PVH Corp. (PVH) Q1 2026 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to today's PVH First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this call may be recorded. [Operator Instructions] It is now my pleasure to turn today's program over to Cait Howard, Senior Director of Investor Relations.

Thank you, operator. Good morning, everyone, and welcome to the PVH Corp. First Quarter 2026 Earnings Conference Call. Leading the call today will be Stefan Larsson, Chief Executive Officer; and Melissa Stone, Interim Chief Financial Officer and Executive Vice President, Global Financial Planning and Analysis. This webcast and conference call is being recorded on behalf of PVH and consists 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 to be discussed includes forward-looking statements that reflect PVH's view as of June 3, 2026, of future events and financial performance. These statements are subject to risks and uncertainties indicated in the company's SEC filings and the safe harbor statement included in the press release that is the subject of this call. 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 first quarter 2026 earnings release, which can be found on www.pvh.com and in the company's current report on Form 8-K furnished to the SEC in connection with the release. At this time, I am pleased to turn the conference over to Stefan Larsson.

Thank you, Cait, and good morning, everyone, and thank you for joining our call today. I want to start by thanking our teams around the world for their hard work this quarter as we build Calvin Klein and Tommy Hilfiger in to their full potential. For the first quarter, we achieved our guidance across all key metrics and delivered EPS above our guidance. Total revenue for the quarter was $2 billion, up 2% on a reported basis and exceeding guidance and down 2% in constant currency, in line with our expectations. We grew our direct-to-consumer business 3% in constant currency across both Calvin Klein and Tommy Hilfiger, driven by strength in e-commerce across both brands and all regions. As we discussed last quarter, we strategically increased our marketing spend, and this stepped up investment, together with a sharper focus on our target consumer segments is cutting through, attracting new consumers, driving online traffic up and delivering mid-single-digit e-commerce growth in constant currency. We also grew multiple full hero categories in D2C, underwear and denim for Calvin and sweaters and outerwear for Tommy as we scale the impact of our stronger product cut through campaigns and improved consumer experience. Wholesale was down mid-single digits in constant currency driven by the timing effects we discussed last quarter, together with cautious partner positioning. Importantly, we delivered flat gross margins in the quarter versus last year, reflecting year-over-year improvement in all regions, excluding tariffs. We also delivered an operating margin of 6.5% for Q1 at the high end of our non-GAAP guidance, including the impact of tariffs. Globally. In Q1, we further invested in the shopping experience across digital shop-in-shops and store concepts, completing more than 140 refurbishments and new store openings combined. We continue to strengthen our supply chain in the quarter with good inventory levels, down 5% versus last year, supported by improvements in availability, better on-time deliveries and going margins on plan for both brands. We also continue to make important progress in becoming more data and demand-driven, enabled by our enterprise data platform and strengthen through our partnerships with open AI and sales force. Together, these capabilities are helping us connect consumer product and operational insights across the value chain so we can move faster, get closer to demand and make more data-driven decisions. At the highest level for the quarter, we delivered on all our commitments across the P&L. Despite the increasingly challenging consumer and macroeconomic environment in EMEA, driven by the prolonged Middle East conflict. As we look forward, we are balancing 2 opposing forces. The first is increasing business momentum we are building in both Calvin and Tommy. When we last spoke at our full year earnings call, we have started 2026 with higher spring season sell-through trends across both brands and all 3 regions. This momentum has since continued in the Americas and APAC with strong new consumer acquisition growth and e-commerce growth in all our regions. The second force is the prolonged effects of the Middle East conflict, now extending beyond the third month, which is putting increasing pressure on our EMEA business in 3 ways. First, our direct Middle East business is seeing notably lower wholesale demand. Second, we have seen a knock-on effect in Turkey as reduced tourism and macro factors weigh on demand there. And third, we are seeing a broader macro effect on consumer purchasing behavior in the EMEA region, including the effects of higher fuel costs, which is leading to lower consumer sentiment and fewer drives to stores. With these 2 forces at play, we are leaning into the areas where we have already built momentum. We plan to grow our APAC and Americas business overall, fueled our e-commerce strength in all regions. And continue to invest in our effective marketing, where we are increasing our spend by 50 basis points versus last year. In our operations, we are making sure that we keep optimizing our inventory levels, further improving on-time deliveries and keeping going margins on plan. And we will keep investing in elevating the consumer experience across e-commerce. And this year, through our new store concepts in both brands we are significantly ramping up our upgrades to key shop-in shops and stores globally. As we shared last quarter, we did not include the prolonged effects of the Middle East conflict in our original guidance, which we now expect to feel the impact of for the full 3-month period in the second quarter as well as through the back half of this year. As a result, we have to reduce our EMEA outlook, and we are updating our overall full year outlook. We now expect the company to be flat for the full year and down slightly in constant currency. We are reaffirming our full year EBIT margin and EPS guidance, which includes offsets from tariff refunds. Melissa will share more details on this shortly. It's important to note that while we adapt to the prolonged effects of the Middle East conflict, we are continuing to fuel our business and brand momentum and keeping our long-term perspective. Let me now come back to how we drove the business in Q1, where a key piece of how we continue to build the brand momentum for both Calvin and Tommy in the quarter, is the sharpened focus we have on our consumer power segments, the status shopper for Calvin and the style and enthusiasts for Tommy. These consumers shop more often have higher order values and are more loyal. Step by step, we are bringing this strategic consumer lens and discipline to every aspect of our commercial plans. We are increasingly targeting these power segments and are focused on the hero categories where we have the right to play and win. These include underwear, denim, outerwear and knits for Calvin and sweaters, outerwear, shirts and knits for Tommy. We continue to put innovation and newness into creating the best product franchises within those categories, and we are increasingly driving full funnel 360 activations. As we scale this disciplined approach, we see increasing commercial impact across both brands. In Calvin Klein, throughout Q1, we continue to focus on Calvin's greatest areas of brand authority underwear and denim, leveraging stronger operational execution to drive measurable commercial impact in bigger and bigger parts of the product assortment. During the quarter, we delivered a stronger and more consistent drumbeat of new product innovation and campaign moments, featuring culturally relevant talent, including Dakota Johnson John Cook and FC Barcelona Star refine. These full funnel brand activations help strengthen the connection from brand impact to conversion and we delivered mid-single-digit growth in global underwear and double-digit growth in denim in our direct-to-consumer business. The strength we are building in these key growth categories is meaningful since they account for a significant portion of the total Calvin business globally. We also saw strong momentum across digital channels, particularly in share of search and e-commerce, where we continue to see our full funnel approach translate into consumer action with increased traffic across all regions. As we discussed last quarter, we also continue to capitalize on the ongoing '90s inspired trends that Calvin Klein help define, leaning into the iconic silhouettes and styling made current for today's consumers. In addition, just a few weeks ago, we launched Jon Cook for Calvin Klein. A capsule collaboration that blends John Cook's style with Calvin's iconic '90s aesthetic. This is John Cook's first fashion collaboration, and it's already our most successful Calvin collaboration to date. Through teaser content, immersive pop-ups, digital-first storytelling, we tapped into John Cooks and Calvin's global following and built excitement and authentic consumer connections. The response has been incredible across all channels, with lines forming outside stores around the world on launch day and impressive sell-through rates across all regions with 99% sell-through on Tmall in China and a complete sellout at our pop-up store in L.A. In the marketplace, we are about to launch a new store concept for Calvin Klein, and you will see some of those new elements in the flagship store we just opened in Seoul, Korea, representing another step forward in modernizing our global fleet and bringing the brand to life in even more immersive and aspirational ways. In Tommy, we continue to make great progress in unlocking the full potential of Tommy and its classic American cool DNA. We're doubling down on our target consumer and strengthening our focus on Tommy's iconic product categories. This focus came to life with the launch of our Tommy Spring campaign in the quarter which we executed with more powerful storytelling and a more elevated consumer journey, including a stepped up digital experience, driving much higher engagement than last year and delivering mid-single-digit D2C growth in our core categories with sweaters and outerwear, both up double digits. On a more granular level, we also expanded our product storytelling with an emphasis on our iconic product franchises like transitional outerwear, cable sweaters and sweater polos to name a few. The brand's momentum in sports culture continues through its partnership with Liverpool Football Club, Cadillac Formula 1 and U.S. SailGP. In Q1, we leveraged several exciting consumer moments, including our Miami Formula 1 activation, where we launched our fan wear capsule, the first drop in a series inspired by the most iconic cities on the Formula 1 calendar. When we last spoke, we had just announced Travis Kelce, American football icon and 3 times Super Bowl Champion as a global brand ambassador and creative collaborator. He's a huge star on and off the field, and we are excited to partner with him in a series of campaigns starting with our Fall '26 campaign shot at The Plaza Hotel in New York. Travis loves the Tommy brand, and we are seeing significant and sustained earned media already with the social reach of the announcement itself reaching hundreds of millions of people across social platforms. In the marketplace, we also continue to elevate the consumer experience and are now rolling out our new Tommy shop-in-shop and store concept globally, with several new openings in Q1, including Herald Square in New York City and MK in Stockholm with additional new stores planned for this year. We will continue to address top Liverpool football club players ahead of key matches, focusing on personal and distinct styling and shopability for each look. Last week, with the World Cup just about to start. Tommy and LFC unveiled the summer of football, presenting Liverpool football clubs, most recognizable players in the summer 2026 collection. Looking ahead to Q2, we continue to maintain our sharper consumer and category focus. We are further expanding innovation and newness across our core product franchises and we are delivering cut through full funnel marketing that connects with culture and our target consumer. Now let me turn to our regional performance, starting with Europe. Revenue decreased mid-single digits in constant currency, in line with our expectations with positive spring season momentum offset by lower D2C performance in April due to the prolonged direct and indirect effects of the Middle East conflict as I previously discussed. Despite these effects, especially on traffic to stores, we drove strong e-commerce traffic improvement in the quarter, which translated into low single-digit e-commerce growth supported by our marketing investments and enhanced execution. Importantly, while we see the effects of the Middle East conflict extending into Q2 and the full year. We have seen Europe D2C performance improved in May quarter-to-date, partly supported by positive calendar timing. We also continue to see growth in our consumer base, increased consideration and purchase intent and stronger engagement with our key campaigns and core product stories. For both Calvin and Tommy, we continue to see that where we lean in and introduce newness and product innovation into our core categories, the consumer responds and we drive growth. Our focus continues to be on scaling this across bigger parts of the assortment while adjusting our outlook to reflect the prolonged Middle East contract. Importantly, we expect to maintain our marketing investment plan in the region, drive higher ROI and conversion of our e-commerce traffic and strengthen the overall consumer brand experience in the region across all channels to deliver commercial impact for both today and the long term. Next, turning to the Americas. In the first quarter, we delivered low single-digit growth in our D2C channels, driven by our e-commerce business with significant AUR gains in the high single digits. Our e-commerce channels continue to grow quarter-over-quarter and year-over-year, supported by higher traffic and average order value. This D2C growth was offset by a decline in wholesale as expected due to timing shift. And overall revenue was down slightly in the Americas year-over-year, in line with our plan. Product-wise, spring newness and seasonal categories outperformed in the high single digits across men's and women's in both brands. We also expanded our Linen lifestyle assortment launching earlier in the season this year, building upon success last year. Denim also continued to outperform, up double digits, benefiting from increased newness, more strategic investments in core fits and strong execution across consumer touch points. We will continue to focus on strengthening the in-store brand experience and further step-up remodels this year. Within wholesale, we launched Tommy Hilfiger women's sportswear in Macy's in over 200 doors with sell-through outperforming plans and are investing in building out a new shopping experience, including a remodel in Herald Square flagship opening later this month. Importantly, while the overall wholesale channel declined year-over-year, driven by timing, sell-through with key partners was positive in the quarter. Moving to Asia Pacific. We delivered a strong start to the year with growth ahead of plan, driven by our D2C channels. Revenue was up mid-single digits in constant currency, supported by favorable Lunar New Year timing and strong spring performance with seasonal campaigns featuring APAC relevant talent. D2C was up double digits year-over-year, led by strength in brick-and-mortar and continued high single-digit e-commerce growth, while wholesale remains more cautious. Importantly, we delivered strong double-digit growth in our core categories of men's underwear and denim. All our markets in Asia strengthened their top line growth versus last quarter, continuing the sequential improvement trends from 2025 with strong traffic and sales momentum in China and Southeast Asia. This was partially offset by headwinds in Australia, where the consumer is under pressure from high fuel prices and interest rates. Looking ahead, we expect to sustain our momentum in APAC with growth led by D2C and strength in key consumer moments together with disciplined marketplace execution, offsetting the challenging macro in Australia. For Q2, our APAC team is continuing to drive strong consumer engagement, leveraging the excitement around key local activations. First, the John Cook Calvin Klein collaboration we just had, where we had over 85 in-store activations. The important upcoming 618 shopping festival in China and the sole flagship store opening. In our licensing business, we continue to work very closely with our long-term strategic partners who are fully aligned with our brand direction and help bring our vision to life across multiple complementary categories where they are experts from watches and fragrance to eyewear. These partnerships are a critical part of how we drive sustainable, profitable growth through the PVH+ Plan. While revenues in licensing were lower versus last year, reflecting the transition of previously announced women's wholesale categories in North America we still expect a go-forward licensing business to grow over the full year. In conclusion, for the first quarter, we delivered on our guidance across all key financial metrics, reflecting our disciplined PVH+ Plan execution and the momentum we are building in our 2 iconic global brands, Calvin Klein and Tommy Hilfiger. We grew our D2C business across both Calvin and Tommy, driven by strength in e-commerce. We expanded our product strength in both brands and drove D2C growth in key growth categories like underwear and denim in Calvin and sweaters and outerwear in Tommy. We increased our marketing spend and are cutting through, attracting our power consumer segments and driving strong e-commerce traffic. We delivered stable gross margins in the quarter, reflecting year-over-year improvement in all regions, excluding tariffs, and we continue to invest in the shopping experience. As we look forward, we continue to fuel the positive brand and business momentum in both Calvin and Tommy globally, driving growth in both APAC and Americas and driving e-commerce growth in all regions, while having to reduce our EMEA outlook to the prolonged effects of the conflict in the Middle East. In Calvin and Tommy, we have 2 of the most beloved brands in our sector globally. And every quarter, we will continue to strengthen the consumer offering as we build them into their full potential. And with that, I'll turn the call over to Melissa.

Thanks, Stefan. Good morning. For the first quarter, we delivered 2% reported revenue growth, slightly better than our guidance with constant currency revenue down 2%, in line with our plan. We drove D2C growth in total, both in stores and online across both Calvin Klein and Tommy Hilfiger. Operating margin was 6.5% and at the top end of our previous guidance range, with gross margin stable versus last year and better than planned and SG&A roughly in line with our expectations. EPS was better than our plan, primarily driven by lower tax and interest expense. As we look forward, we are updating our full year outlook, which now includes the prolonged x of the Middle East conflict together with offsetting benefit from tariff refunds. I will take you through these changes shortly, but first, I will discuss our first quarter results in more detail. From a regional perspective, EMEA revenue was up 2% reported and down 5% in constant currency. Both direct-to-consumer and wholesale revenue declined mid-single digits in constant currency as we lap stronger prior year comparisons and the macro environment became increasingly challenging due to the conflict in the Middle East. The impact of the conflict in the Middle East was felt more sharply in April. And as Stefan mentioned, negatively impacted our wholesale business in the region our business in Turkey and consumer traffic and spending more broadly across EMEA amid higher fuel costs. Wholesale revenue also reflected negative shipping timing effects as a larger portion of our spring season shipped in Q4 last year than in Q1 this year. Revenue in Americas was down 1% as low single-digit growth in D2C was more than offset by a mid-single-digit decrease in wholesale revenue. Importantly, we continue to drive growth in our e-commerce business, which was up low double digits. The decrease in wholesale revenue reflected a first half to second half timing shift compared to 2025 and partly offset by an increase in wholesale revenue driven by the North America license transitions. In Asia Pacific, revenue was up 10% reported and up 6% in constant currency, which included an approximately 4% benefit from the timing of Lunar New Year compared to last year. We grew D2C revenue by low teens in constant currency and by mid-single digits, excluding the Lunar New Year timing effect, reflecting strong execution around key consumer moments during the quarter. Wholesale revenue declined high single digits in constant currency as our wholesale partner in the region continued to take a cautious approach. Within the region, we drove strong high single-digit growth in constant currency in our China business following a challenging first quarter last year with double-digit growth in D2C, both in stores and online, including the Lunar New Year timing impact. Growth in China and other key markets was partly offset by lower revenue in Australia, where high fuel prices and interest rates are weighing on consumer spending. In our licensing business, revenue was down 7%, primarily due to the North America license transitions. Excluding the impact of these transitions, the go-forward licensing business was down 1% due to timing that will offset later in the year. Turning to our Global Brands. Calvin Klein revenues were up 1% as reported and down 3% in constant currency. Tommy Hilfiger revenues were up 3% as reported and down 2% in constant currency. From an overall PVH channel perspective, direct-to-consumer revenue was up 6% reported and up 3% in constant currency which included an approximately 2% tailwind from the timing of Lunar New Year compared to the first quarter last year. Sales in our retail stores were up 5% reported and up 2% in constant currency, driven by increases in Americas and APAC, partly offset by a decline in EMEA. We Sales in our e-commerce business were up 11% reported and up 6% in constant currency, with growth in both Calvin Klein and Tommy Hilfiger and across all 3 regions. Total wholesale revenue was flat as reported and down 6% in constant currency, with declines in all regions, as I just discussed. In the first quarter, our gross margin was 58.6% and unchanged compared to 58.6% last year despite a significant gross tariff headwind and approximately 50 basis point impact from the ongoing North America license transitions and the impact of an increased promotional environment. Notably, excluding the impact of increased tariffs, we drove gross margin expansion in all regions, reflecting our operational improvements and supported by healthy inventory levels. Inventory at quarter end was down 5% compared to Q1 last year. SG&A as a percent of revenue increased 160 basis points versus last year to 52.1% and included a 70 basis point increase in marketing spend compared to the first quarter of last year, as well as other investments in our business and our brands. In sum, EBIT for the first quarter was $131 million. Earnings per share was $2.01. Interest expense was $16 million, and our tax rate was approximately 19%. Now moving to our outlook. Our full year outlook reflects 2 key updates. First, recall that our previous guidance excluded any potential impact from a prolonged or expanded conflict in the Middle East. Our updated outlook now reflects the direct and indirect impacts to our revenue and earnings that we already felt in the first quarter and assumes an impact to our full year 2026 revenue and earnings with a more pronounced effect expected in the second quarter, including impacts to our wholesale business in the Middle East, to our business in Turkey as well as a broader impact to consumer spending in EMEA. Second, we are updating our tariff outlook. Our outlook continues to assume a negative impact from tariffs on goods coming into the U.S. but now also assumes a positive impact from tariff refunds. With respect to tariff rates, there continues to be uncertainty and our assumption of a full year blended rate of approximately 15% is unchanged, as is our expectation of an approximately $195 million gross tariff cost and EBIT or an approximately 215 basis points unfavorable impact to operating margin, which we will partly offset with our planned mitigation actions. Our outlook now also includes an approximately $100 million benefit to EBIT or an approximately 100 basis point favorable impact to operating margin related to tariff refunds not contemplated in our previous guidance. We expect to record these rebounds in the second quarter. As a result of our revised expectations related to the Middle East conflict, we are revising our reported revenue guidance to approximately flat to the prior year compared to guidance of a slight increase previously. We are also revising our constant currency revenue guidance to down slightly compared to guidance of flat to up slightly previously. Our operating margin outlook remains unchanged at approximately 8.8%. Regionally, we now expect revenue for our EMEA region will decrease mid-single digits in constant currency versus last year. Our revenue outlook for Americas and APAC remains unchanged, and we continue to expect to grow in both businesses. Our revenue outlook for licensing also remains unchanged. We expect gross margin to be up approximately 100 basis points versus last year, compared to up slightly previously, including the favorable tariff refund benefit of approximately 100 basis points, not contemplated in our prior guidance, partially offset by the negative impacts of the Middle East conflict. We expect SG&A as a percentage of revenue to be up approximately 100 basis points compared to last year compared to guidance of up slightly previously, reflecting further SG&A deleveraging resulting from our updated revenue guidance, which we will work to offset with other SG&A efficiencies. We Importantly, we continue to invest in our business and our brands to drive our business in the near term where we see strength, fueling the momentum in Americas and APAC and our e-commerce business globally. And for the long term, as we continue our multiyear journey to build Calvin Klein and Tommy Hilfiger into their full potential. As such, we continue to expect that we will increase marketing by at least 50 basis points to approximately 6% of sales in the full year 2026, consistent with the plan we set forth at the beginning of the year. Turning to below-the-line items. Interest expense is now expected to be approximately $75 million, and our expectation for taxes is unchanged from our prior guidance. Taken together, we continue to expect EPS in a range of $11.80 to $12.10. With respect to capital investment, we continue to project capital spending of approximately $250 million this year as we invest globally in e-commerce as well as store and shop renovations. We also remain committed to returning excess cash to stockholders through share repurchases as part of a PVH+ plan. Our expectation to repurchase at least $300 million of our shares for the full year remains unchanged. Next, turning to our second quarter outlook. We are projecting revenue to be down 3% to 4% on a reported basis and down 4% to 5% on a constant currency basis compared to 2025. In EMEA, we expect revenue to be down mid-single digits in constant currency with continued declines in both D2C and wholesale revenue as the region is expected to be meaningfully impacted by the conflict in the Middle East in the second quarter. In Americas, we are planning revenue down slightly as slight growth in D2C is offset by lower wholesale resulting from the planned first half to second half timing shift that I discussed previously. In Asia Pacific, we expect revenue to increase slightly in constant currency as growth in D2C is offset by continued caution on wholesale. And in our licensing business, revenue is expected to be down low teens overall, driven by the previously mentioned North America license transitions with growth expected in the balance of the business. We expect our second quarter gross margin to increase approximately 470 basis points compared to last year, resulting from the recognition of tariff refunds in the second quarter. Excluding the impact of tariff refunds, gross margin is expected to be relatively flat to last year, in line with first quarter trends. SG&A expense as a percent of revenue is expected to increase over 300 basis points in the second quarter compared to last year, including an approximately 100 basis point increase in marketing spend. As we've discussed, this year, we are more heavily weighting our marketing spend to the first half to amplify our cut-through campaigns and drive brand heat early in the year. The increase in Q2 also reflects a slight shift in timing of marketing investments from Q1 into Q2 compared to our original expectations. Overall, we expect our second quarter operating margin with approximately 9.5%, reflecting the benefit of approximately $100 million of tariff refunds partially offset by a meaningful impact from the Middle East conflict on our wholesale business in the region, our business in Turkey and consumer spending more broadly in EMEA, which we expect to be more pronounced in Q2 than in Q1. Second quarter earnings per share is expected to be in a range of $3 to $3.10. Our tax rate is estimated at approximately 22% and interest expense is projected to be approximately $18 million. Before we open it up for questions, I want to reiterate that while we are navigating the prolonged effects of the Middle East conflict, we are continuing to work relentlessly to unlock the full potential of our 2 iconic brands through the disciplined execution of the PVH+ Plan. We are strengthening our data and demand-driven operating model, improving inventory productivity and balancing a disciplined approach to managing expenses with continued high-value brand accretive investments to support the long-term growth of Calvin Klein and Tommy Hilfiger. And with that, operator, we would like to open it up for questions.

[Operator Instructions] Thank you. Our first question is coming from Jay Sole with UBS.

Stefan, I want to ask about the PVH+ Plan. It sounds like you're scaling the Plus plan across the business, applying it to different categories, having success. Can you just talk about where you are in that journey? How much of the assortment has been is now being executed the way that design and the PVH+ Plan? How much more is there left to go? And also on inventory, I think with the slowdown in the EMEA region, it would be fair to think that maybe there would be an inventory overhang that you'd be looking at some pretty significant markdowns and discounts over the next couple of months, if not next couple of quarters. But based on the inventory being down 5% in the guidance that most just gave, it sounds like that inventory is in pretty good shape. So if you can just talk about the PVH+ Plan in that demand-driven supply chain that you've been using to keep inventory under control and if you do expect markdowns? And if not, like how have you been able to avoid that?

Yes, thank you, Jay. Let's start with the progress of the PVH + Plan because you're right, this quarter, I would say it's one of the quarters where we put the most proof points on the board. So it's really tough to see the prolonged effect of the war hitting us. But if we look at the underlying strength and the momentum we are driving in Calvin and Tommy is really seen in for both brands up 3%. E-commerce up mid-single digit both brands or regions. And what's really -- how we are driving that connecting to the PVH+ Plan is we are leaning into the strength we have built over the past few years with the Gen Z and young millennial consumers. So we are really leaning into the power segment. And we see that in the quarter, underlying the performance, we see significant strength in e-commerce traffic and then we translate that to e-commerce growth. And then from a product innovation perspective, to your point, we continue to scale it in the quarter. So when we in Calvin prior to this quarter, we're able to give you proof points of saying part of underwear that we drove innovation is growing part of denim is now scaled. So it's all of underwear in Calvin is up mid-single digits. This is D2C. All of denim is up double digit. Same in Tommy, so leaning into spring sweaters, transitional outerwear, both those power categories are up double digit. So it's really the connection between the increased consumer focus and winning with the Gen Z and young millennials, scaling the product innovation investing more in marketing. So we are investing 50 basis points more in marketing this year and really see the effect of the traffic. And then we see the effect, not only in revenue in D2C up, but we see gross margin, as Melissa said, gross margin outside of tariff effect is up across the company. And then we invest in the shopping experience. So you'll see our social and e-commerce experience continue to improve. But you also see a growing number of rebuilds and new stores. So combined for the quarter, we had 140 rebuilds and new stores. And then back to your question about the inventory, yes, so we feel really good about the way we strengthen our supply chain, we get closer to demand. So inventory now is down 5%. So we feel really good about the inventory now and how we are positioned going forward. We worked hard last year on improving on-time deliveries. We worked hard to improve the growing margin across both brands. So it's really the 2 forces we are talking about. You see that the positive effect beyond what we have seen in any other quarter in the underlying momentum we are driving for Calvin and Tommy. And then you see the big effect given our size and disproportionate exposure to the Middle East and Europe.

We'll now move on to Brooke Roach with Goldman Sachs.

Stefan, can you unpack the trends that you're seeing with the consumer in both Europe and the Middle East today and the plans that you have to mitigate this pressure. And Melissa, as a follow-up, you laid out 3 key areas of pressure, the Middle East, Turkey and core Europe. Can you quantify the headwind that you're seeing from each as well as your assumptions for these businesses going forward?

Yes. Thanks, Brooke. So let's start with taking a step back. And so what's changed since last quarter. The only thing that has changed which is the European outlook is the prolonged effect of the war. So we didn't have that last quarter. And since then, we have, to your point, seen it in 3 different ways. We see the effect directly on the Middle East region, where we see lower wholesale demand. We see a knock-on effect on Turkey, which is a big and important market for us. reduced tourism macro slowdown. And then we see it in the EMEA consumer. So coming back to last quarter, again, we started spring season, including in Europe, better than last year. Then we saw a big slowdown in April. And then since April, as I mentioned, we have seen an improvement in the D2C trends in May. But when we look at the take down in Europe because of the prolonged effects, you can see it in 2 different buckets. The first one is the direct effect from the Middle East and Turkey, approximately half. And then approximately half is the indirect effect on the European consumer backdrop. And we see it most pronounced in traffic to physical stores and doors. So we saw it in April, again, better in May, but May we also had a few positive calendar shifts, but it's improved in May. But we then take a prudent outlook and say we will most likely live with these effects for the rest of Q2 and the rest of the year. And we look at the way we have estimated the effects is we look at April and May and then extend it. So -- and then, of course, we work really hard in Europe and across the company to mitigate this. So first of all, leading into the momentum we have in APAC and Americas. So continue to drive growth with both APAC and Americas. And we see the consumer in America holding up well, we see the consumer strengthening in APAC. We lean into fueling the e-commerce strength because even though we see the overhang of the war, having an effect in Europe, we see e-commerce up in Europe and traffic to e-commerce up. We continue to invest in the marketing. And as I shared to Jay's question, we see increasing effect on how we lean into our power consumer segment. And then we are very disciplined on keeping our inventories in check. We keep improving our on-time deliveries. So when we come into fall, our on-time deliveries are better, and the go-in margins are on plan for both brands. So that's at large how we mitigate it.

Yes. Yes. And I think Stefan mentioned it, but we're thinking of the overall impact of the 3 reasons that he mentioned is about half directly in the Middle East as well as the overhang in Turkey and then about half the impact to the broader European region. And I would just add, from a total top line perspective for PVH we are maintaining our expectation for growth in Americas and APAC. We really see the momentum continuing in those business businesses, we expect to grow DTC in both Q2 and for the full year. And we do see strength in e-com in all 3 regions, continuing.

We'll move on now to Bob Drbul with BTIG.

This is [ Jay Catsicas ] on for Bob. Just maybe keeping with the EMEA region. Can you talk about how the trends progressed in the quarter, maybe by brand specifically. And then that may and DTC improvement that you cited, was that kind of broad-based across both brands? Or would you maybe call out Calvin or Tommy as kind of leading that?

Thanks, Jay. We see the positive momentum in e-commerce, we see across both brands. So when we look at what's fully in our control, the brand momentum and continuing to increase that we see that for both brands. And we see, despite the overhang from the prolonged war we see, including in Europe, growth in our consumer base, growth in e-commerce traffic increased consideration, increase purchase intent. But then we see the 3 effects, which are real for Q2 and the back half. And that's why we have to take down our outlook to adjust for that. But it's really -- I keep coming back to those 2 different forces. The force of brand momentum that we are driving ourselves, including in Europe, and then the force of the direct Middle East effect and the indirect effect. And then as I mentioned, we have seen May strengthening to April but we are prudent looking out at the rest of the year. So we are not extending May for the rest of the year. We look at April and May together.

We'll move on now to Michael Binetti with Evercore.

Melissa, would you talk us through the bridge to the margin improvement in the second half? I think EBIT margins are guided to get back to about flat year-over-year after being down maybe 300 basis points or more in the second quarter if we exclude the tariff refund. Anything you could give us on the pieces to the bridge or if any ways we can try to think about quantification of that bridge. And then if you wouldn't mind, if you could talk through some of the mechanics on how the tariffs will work, the -- how you think the best use of the refund funding and the cash that you're going to get from that?

Yes. Sure, Michael. Thanks for your question. So on the bridge first. So for the year, like we talked about, we're maintaining our overall operating margin guidance at 8.8%, and that outlook now includes the benefit of tariff refunds, enabling us to absorb the prolonged effects of the Middle East conflict, which we had not factored into our previous guidance. while continuing our planned investments in our brands and our business. So as we think about the trajectory for the first half versus the second half, what's new is that we see the pressure related to the effects of the prolonged conflict with the most acute deleverage impact in Q2, and that's offset by the benefit from the tariff refund, which is also in Q2. Otherwise, I think what we shared when we met last quarter still really holds. So I'll break it down into 3 main pieces. First, on the top line, we have some timing shifts, which we have spoken about, particularly in wholesale for Americas, which will benefit us in the second half as well as the ramping impact of our strategic initiatives. And then second, in gross margin. The first half is burdened by tariff costs, which had really only a very small impact in the first half last year. And then in inventory cost, we see the favorable impact, including FX building as the year progresses, and that comes through as strength in our gross margins. And then third, in SG&A, Overall, for the year, as we've talked about, we're increasing our marketing investment, and that's going to be up over 50 basis points as a percentage of sales to about 6%. And in line with what we had originally planned, we really strategically weighted that investment to the first half to drive brand heat early in the year. So you remember that in the second half of 2025, we had already stepped up our marketing investment. And so that step-up continues into this year, and then we lap that in the second half. And then as we work to offset the effects of the Middle East conflict with our ongoing very strong cost discipline, you'll see those SG&A efficiencies start to grow and the impact in the second half as well. And so overall, as you mentioned, our guidance implies about year-over-year second half EBIT margin to be flat. And I think we have clear line of sight into the seasonality of our business and these gross margin and SG&A impacts that will get us there. And then on your question on tariff refunds. So yes, our outlook now includes approximately $100 million benefit from tariff refunds to our EBIT, and that's about 100 basis point favorable impact to our full year operating margin, which was not contemplated in our previous guidance. Important to note that we expect to fully recognize that in Q2, which is worth about 470 basis points to our gross margin and our operating margin. So I think that really enables us in this difficult backdrop to balance our disciplined approach to managing costs with the need to continue to invest behind our strategy and our brands and build for the future. So we expect to continue our marketing investments and our other investments in the consumer shopping experience across all channels and all regions. And in terms of the cash, we'll follow our standard capital allocation approach, balancing our investments with return to shareholders. Our current outlook assumes at least $300 million of share repurchases for the year. And we're also planning $250 million in capital expenditures, which is a stepped-up investment in digital stores and shop-in-shops, and that remains unchanged.

We'll move on now to Dana Telsey with Telsey Group.

As you think about the marketing, Stefan, that's helping to drive the funnel of sales in the back half of the year, number one, what do you see as most impactful for Calvin and Tommy in the back half of the year? And then also the marketing spend in the back half of this year versus last year? And then just any progress update on the license take-backs and how you're progressing with those.

Yes. Thanks, Dana. When it comes to the first half, second half for both Calvin and Tommy, you'll see a continuation of the marketing that's really effective for us and really works for us. So if you look at look at the first quarter in Calvin Klein that why it's so important that we drive growth in all of the world of underwear, the world of denim, mid-single-digit growth, double-digit growth it's really connected to, one, a stronger and more consistent drumbeat of new product innovation. And then how we can -- how we build campaigns around those product innovation, and we leverage it with talent to shape culture whether in Q1, it was Dakota Johnson, John Cook, [indiscernible], the soccer star from Barcelona. So you'll just see us continue to do this. And you see -- you will see us in Calvin how we build out the dimensions of the campaign. But they will all be focused on our power consumer segments, our key growth categories product innovation within those categories and then full funnel activation. And one really exciting example from Q1 is Calvin has done a lot of collaborations over the years, but the most successful ever was a few weeks ago when we collaborated with a superstar from BTS John Cook. So we invited him in as a co-creator but very focused around the key growth categories, the denim jackets, the hoodies, the logo, et cetera. So very true to the iconic '90s Calvin with the fresh take and the eyes of John Cook, and it sold out too fast. But you will see us do more and more of that in a very consistent way. And then in Tommy, what was really exciting to see is that we built out a bigger and more dimensional lifestyle campaign, more product storytelling, more elevated, and you can really see how that drove the growth in our core categories. So core categories in D2C was up mid-single digits, but then transitional outerwear, sweater polos, like hyper-relevant new innovation in product up double digit. And then you see us in the fall, you see us continue to lean into the sports franchises that we have with Tommy, Liverpool Football Club, Cadillac Formula 1. And then we have Travis Kelce. So we just shot the Travis cause campaign, as I just shared for fall. And Travis loves Tommy. He is a great ambassador for us. First season, we come out together with him in a campaign is Fall '26, and we just shot it at plus hotel. But just the announcement in itself drove hundreds of millions of mentions on our social platform. So you'll see a steady -- what you should look for is a steady drumbeat of building out our 360 campaigns, just reinforcing the beloved brand DNA to those power consumer segments in a very disciplined way with the right categories and the right product innovation. And that's -- if I look at Q1, that's what I'm most proud of are that the team that we are now -- that's work that started over a year ago that we are putting the different pieces together for the consumer flyway. And on the licensing piece, Dana. So this year, we are through the biggest part of the take-back of our North America women's wholesale license. And this quarter, I'm excited to share that we launched together with Macy's, our women's Tommy product, and we have had better sell-through than planned, very well responded by our partners, the consumers, and we are investing in the shopping experience as well. So this year, you see the biggest part will have been taken back. And then we continue to grow the licensing, the go-forward licensing business that we have. That's very strong. And we also bring in talent their leadership talent to help bringing best-in-class experience when it comes to licensing and partnerships. So you will see us continue to grow that already today the go-forward license business is growing for this year.

We'll move on to Blake Anderson with Jefferies.

So I wanted to ask one on Europe to start. So you mentioned Europe D2C had improved in May I think, partially impacted by calendar timing. Can you elaborate more on that rate and what it was excluding the calendar timing and how that compared to April? And then related to that, what are you assuming for Europe D2C for the rest of the year. And any color on stores versus e-com would be really helpful, too.

Yes. Thanks, Blake. Yes, what we have seen in May is an improvement versus April. And some of that improvement is connected to Easter ship and different holidays that come after a certain period of time after Easter that have shifted. So that was positive in the beginning of May, but it's underneath of there, there is an improvement versus April. But as I shared, the outlook for the rest of the year, we have taken a prudent approach with looking at both April and May trends, but definitely encouraging in May. If you look at stores versus e-commerce, as I mentioned, we see the consumer backdrop. And we saw it broad-based in the market in April that traffic where the consumer has to get into their car, we are the most -- we see the most effect. But when we lean into our brand momentum in e-commerce, we see that we are still able to drive growth. So we are leaning into the back half of the year in Europe and supercharging our e-commerce growth.

Yes. I would just add that we are expecting growth for e-com in Europe for the full year.

And with that, I got a sign that we are -- thank you, Blake. I got a sign that we are on time. So thank you, and thanks, everyone, for being on this journey. The 2 biggest takeaways for us right now is the increased momentum we are driving in Calvin and Tommy globally in all the different proof points that we were able to put on the board for Q1. We'll continue to expand those positive proof points towards the rest of the year, while we mitigate the prolonged effect of the war. And taking 2 steps back is the journey we are on is to build into the consumer love and the strength we have in Calvin Klein and Tommy Hilfiger, 2 of the most beloved brands globally in our sector. And every season, no matter what external headwinds are will -- or positive, we will continue to build relevance into our brands and win more with Gen Z and Young Millennial consumers. So with that, we say thank you, and looking forward to speaking next quarter.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.