating solid local currency growth, excluding China. The region demonstrated nearly 30% year over year growth inclusive of a 15% headwind from foreign currency.

Nancy sales.

Sales growth was driven by double digit growth in Australia, Japan, Korea, and southeast Asia. Despite restrictions, we drove mid single digit local currency growth in China.

In addition, e-commerce delivered solid double digit growth led by China, Korea, and Australia as we continue to expand our presence on the most important digital growth platforms in the region.

As I shared in my Korea example, earlier across the region, we're connecting our PVH plus product and consumer engagement initiatives all the way to the stores, where we meet the consumer we saw strong performance for our fall collections and we continue to build brand heat and strong engagement, particularly around key holidays.

Days.

We are delivering strong hero products, coupled with ongoing locally relevant product collaborations. These efforts are driving strong growth in underwear led by new silhouettes. Some functionality outerwear driven by buy now wear now transitional products as well as denim fits that resonates with the Gen Z consumer.

During the quarter, we drove strong e-commerce performance for key consumer moments such as the Chinese Valentine's day.

Most recently, we delivered double digit <unk> and comp growth during China, 11, 11 activation outperforming the industry.

Accordingly, both Tommy and Calvin gained market share and moved up to rank in some T. Mall. In addition, both brands live streaming events achieved a record 10 million views and each also delivered a record 100 million RMB GMB, which very few brands achieved our collaborations with <unk>.

<unk> mall with product development led by our innovation center on the platform continue to fuel our results. We are leveraging data and insights in these collaborations to quickly be able to read and react and replenish these products to maximize sales.

We've also continued to rationalize our assortment to improve SKU productivity and inventory efficiency, while simultaneously, enabling the region to activate near an onshore product supply chain for speed and margin expansion.

We remain excited about the progress and underlying performance in the region and the future white space opportunity, particularly digital which remains underpenetrated.

Lastly for North America, we remain in the early phase of our multi year journey to unlock the significant opportunity in the region. We are doubling down on driving improved execution through our PVH plus plan.

Most importantly, we are seeing positive performance indicators, especially in our D to C stores underscoring the effectiveness of the PVH plus execution as.

As we have moved through the year, even with external challenge shifts we have driven sequentially improved domestic consumer comps, which returned to pre pandemic levels in the third quarter.

In the third quarter D to C stores delivered double digit positive comps driven by higher traffic, we continue to make step by step progress starting with product in our assortment.

As we shared with you last quarter, we have been allocating more inventory to select doors to showcase the full assortment of our most important hero products. This past quarter refer to scaled our learnings to additional stores with significantly improved inventory levels in these hero product pro.

<unk> and improved in store experience to generate stronger results.

This select group of stores continue to show a very strong sales lift against control doors with higher transactions and AUR.

We're told me are number one category men's polo significantly improved to achieve 2019 levels. During the third quarter, we are seeing a lift as traffic and inventory positioning improves our global best seller initiative, which puts the best products from our global design Center in.

North America continued to grow its impact in the third quarter up from 50% in the second quarter and we're seeing strong performance from these products.

In wholesale we are deepening the work we do together with our key wholesale partners. We are re merchandising doors with improved stock levels, and we will intensify field team coverage and create clear product presentation.

In addition, we are seeing good improvement in on time delivery a significantly larger portion of spring orders are projected to be on time compared to the fall and holiday season.

Lastly, as we just announced we are extending our licensing agreement with G. III in North America, and we're doing that in a way that over a multiyear time period step by step we will transition our business back in house, we are grateful to G. III for their partnership and long term commitment to Calvin Klein.

And Tommy Hilfiger, and they will continue to be a key partner as we work together over the next few years to internalize the direct operation of these businesses. This is an important long term step to unlock the full potential of our brands in North America by bringing these core product categories in house over time.

We will be able to draw on the power and expertise of our global brand teams and have them fully connected to the demand driven supply chain we are developing.

Next I'll share a few key global brand highlights on how we are bringing both brands to life for the consumer beginning with Calvin Klein.

We have continued to drive strong brand relevance through our exciting brand campaigns, featuring maturation of talent for the millennial and Gen Z consumer.

In September we launched Calvin or nothing new underwear campaign, starring actor Maya Hawke and Belgium professional footballer Raw Malone Takako the campaign channels. The brand's iconic impactful aesthetic and featured the latest underwear offerings on Instagram, where Calvin has over.

22 million followers, the campaign exceeded our expectations and outperformed our engagement rates benchmarks.

Most recently, our head of the World Cup Calvin Klein Taps soccer players trends Alexander Arnold Anthony Robinson <unk> <unk>.

Charlotte and virtual van Dyke and the latest installment of the campaign expanding on the strategy of working with culturally relevant of the moment talent for global appeal.

In addition, Calvin Klein jeans launched a capsule collection in campaign in partnership with leading European online retailers Salon, though the campaign launched first four cylinder plus members a loyalty program that gives consumers early access to new releases before becoming available on Salado Calvin Klein Dot com.

And Calvin Klein retail stores in key European countries.

In Asia as I mentioned earlier, we leverage Mega talent to drive brand relevance by featuring Jenny Kim Jessica Xiong <unk> Xiong parks, so John and others in images that captures the versatile nature of this season's Calvin Klein offerings across the region and increasingly globally.

Turning to a holiday we recently launched our curated gift guide, which includes iconic styles of underwear and apparel focused on elevated classics for going out super soft layers. So staying in an addition to our brand driven holiday campaign through our brand ambassadors and collaborators we will pulse.

Our holiday content to drive relevance and engagement throughout this important shopping period.

Moving on to Tommy Hilfiger.

Our marketing initiatives in the third quarter delivered brand heat brand campaigns and immersive experiences where the highlight was our return to New York fashion week, which kicked off with a multi versus Tommy factory runway experience that launched our new Tommy Hilfiger Monogram collection and included a star studded <unk>.

<unk> list generated global visibility and strong consumer engagement, we generated approximately $6 2 billion impressions from August to October and approximately 27 million social engagements over the same period.

Tommy factory runway show ranked number two on the list of the most talked about shows in New York generating significant media interest with the most Brian mentioned surround inclusivity American sustainable compared to other top participating brands into New York fashion week.

The brand campaign. This fall generated $1 1 billion, social media impressions and $44 million inorganic reach the tick Tock video featuring Tommy Hilfiger is our best performing video on the platform to date. In addition, we generated strong consumer engagement, reaching 14 million followed.

On Instagram and drove strong engagement on the platform.

The brand has seen strong consumer demand following the launch of Tommy Hilfiger monograph in Europe to campaign, featuring celebrities such as Kate and Leila Moss Travis Barker Jamba test and Anthony Ramos drove a higher sell through rate twice that of the rest of the fall collection range with <unk>.

Double digit increases in ASP.

Im very strong retail activations, we saw incredibly strong impressions and share of voice in Asia, and North America as well.

In addition, as part of the Tommy Hilfiger Monogram collection, the brand's collaborated with British design of Richard Quinn on a limited edition capsule, which highlights the refreshed logo and received exclusive tier one retail distribution globally, including French premium retailer Prentice Hall.

We're excited about our upcoming holiday campaign and collection featuring American iconic styles with distinctive modern aesthetic inspired by Andy Warhol factory paying tribute to Warhol famous parties and the joy of gift, giving during the holiday.

The collection is available at <unk> Dot Com, Tommy Hilfiger stores globally and key wholesale partners.

And for Tommy Jeans, the label is collaborating with Martin Rolls for now I'm, recalling I inspired capsule collection with modern wardrobe Essentials fusing Street wear style with prep details is currently available on <unk> dot com and Tommy Hilfiger stores globally.

For both brands, we're looking forward to an exciting holiday season.

In closing I feel very good about the strong underlying performance we delivered in the quarter that enabled us to beat both our top and bottom line expectations and I am confident in our ability to deliver our full year commitments and.

And we are delivering this despite the macro challenges and volatility we are all navigating through.

Looking forward I'm incredibly optimistic for how in a very disciplined manner through the PVH plan every quarter, we will unlock more and more of the full potential of our two iconic brands Calvin Klein and Tommy Hilfiger across all our regions leveraged by PVH has a high performing global.

Load growth platform, we will be relentless in our execution of this.

Before I turn the call over to <unk> I would like to again, thank all our associates around the world for your hard work important contributions this year and I wish everyone, a happy healthy and safe holiday season.

I'll now turn the call over to <unk> to discuss the financials in more detail.

Thanks, Stefan and good morning.

My comments are based on non-GAAP results and are reconciled in our press release.

As Stefan discussed we are pleased to report strong third quarter results, which exceeded our topline guidance by 2% delivering underlying revenue growth of 9% versus last year and significantly exceeding our earnings guidance with earnings per share of $2 60.

We remain laser focused on what is within our control as we continue to navigate a challenging and increasingly complex macroeconomic environment and that discipline is reflected in our performance for the quarter.

Our underlying revenue growth was driven by strong growth across all regions and both our Tommy Hilfiger and Calvin Klein brands. We delivered continued solid performance in our international businesses and sequential improvement in North America, driven by the direct to consumer business.

On a reported basis revenue was down 2%, which reflected a 9% negative impact from exchange and a 2% negative impact from the war in Ukraine.

We continue to focus on driving performance in our direct to consumer business, where we have the closest connection to our consumer and DTC was up high single digits on an underlying basis on a reported basis DTC revenue was down 5% compared to last year, which reflected a 10% negative impact from exchange and a two.

Cent negative impact from the war in Ukraine.

From a regional perspective, we drove underlying growth across all markets third quarter revenue for our international businesses was up 7% versus last year on a constant currency basis, continuing to significantly exceed 2019 pre pandemic levels.

Within our international business, our European business had a record quarter exceeding 1 billion euro revenue for a quarter for the first time ever.

Our Asia Pacific business, excluding China grew nearly 30% compared to last year, even with a negative impact of exchange of 15% and.

And importantly, we drove mid single digit growth in China in local currency as COVID-19 restrictions, there lessened compared to the first half of the year.

While we remain optimistic about our business in China that continues to be a challenging environment as restrictions have once again intensified in the fourth quarter.

In North America revenue in the third quarter was up 10% overall for Tommy Hilfiger, and Calvin Klein and above our plans. Despite the inflation and interest rate pressures that continue to weigh on consumer sentiment in the region.

Our North America retail store business was up double digits versus last year, even as we continued to be impacted by the lack of international tourism from Asia.

And we drove sequential improvement versus the second quarter as we improved inventory levels in store and grew sales to domestic consumers with our comp base now back to 2019 levels.

Our wholesale business was also up double digits versus last year.

Our global brands also continued to deliver strong underlying growth with Tommy Hilfiger revenues up 7% on a constant currency basis, and Calvin Klein revenues up 9% on a constant currency basis reported revenues were down 4% for Tommy Hilfiger and up 1% for Calvin Klein.

In the third quarter, we delivered gross margin of 55, 9% up approximately 130 basis points compared to pre pandemic levels, but down approximately 180 basis points compared to last year.

This includes a 40 basis point negative impact of exchange, while gross margin reflected planned price increases that benefit was more than offset by higher costs and increased promotional selling as inventory levels are elevated across the industry.

SG&A expense as a percentage of revenue for the third quarter was better than planned at 46, 2% and nearly flat to last year. We continue to take a disciplined approach to managing expenses driving cost efficiencies, while making targeted investments in strategic areas to fuel growth in.

In line with the fifth growth driver of the PVH plus plan.

We also took actions this quarter to drive initial progress under the plan, we announced last quarter to reduce people costs in our global offices by approximately 10% by the end of 2023.

As a reminder, we expect that once completed these reductions will generate annual cost savings of over $100 million with a small benefit to 2022 and increased savings as we move through 2023.

In total our EBIT for the quarter exceeded our guidance due to strong revenue performance and lowered expenses operating margin was nine 6% as reported and 10% excluding the negative impact of approximately 40 basis points due to exchange.

On a GAAP basis, we also took a noncash goodwill impairment charge of $417 million, which was nonoperational and driven by significant increases in discount rates.

Earnings per share was $2 60, compared to $2 67 in last year's third quarter and exceeded the top end of our guidance by 45.

Almost entirely driven by the improvement in EBIT.

Earnings per share for the quarter also included a 35 negative impact compared to the prior year related to exchange and an <unk> 18 negative impact due to the war in Ukraine.

Inventory was up 32% at the end of the quarter compared to the prior year period due to a combination of factors first inventory levels were abnormally low last year in all regions and consistent with second quarter, we are normalizing to levels that support our planned growth.

As we've discussed previously we have increased our inventory investment in core product to mitigate supply chain and logistics disruptions and ensure that we have the right product at the right time.

While supply chain and logistics disruptions have not eased entirely we have begun to see improvements in on time delivery and decreases in in transit times.

And lastly inventory levels remain elevated in North America wholesale due to lower than expected demand at the end of Q2 I mentioned that this was worth about $65 million of the increase in inventory versus the prior year at.

At this point, we have reduced that amount by nearly a third and are on track with our plan to normalized inventory levels in North America.

Additionally, we delivered on our commitment under the PVH plus plan to return excess cash to shareholders returning over $100 million to shareholders during the quarter through the repurchase of $1 9 million PVH shares and our dividend.

Moving on to our outlook.

To start with we are reaffirming the top end of our projected revenue guidance up 4% on a constant currency basis, and our EBIT margin outlook of approximately 9% and we are raising our full year EPS projection to $8 25.

We continue to work relentlessly to drive results, even in the face of the challenging macroeconomic environment and trends within the retail industry. Our strong third quarter performance is a testament to our ability to react quickly in the short term, while continuing to be laser focused on strategic actions to support the long term growth of our business powered by our <unk>.

<unk> brands, Calvin Klein and Tommy Hilfiger.

For the full year, we continue to project underlying high single digit revenue growth in line with our previous guidance on a reported basis revenue is projected to be down approximately 3% as reported compared to 2021 and reflects a 7% negative impact from exchange and a 4% reduction resulting from the <unk>.

<unk> brands transaction, the exit from the heritage brands retail business and the war in Ukraine.

We expect total digital penetration as a percentage of revenue to be nearly 25%.

We expect our full year gross margin rate to remain significantly above pre pandemic levels. The approximately 130 basis points below record levels in 2021, which includes the negative impact of exchange of approximately 30 basis points.

We continue to expect pressure on our gross margin for the remainder of the year due to promotional selling.

Overall, we expect gross margin in the fourth quarter will reflect a similar year over year decline versus what we reported for the third quarter as we offset the negative impact of the increasingly promotional environment by driving our higher margin direct to consumer channel is a greater share of the business versus last year.

We continue to take a disciplined approach to manage expenses across the business in light of increased macro pressures weighing on our gross margin and we are accelerating cost efficiencies, while prudently investing in the core pillars of the PVH plus plan.

SG&A expense as a percentage of revenue for the full year reflects an approximately 60 basis points improvement compared to our previous guidance and is now expected to be approximately 40 basis points higher compared to 2021.

Our full year operating margin projection continues to be approximately 9% and reflects a negative impact compared to last year of approximately 40 basis points due to exchange.

Our interest expense projection is unchanged at approximately $85 million and we continue to expect our corporate tax rate will be approximately 24%.

For the full year 2022, we are raising our projected earnings per share to be approximately $8 25.

Compared to our previous guidance of $8 the increase versus our previous guidance is primarily due to our strong Q3 performance.

Our planned stock repurchases in 2020 to remain at approximately $400 million with approximately $330 million of repurchases completed year to date.

For the fourth quarter, we are projecting mid single digit revenue growth in our underlying business on a reported basis revenue is projected to be down approximately 4% as compared to 2021 and reflects an 8% negative impact from exchange and a 2% negative impact from the war in Ukraine.

Fourth quarter earnings per share is expected to be approximately $1 65.

Which reflects the negative impacts of approximately 27 due to exchange and approximately <unk> 15 from the war in Ukraine compared to the prior year.

We expect our tax rate in this year's fourth quarter will be an expense of approximately 25%, which is relatively in line with our full year rate expectation.

As a reminder, in last year's fourth quarter, we benefited from noncash tax rate relief tied to our purchase of the Calvin Klein brand back in 2003. This benefit ran out in 2021.

As a result, our tax rate in the fourth quarter of last year was a benefit of approximately 33%.

We expect our interest expense for the fourth quarter to be approximately $24 million.

Before we open it up for questions I want to reiterate that we are pleased with our strong third quarter results and that we were able to continue to drive strong underlying growth across the business even in the tough macroeconomic environment.

We remain focused on driving our strategic priorities. Despite the continued volatility.

Through the PVH plus plan, our global brands and businesses are well positioned to drive long term value creation and deliver sustainable profitable growth and shareholder returns.

And with that operator, we would like to open it up to questions.

Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing star can you. Once again that is star one to ask a question.

Thank you our first question will come from Bob <unk> with Guggenheim. Your line is now open.

Alright.

I guess the question that I'd actually like to spend some time on if you could is.

Can you just talk us through the strategic rationale for taking and the G. Three licenses back and sort of how you're structured on them and why now.

Sort of how you're really approach. This I think that would be pretty helpful. Thanks.

Absolutely. Thank you Bob so as we communicated.

Yesterday, we are extending the licensing agreement with <unk> in a way that over a multiyear period will bring these categories back in house and the rationale for that is very much connected to the PVH plus plan and what that is about because.

In essence, the PVH class plan, if a growth plan as a brand driven growth clients hits about locking the full potential of our brands.

And the brands, both Calvin and Tommy and our brands are the most valuable assets. We have so when we look at overtime over the next few years in housing. This it's about giving US complete control of those fronts. So when you look at the PVH class plan, we have five growth drivers in each very much connect.

To what creates value in unlocking those fronts, so product design the product assortment to pricing.

Market channel mix.

Enabling us to connect to a demand driven supply chain. So all those parts are value, creating growth drivers and that's what we will be able to be in control of and.

It will help.

And help unlock more of Calvin and Tommy.

And bigger value creation over time, but it also help us build Calvin and Tommy to truly global cohesive aspirational lifestyle brands.

And then maybe Bob I can give a bit of context from an economics perspective.

To complement the strategic element to this so first of all I think is useful the size the current business impact.

These are predominantly U S womens wholesale categories for Calvin Klein and Tommy Hilfiger and today. These licenses make up approximately one third of our global licensing revenue.

And from a profit perspective, the profit comprised less than 10% of our 2021 EBIT.

I think also important to note is that due to the structure of the agreement we do not expect any material impact to our financial results between now and the end of our PVH plus plan commitments in 2025.

Beyond that in 2026 and beyond we do expect the impact to become more material.

We expect the intake of this business will be accretive to our financial results as we take advantage of the scale of what the rest of the business has.

Alright, Thank you very much.

Thank you. Our next question will come from Michael Binetti with Credit Suisse. Your line is now open.

Hey, guys. Thanks for all the details and congrats on a nice quarter and Thats a tough backdrop.

I've got a quick one on the model just.

For the EBIT guidance in fourth quarter, it seems like it implies a deep.

And step up relative to third quarter on both a year over year on a three year basis, maybe you can unpack that a little bit how much of that cost savings are mixed dynamics that help us understand that a little and then I guess.

What I found interesting was the U S. DTC comments the stores define I know it's been a focus for you. It seems like there's a bigger unlock emerging there.

I know you said I think you said domestic consumer traffic across the back above 2019 levels for the first time, it's great to hear and they've been finding that hard I think.

You told US 30% of sales in those doors or at least in the outlet doors in the tourist volumes, maybe talk a little bit about how far below 2019 levels. Those doors are today in productivity and margins and what you think are some realistic.

Liam term.

Expectations for how much those can progress back to pre COVID-19 levels.

Okay. Thanks.

Thanks, Michael so before for either Sac unpack more detailed financials and the outlook for Q4, so what excites US with Q3 is that we were able to compete to win in.

In a difficult macro backdrop, and we continue to outlook for Q4.

It's based on that we will continue to do that in Q4, and we had on planned start of the holiday and then we compete continue to compete to win through Q4 and Thats the thats the.

Underlying driver of the Q4 outlook, but feel free to give more texture.

I think as we saw as we moved through the third quarter.

Overall August and September strong and then some of the macroeconomic backdrop as Stefan mentioned, we began to see some softening in consumer sentiment in October and we've fought hard and we believe.

<unk> for our fair share there as we look forward, we've incorporated that sort of outlook as we sort of work through the third quarter into the fourth quarter results or into the fourth quarter outlook and expect that to sort of be the underlying dynamic that we're competing in more broadly from a gross margin perspective, we.

Our gross margin impact versus last year to be approximately the same as the third quarter. The composition of that obviously a little bit different is we do expect that higher level of promotional environment to continue through the fourth quarter. We saw at the end, but we get the lift there from <unk>.

Much heavier DTC retail focus quarter, but the overall margin impact from there and then I think from a SG&A perspective, we expect to see continued.

<unk> as we work our way through being really disciplined and focused on the spending.

From an outlook for the fourth quarter heading into their central incorporated into the guidance that we've provided.

And Michael to your question about North American the Green shoots we are seeing in D. C stores, yes, it's exciting because we've worked really hard to double down on the execution starting with.

Our hero products and making sure we have dosed.

First essentials that we are known for in both fronts that we have them in stock. So what we saw in Q3 was that we were able to navigate through most of the supply chain issues. So we had better in stock levels in more of our hero products and then we were really focused on the channel execution than we saw.

We saw that drive this double digit growth in our stores and we saw the comps coming up with a domestic consumer so still early days, but very encouraging if we take told me as an example, where we increasingly connect our products to the global design center of the.

Brand.

And have those best sellers, even for the North American market, we see that in category, a slight men's knits, which is our number one category for Tommy we were up 42% versus last year, So Paulo <unk>.

Connick essential best sellers.

<unk> are driving significant growth in led by global best seller. So we're able to get more of the hero products in stock.

Better product execution leveraging.

Global brand design higher AUR summed up and then we see that we are starting to come off bank came up again.

Against 2019, so early days in North America, and Thats very encouraging.

Very helpful. Thanks, a lot guys congrats.

Thanks, Mike.

Thank you. Our next question will come from Jay sole with UBS. Your line is now open.

Great. Thank you so much I don't want to follow up on some of the comments you made about SG&A.

SG&A control as part of the PVH plus plan, but can you help us understand how much of the really strong SG&A control in the quarter was sort of a response to the consumer environment versus how much is sort of identifying opportunities to streamline costs and get more efficient, which will sort of continue into next year and really beyond thank you.

Thanks, Jay so.

<unk> really done a great job coming in.

And helping us execute on the fifth growth driver of the PVH platform, which is about driving efficiencies and freeing that up to invest in growth drivers. So what you see now in Q3 and going forward increasingly you received that we are step by step becoming more cost competitive of course.

111 aspect of that is even more important when we operate and compete to win in a tough macro but this is something that second I will drive.

Throughout the whole PVH plus.

Germany and beyond.

Yes, I think just more specifically there was really no one single item driving <unk> SG&A efficiency and instead the efficiency was across the board as our disciplined focus on spending on only the most impactful elements of the PVH plus I'm really paid off this is about focus and prioritization and we actually are confident we can both invest.

<unk> growth and deliver SG&A efficiency. So we also continue to invest in those areas. Most important for growth that was included in we're spending so digital as we re platform our U S. Calvin Dot Com site. It continued to build out our European digital ecosystem supply chain as we're building the technology infrastructure across the <unk>.

And logistics capability in Europe , and increasingly moving forward Youll see spending in the U S retail network and global marketing. So we believe that we actually do have the ability to do both to invest in those things most important and really drive those efficiencies as well.

Got it thank you so much.

Thank you. Our next question will come from Chris Nordling with Bank of America. Your line is now open.

Mark Yes.

Hi, yes.

There we go we got you know.

Okay perfect.

Can you provide an updated state of the Union on your performance in some of your major Western European markets and then how some of those trends have evolved quarter to date relative to <unk> and then just as a quick follow up into some of your vacancies for head of Americas, and how does the Calvin.

G III announcement change.

How you are looking at the attributes to fill some of those roles. Thanks.

Yeah, Thanks, Chris So starting with Europe .

We had a record quarter, we never made a quarter before in Europe over $1 billion. It's the first time, we did over 1 billion euros for the first time in a quarter, so very strong execution by our European team.

Drove underlying growth of mid single digit again, we were able to do this despite the tougher macro for sure. There is a tougher macro situation I would say globally, but in Europe .

A good example of when we were able to navigate through that successfully.

And then we go into the start of holiday, where Black Friday has become increasingly relevant in Europe increasingly irrelevant and big.

And we just came out of that then drove strong performance across both brands all channels. So feeling good about.

How how our teams continue to execute really well.

Yes, I think then if we take a look and just more broadly on the European performance as defined mentioned continued to see strength there.

And as we look forward there is all important order books, the fall order book holding well spring order book as we've talked about in prior quarters lending at high single digits and in fact that some of the supply chain global supply chain challenges of loosens product is showing up on time or a little bit early and reconfirming the strength of.

The brand is those accounts are eager to take that product I think moving moving forward as well we feel good about the strength that Europe has continued to drive.

And then Chris when it comes to the leadership searches we have I'm.

I am excited to share that we are making really strong progress. So within the next few weeks I look forward to update you all on what that means both for the Calvin Klein Global brand and for our North America businesses and to your question about how this connects to.

The talent choices the leadership choices connect to the transition of the G. III categories definitely it connects to the PVH plus plants. So we are.

About two land leaders, who will bring some different form sell best in class experience that.

Helps us unlock both Calvin and Tommy So, yes, very excited and looking forward to in a few weeks' time to just give you an update we have time for one more question.

Thank you our last question will come from Ed <unk> with Piper Sandler Your line is now open.

Hey, good morning, guys. Thanks for taking the questions I guess, one short term question as you think about these <unk> licensing I know you said there is no near term financial impact, but how do you think about building talent in preparation for taking those licenses and 25% in 2007, and then Stefan is a longer term question. It seems like U S. Wholesale one of your competitors has been advocating.

Some of these more premium price point, but can you talk about the white space you think.

That you have given that youre able to kind of reposition some of your brands and the more premium product. Thank you.

Yes, definitely so starting from your question about white space or opportunity. So as I mentioned in my prepared remarks I've been traveling extensively at this past weekend Thanksgiving weekend, we will see in a number of our U S markets and just seeing the love for both Calvin and Tommy that consumers love in the North America market.

The opportunity we have to in a more disciplined way tap into that so we have great partnership with our wholesale partners, we have great locations within.

All stores and we have an end consumer that loves Sabra, so where we have opportunity to connect to the PVH plus focus which is better disciplined on the product categories that really matters that are big for the consumer essential and where we have the right to play to win and that we build the best hero products.

Within those and when we do today, it's early days, but where we do that today, we see that we win we win immediately is one to one as soon as we play in the right category with the right hero products, We drive the revenue and we drive we don't we don't see any price resistance. So so it's very it's very <unk>.

Sighting to see that.

Being getting closer to.

Excellent Siem product and then combining that with our consumer engagement and the talent that then the product and the consumer engagement that shows up in social media shows up in ecommerce and increasingly in our stores, it's just exciting potential everytime im out walking stores.

I see it.

It's so concrete.

And then I think Ed Im sure. Its the final want to comment on the build out of the talent capability for the categories coming in but just to sort of start a little bit I think if you think about from a financial perspective on that.

We already do great product creation, all around the world.

Got great supply chain capabilities as well and so I think we believe that we've got.

A good amount of infrastructure in place from a financial perspective.

We've talked about not seeing a material impact to the financials over this medium term period, that's what gives us the confidence as Stefan I'll talk about how we go about building out some of that the actual capabilities themselves.

Yes, we have both both the time the time plan is setting ourselves up in a very good way to us.

As Sam mentioned step one is to leverage the capability, we already have because we have a lot of these capabilities and we see that with dose leaders and teams and capabilities, we're able to drive winning.

Winning big in both Europe , and Asia. So we see that one is tapping into that and two is to complementing our team strength leadership strength here. So we're doing both.

Having this time to ramp that up.

And with that.

Thank you very much.

And with that we will.

Want to thank all of you.

Following us and wish you a really good restful holiday and looking forward to catching up into the new year.

Okay.

Thank you ladies and gentlemen. This concludes today's event you may now disconnect.