2019 Annual Report

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2019 Annual Report ANNUAL REPORT 2019 CONTENTS 1 ..... PRIORITIES 3 ..... LETTER TO STOCKHOLDERS 6 ..... YEAR IN REVIEW 12 ...... TOMMY HILFIGER 16 ...... CALVIN KLEIN 20 ...... HERITAGE BRANDS 24 ...... CORPORATE RESPONSIBILITY 28 ...... DIRECTORS, OFFICERS, EXECUTIVES & BRAND MANAGEMENT 29 ...... OTHER INFORMATION 30 ...... GAAP TO NON-GAAP RECONCILIATIONS 33 ...... ANNUAL REPORT ON FORM 10-K ABOUT PVH PVH is one of the most admired fashion and lifestyle companies in the world. We power brands that drive FASHION FORWARD – for good. We manage a diversified brand portfolio, including the CALVIN KLEIN, TOMMY HILFIGER, Van Heusen, IZOD, ARROW, Warner’s, Olga and Geoffrey Beene brands, as well as the digital-centric True&Co. intimates brand. We market a variety of goods under these and other nationally and internationally known owned and licensed brands. PVH has over 40,000 associates operating in more than 40 countries and generated $9.9 billion in revenues in 2019. That’s the Power of Us. That’s the POWER OF PVH. VISION To be the most PURPOSE admired fashion and We power brands lifestyle company in that drive fashion the world. forward – for good. PRIORITIES 1. DRIVE 4. DEVELOP consumer engagement through innovative a talented and skilled workforce that designs and personalized brand and embodies our values and an entrepreneurial shopping experiences that capture the spirit, while empowering our associates to heart of the consumer. design their future. 2. EXPAND 5. DELIVER our worldwide reach through organic sustainable, profitable growth and generate growth and acquisitions. free cash flow to create long-term stockholder value. 3. INVEST in and evolve how we operate by leveraging technology and data to be dynamic, nimble and forward-thinking. VALUES Individuality Partnership Passion Integrity Accountability Be you Work together Inspire and innovate Do the right thing Own it STRATEGIC PRIORITIES – ANNUAL REPORT 2019 / 1 2 / ANNUAL REPORT 2019 – LETTER TO STOCKHOLDERS LETTER TO STOCKHOLDERS Emanuel Chirico Chairman and Chief Executive Officer 2019 demonstrated the Power of while allowing us to make faster and of only 28 companies to reach this PVH. Inspired by our vision and more informed decisions to drive milestone. Our success since our our purpose, we expanded our long-term opportunities. founding almost 140 years ago speaks international businesses, both The year also presented us with to our resilience and ability to drive organically and through the strategic several headwinds – from a softening transformation while successfully acquisitions of licensed businesses, consumer environment to geopolitical managing our brands. further strengthened our senior challenges to some self inflicted These characteristics will be critical leadership team and deepened issues and ending with the onset of for PVH as we navigate 2020. As our commitments to effect positive the COVID-19 outbreak. We took we begin the year, the COVID-19 change in our industry and the decisive actions by evolving CALVIN outbreak has become a pandemic, world at large. KLEIN product assortments and in impacting every major market in We power brands that drive fashion addressing excess inventory levels which we operate, with temporary forward – for good. In 2019, we built at Tommy Hilfiger North America store closings by us and our retail upon our long-standing commitment stemming from lower levels of partners across all regions. Our to corporate responsibility (“CR”) by international tourists travelling to the people are demonstrating their launching Forward Fashion, our vision U.S., as well as weathered challenges passion and dedication to PVH as for the future that provides a new in the moderate segment of the I write this, as most of our associates level of ambition and transparency market where our Heritage Brands around the world are working across our CR platform and reinforces business operates. While these issues remotely to continue to operate our long-standing commitment to negatively impacted our financial our business through this difficult sustainable business. performance for the year, we believe time. While the pandemic is highly that our actions will position us dynamic and continues to unfold, We invested in the consumer data to deliver sustainable, profitable my confidence in PVH and its ability journey, digitization, our supply future growth. to navigate this crisis is unwavering. chain and our talent, with an I believe that our core strengths – emphasis on inclusion and diversity. PVH has a long legacy of delivering our talent, our brands, our strong Our dedication to providing the financial excellence and, in March fundamentals and balance sheet – will most desirable products and a 2020, we celebrated our 100-year continue to support us through the personalized consumer experience anniversary listed on the New York uncertain time, and ultimately lead helped us deepen our connection Stock Exchange. This is truly an us back to a healthy path of long-term with consumers. These important incredible achievement, as we are growth once the pandemic subsides. investments continue to support the the first apparel company and one transformation of our operations, LETTER TO STOCKHOLDERS – ANNUAL REPORT 2019 / 3 By the Numbers REVENUES ($ in millions) $9,909 $9,657 $8,915 GAAP EARNINGS • Hiring Stefan Larsson into the newly created role of President, PVH Corp., PER SHARE where he is overseeing PVH’s $5.60 branded businesses and regions, with the Calvin Klein business 2019 FINANCIAL $9.65 turnaround as his top focus area. PERFORMANCE $6.84 • Appointing Cheryl Abel-Hodges The power of our diversified as CEO of Calvin Klein, with an business model helped us navigate NON-GAAP EARNINGS immediate focus on overseeing the PER SHARE1 the challenges and mitigate some product turnaround and driving of the pressure on our financial brand expansion, particularly $9.54 performance. We executed against in Europe and Asia. our strategic priorities and • Appointing Tom Chu as President, $9.60 continued to invest in and evolve PVH Asia Pacific, our brands to capture the heart where he is $7.94 of today’s consumer. overseeing the expansion of CALVIN KLEIN and TOMMY 2019 2018 2017 We grew revenues by 3% to $9.9 HILFIGER across the region, billion and delivered GAAP earnings 1 Figures exclude certain amounts that were deemed which is our largest long-term non-recurring or non-operational. Refer to GAAP per share of $5.60 compared to market opportunity. to Non-GAAP Reconciliations on pages 30 and 31. $9.65 in 2018. On a non-GAAP basis, • Continuing the optimization of our we posted earnings per share of Heritage Brands portfolio, including 2019 REVENUES $9.54* (which included a negative by streamlining operations, selling impact of $0.35 per share related our Speedo North America business to foreign currency exchange rates) 48% (which closed in April 2020), and Tommy Hilfiger as compared to $9.60* in 2018. While exiting businesses, such as DKNY by business 37% these results were below our initial Calvin Klein men’s apparel, that did not meet % 15% expectations, performance in our Heritage Brands Europe business was a highlight, our profitability requirements. as we continued to experience • Addressing challenges in the Tommy outstanding results in our Tommy Hilfiger North America business by 43% U.S. Hilfiger business and we re-ignited proactively taking markdowns to 37% the CALVIN KLEIN brand’s right-size inventory levels, including by region1 Europe 14% momentum. in response to lower levels of % Asia Pacific international tourism into the U.S. 6% Operating a business in these Americas (excluding U.S.) uncertain times required us to • Evolving to the new era of retail by embrace change while preserving our growing our digital commerce 1 Europe includes the Middle East and Africa; unique culture, and we took actions penetration, expanding our Asia Pacific includes Australia and New Zealand; to best position PVH for long-term omni-channel capabilities and Americas (excluding U.S.) includes Canada, Mexico, South America, Central America and the Caribbean. success. These included: reducing our retail store footprint. * Figures exclude certain amounts that were deemed non-recurring or non-operational. Refer to GAAP 4 / ANNUAL REPORT 2019 – LETTER TO STOCKHOLDERS to Non-GAAP Reconciliations on pages 30 and 31. CAPTURING Highlights from 2019 include: important markets over the long- term by leveraging the power of INTERNATIONAL • Capitalizing on the European our regional operations. EXPANSION opportunity: Europe outperformed OPPORTUNITIES as our highest-growth region, • Navigating the brand opportunities in and our strong regional presence Asia: While Asia experienced mixed Powered by our brands’ strength, is a key competitive advantage. trends during 2019, we continued relevance and recognition, we Performance for TOMMY to position our businesses for a continued to pursue our global HILFIGER continued to be long-term trajectory of sustainable expansion efforts. We capitalized exceptional. While the brand is top and bottom-line growth. on organic growth opportunities well-penetrated, with nearly $2.5 Our strong brand positioning and internationally and acquired billion in revenues in Europe, it talented teams drove the businesses two regional licensed businesses, continues to gain market share and forward, despite the weakening resulting in 9% revenue growth exhibit momentum across all major consumer environment in China, outside the U.S. countries, channels and categories. protests in Hong
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