PVH 2Q15 Earnings Call Notes

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Strong performance in Europe and China, weak performance in Korea and Brazil

“By region, we are seeing very strong performance for Europe and China for both brands. In Korea and Brazil, where we have a large Calvin Klein business, sales trends continue to be challenging as we are being negatively impacted by the macroeconomic environment for each of those countries.”

Later back to school is making it difficult to read the wholesale business

“In North America, we are dealing with a later back-to-school selling season, due to a weak later Labor Day Holiday, which is making it more difficult to read the business. Our retail same-store sales are running negative low-single digit at Calvin Klein and negative mid-single digit at Tommy Hilfiger. Those two businesses are running on plan given the later back-to-school season and are continue to be impacted by international tourist traffic and spending”

You can’t help but be a little bit more conservative watching what’s gone on with the stock market

“The challenge is – trying to operate that business is, trying to get beyond a lot of the noise that’s going on from the stock market point of view and where we see the business moving and going. So you can’t help, but look at that business and be a little bit more conservative about how we project that business out both through the balance of this year and then moving into 2016 and beyond. So it just gives us pause.’

Valuations are high but we still want to buy the Hilfiger license that we don’t own in China

“on Tommy, potentially we’re acquiring the 55% of the Tommy Hilfiger license business that we don’t own throughout China…I think from a valuation point of view, although that market has taken hits – if you look at PEs or valuations (23:28), they’re still relatively high. So we will be diligent as we look at that. But, clearly, one of our goals would be to own that business sooner rather than later”

It’s tough to read how back to school is going

“I think – geographically, I think it’s much more of a Northeast, Southeast phenomenon with the whole back-to-school being somewhat later. I think as you move across the country, some of those schools come back earlier. And since most of our retailers and ourselves have a concentration of business in those regions, it’s having a significant impact on trying to read business. I think when we get to September 15 or whatever, we’ll have a real clear understanding of how this back-to-school period is trending”

Favorable shift in Chinese New Year for Q4

“we are going to benefit in the fourth quarter like everyone else from early Chinese New Year, which really impacts a lot of the Asia markets. It’s about two weeks to three weeks earlier this year and you’ll get – you get two things happening; you’ll get earlier actual retail sales in the stores that we are operating, but also because of the early Chinese New Year, wholesale shipments are falling into January out of February.’

How do you raise prices in a world facing deflationary pressure

“the challenge, the biggest challenge we’re looking at is, how aggressive to raise prices particularly in a world, as you look out there that is facing extraordinary deflationary pressure in just general terms across a – the ways most economists speak, the biggest concern is deflation, not inflation.”

The biggest headwind we face is currency

“the biggest headwind we face, cut through it all, is currencies. ”

We’re seeing positive trends in Europe but also cost increases

“Europe. It has gone through some macro issues, but we’re actually seeing positive sales trends in Europe. We believe that economy is coming back and that consumer is re-engaging. The challenge we are facing in Europe for 2016 will be cost increases that are double-digit cost increases”

Planning to grow China mid single digits

Clearly, this is not the heydays of three years ago [in China] where, from 2007 to 2010, the business grew 15% topline. We are planning the business to grow more mid-single-digits. I think that’s reasonable.”

Biggest thing we’re dealing with is uncertainty

“I guess the biggest thing we’re dealing with is uncertainty and what that does to – potentially does to the consumer, how that forces us to plan our business, and reacting to the macro-environment”

60% of our marketing budget is directed at digital

“I would say between Calvin and Tommy, 60% of our marketing budget are directed at digital marketing, and connecting with the consumer there, converting them to our in-store platforms, our wholesale customers’ in-store – online platforms or our own brick-and-mortar stores as well.”

Important to get into other retailers besides department stores to connect with younger consumers

“I don’t think it’s any surprise to anyone that department stores tend to skew somewhat older…
So the opportunity with some of the retailers you talked about, Urban Outfitters, with Topshop, particularly The Buckle as we move forward, some other players Opening Ceremony, you mentioned, it’s as much – it’s as important as it is commercially. It’s also very important from a brand positioning point of view how we connect with the younger consumer, how we connect digitally, how we sell online for that consumer.”

European tourism is booming with the weak Euro

“our Chinese consumer or Asia consumer instead of being in the United States is more so in Europe. And as you – I was in Paris and I was in Amsterdam this last month, you could see the tourism boom that’s going on there and helping their economy.”

When you go on that show with Cramer it does get a little crazy at times

“when you’re on that show with Jim Cramer, it does get a little crazy at times.”

Amazon is good about getting us the brand experience on their site

“Our Calvin Klein Underwear business in particular is by far the largest selling underwear on the Amazon site, as you would expect giving them that product category. So they’re a great partner. We really manage that very closely from – making sure it’s brand enhancing. We just don’t want goods on the site. We want the brand experience on the site. And they’ve been very good at getting us that. ”

50% of outlet sales are going to be from tourists?

“if you’re a global player that really attracts a global consumer, in those centers like Orlando or Harriman, your customer base in those centers for those brands, 50% of the credit card sales are international tourists from South America, Europe and Asia. “