Christopher Nardone • Bank of America

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CFO Justin Picicci affirmed that the 15% operating margin target is not a ceiling and that future expansion will be driven by a mix of gross margin gains and SG&A leverage. President and CEO Patrice Louvet added that meaningful AUR growth opportunities remain across all regions, fueled by the ongoing brand elevation strategy, which includes product mix, channel shifts, promotional pullback, and targeted pricing.

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Executive Justin Picicci stated the company is in the preliminary planning phase for the NGT project, which includes a single global ERP, predictive buying and allocation tools, and upgraded warehouse management systems. He indicated that more details on costs would be provided next quarter, with a broad timeframe for a staged implementation likely beginning in the fiscal 2027 range.

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President and CEO Patrice Louvet expressed strong confidence in China, noting 17 consecutive quarters of growth and unchanged ambitions. He stated that growth is driven by new customers, comps, and new platforms. While monitoring volatility, the company continues its disciplined, long-term store expansion strategy, with China still representing only 8% of total sales.

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CEO John Hazen affirmed the four core strategic initiatives remain unchanged but highlighted his focus on improving the margin structure of exclusive brands through sourcing, putting more marketing muscle behind key exclusive brands like Cody James, and reinvigorating the work boot business with new marketing campaigns. He also confirmed that if sales exceed the high end of guidance, the company would expect to see SG&A leverage beyond the guided 50 basis points.

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Executive John Vandemore stated that expectations for China remain modest, though the Q1 decline was exacerbated by a tough comparison to the prior year's growth. He sees signs of stability and noted the company is focused on reinvigorating demand with its Comfort technology products. Regarding pricing, Vandemore described it as an 'in-process motion' rather than a single decision, with the most acute impacts from a stable tariff structure expected in Q2 and Q3.

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John Vandemore (executive) stated that the strong U.S. wholesale growth was driven by the same factors seen all year: strong performance with key accounts and continued adoption of comfort technologies by partners. He expressed no concern about inventory levels in the wholesale channel, citing strong sell-throughs and successful recent marketing events like brand takeovers. David Weinberg (executive) added that shipping demand from wholesale customers remained strong into the new year.

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CFO John Vandemore described early-stage bookings and customer conversations for spring as 'very healthy and encouraging,' though it was too early for specifics. He assessed channel inventory as 'fairly balanced' with no significant issues. Executive David Weinberg added that partners are readily accepting shipments, indicating strong demand and no inventory backups at their distribution centers.

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Executive David Weinberg clarified that their view on domestic DTC for the back half remains conservative and has not markedly changed, meaning the guidance increase is almost entirely from wholesale strength. He noted that growth is broad-based across divisions and genders, driven by the continued success of comfort technologies like Skechers Hands-Free Slip-ins, ArchFit, and Max Cushioning, which are successfully encouraging consumers to trade up within the portfolio.

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CFO Harmit Singh stated that while the first half was strong, the company remains prudent and is modeling U.S. wholesale to be flat for the full year. He confirmed there are distribution opportunities, particularly in growing categories like women's and tops, and highlighted the effort to grow the Levi's brand at Target as an example of expanding within the channel to support the lifestyle pivot.

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CEO Andrew Rees stated the company is happy with its wholesale order books through Q3 and has clean channel inventories, but declined to comment on in-quarter sell-through. CFO Susan Healy noted the Easter timing shift impacts Q1 comparisons. Regarding capital allocation, Healy confirmed commitment to the 1x-1.5x leverage target but stressed a dual approach of debt repayment and opportunistic share buybacks, pointing to the recent $1B authorization increase as a sign of confidence in the stock's value.

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CEO Andrew Rees expressed confidence in the Q4 DTC plan, citing strong product, holiday planning, and logistics. He explained the Amazon 3P shift provides better brand control on a crucial marketplace. CFO Susan Healy and CEO Andrew Rees addressed margins, stating that while 2024 and 2025 are investment years that will pressure the EBIT rate below recent highs, the company remains disciplined and balances this with maintaining industry-leading profitability.

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CFO Steve Fasching clarified that the Clifton 10 product will flow into the market during both Q4 and Q1 of the next fiscal year, with the initial wholesale sell-in accounted for in current guidance. He confirmed that the margin impact from closing out the Clifton 9 is included within the guided ~100 basis point headwind from promotions for Q4.

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President Jen Foyle clarified that growth in the entire soft dressing category, not just sleep, provides a buffer against any potential swim category softness. She expressed high confidence in store expansion, citing the strong performance of new OFFLINE stores, untapped markets for Aerie, and the high profitability of new, efficient store designs.

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Mike Mathias, CFO, clarified that the narrowed full-year revenue guidance was not due to weakness in the core AE or Aerie brands but rather a tightening of forecasts for 'other revenue components' like licensing. He reaffirmed store plans for the year, which include 25-30 Aerie/OFFLINE openings and 20-25 AE closings, resulting in a net neutral total store count, alongside 70-80 remodels.

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CFO Zac Coughlin explained that the Q4 outlook assumes a continuation of current DTC trends, with the main driver of margin improvement being incremental SG&A efficiencies that will be more impactful in Q4. He clarified that the guidance for a 'modestly more promotional environment' reflects the tougher macro backdrop, not a change in PVH's strategy of prioritizing full-price selling.

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