Executive Summary / Key Takeaways

• PVH Corp. is executing a multi-year transformation under its PVH+ Plan, focusing on elevating its iconic Calvin Klein and TOMMY HILFIGER brands, driving operational efficiencies, and disciplined capital allocation to achieve sustainable, profitable growth.
• The company delivered better-than-expected Q2 2025 results, with reported revenue up 4% and constant currency revenue up 1%, driven by strong brand momentum and sequential improvements in direct-to-consumer (D2C) performance.
• PVH is actively mitigating significant headwinds from increased tariffs (estimated $70 million unmitigated EBIT impact for FY2025) and a challenging macroeconomic environment, while reaffirming its full-year 2025 constant currency revenue, operating margin (approximately 8.5%), and EPS ($10.75-$11.00) guidance.
• Operational improvements, particularly the resolution of Calvin Klein's product creation challenges and the "Growth Driver 5 Actions" (targeting $200-$300 million in annual cost savings by 2026), are expected to drive sequential margin expansion, positioning PVH for double-digit operating margins by year-end and a strong profit start to 2026.
• Strategic investments in technology for a single global stack, enhanced digital commerce, and optimized distribution networks are foundational to PVH's demand-driven operating model, contributing to both cost savings and an elevated consumer experience.

Setting the Stage for PVH's Transformation

PVH Corp., a global apparel powerhouse with a heritage spanning over 140 years, stands at a pivotal juncture in its multi-year strategic transformation. The company, known for its iconic Calvin Klein and TOMMY HILFIGER brands, is actively reshaping its business under the "PVH+ Plan," a comprehensive strategy launched in April 2022. This plan aims to build these two global brands into the most desirable lifestyle brands worldwide and position PVH as a top-performing brand group in the sector. The current industry landscape is marked by significant global macroeconomic volatility, including inflationary pressures, elevated interest rates, and the risk of recession, particularly impacting North America. Consumer sentiment has weakened, translating into lower retail traffic and an increasingly promotional environment across the sector.

Against this challenging backdrop, PVH's strategy emphasizes leveraging its foundational strengths: deeply beloved global brands, a diversified international revenue base (over 70% of 2024 revenue generated outside the U.S.), and a strategic commitment to operational excellence through technological integration. The company's competitive positioning is rooted in its ability to offer accessible premium fashion across diverse distribution channels, contrasting with ultra-luxury players like LVMH and Kering , and offering a more fashion-forward approach than mass-market retailers like Gap Inc. . While precise, directly comparable market share figures for all niche competitors are not publicly detailed, PVH's strong performance in key categories like men's premium underwear suggests robust brand equity.

PVH's technological differentiation is not in proprietary product materials, but rather in its strategic application of technology to enhance operational efficiency, drive data-driven decision-making, and elevate the consumer experience. A core initiative is the development of a "single global technology stack," which aims to consolidate historically decentralized and fragmented systems into a unified platform. This is expected to deliver "tens of millions of dollars of annual savings" once fully implemented, significantly contributing to the company's competitive moat by reducing operational costs and improving agility. Furthermore, PVH is investing in "upgrades and enhancements to platforms and systems worldwide, including our digital commerce platforms," which are critical for elevating the online shopping experience and driving digital growth. The redesign of its global distribution network, including streamlining logistics in North America by consolidating into two warehouses and in-housing e-commerce distribution, is projected to "increase our US warehouse capacity utilization to approximately 85% to 90% and significantly decrease North America distribution expenses." These technological and operational advancements are foundational to PVH's ambition to become a "demand- and data-driven operating model," enabling better inventory management and more responsive product development.

The PVH+ Plan: A Blueprint for Brand Elevation and Efficiency

The PVH+ Plan is a multi-faceted approach to unlock the full potential of Calvin Klein and TOMMY HILFIGER. For Calvin Klein, the strategy focuses on amplifying its core strengths in underwear and denim through product innovation and powerful marketing. The "Icon Cotton Stretch" men's underwear franchise, for instance, drove a remarkable 14% global sales growth in Q2 2025, building on 25% growth in Q1 2025, following a viral campaign featuring superstar Bad Bunny. This success is being replicated with the Fall 2025 launch of the "Icon Cotton Modal" women's underwear franchise, supported by a global campaign featuring a leading music superstar. Fashion denim, with its focus on 90s styles and looser fits, also saw a 19% growth in Q2 2025. These initiatives are complemented by strategic marketplace expansions, including new flagship stores in Tokyo's Harajuku district and New York's Soho.

TOMMY HILFIGER's brand-building efforts center on connecting its "classic American cool" DNA to global culture. Partnerships, such as with Apple Studios for "F1 The Movie" (the highest-grossing sports film to date), and the new alliance with Cadillac for the Formula One racing team, exemplify this strategy. Product expansion is also a key pillar, with the brand successfully entering men's dress casual and launching the "Tommy Girl Capsule" in women's, which attracted a younger consumer base. Increased marketing investments, including a global fall lifestyle campaign featuring supermodel Claudia Schiffer and Nicholas Hoult, are designed to drive high-quality traffic and amplify product storytelling.

Underpinning these brand-specific initiatives are the "Growth Driver 5 Actions," a multi-year program initiated in Q2 2024 to simplify PVH's operating model and achieve substantial cost savings. This involves centralizing processes, improving systems and automation, and redesigning the global distribution network. These actions are projected to generate annual cost savings of approximately $200 million to $300 million by 2026, with the majority of the benefits expected to be realized by the end of 2025. The company has already made meaningful progress, with cost savings contributing to improved SG&A as a percentage of revenue.

Financial Performance: Resilience Amidst Headwinds

PVH's financial performance in the second quarter and first half of 2025 demonstrates resilience in a challenging environment. For the thirteen weeks ended August 3, 2025, total revenue increased 4% on a reported basis to $2.17 billion, and 1% in constant currency, exceeding guidance. Gross profit for the quarter was $1.25 billion, representing a gross margin of 57.7%, a decrease of 240 basis points year-over-year. This decline was primarily due to the transition of licensed product categories in-house (approximately 50 basis points impact), the initial negative impact of recently enacted tariffs (approximately 20 basis points), increased promotional selling, and higher freight costs.

Selling, General and Administrative (SG&A) expenses for the second quarter were $1.13 billion, or 52.1% of total revenue, an improvement of 10 basis points as a percentage of revenue compared to the prior year. This leverage was driven by cost savings from the Growth Driver 5 Actions and overall cost efficiencies. Income before interest and taxes for Q2 2025 was $133.2 million, with an operating margin of 6.1%. Net income for the quarter was $224.2 million, or $4.63 diluted EPS, compared to $158 million, or $2.80 diluted EPS, in the prior year. The significant increase in net income was largely due to a substantial income tax benefit of $113 million in Q2 2025, which reflected the impact of $479.5 million in pre-tax noncash goodwill and other intangible asset impairment charges recorded in Q1 2025 that were non-deductible for tax purposes.

For the twenty-six weeks ended August 3, 2025, total revenue grew 3% to $4.15 billion. Gross margin for the first half was 58.1%, down 260 basis points year-over-year, impacted by similar factors as the second quarter. SG&A expenses as a percentage of revenue improved by 30 basis points to 51.9%. The company reported a loss before interest and taxes of $199 million for the first half, primarily due to the $479.5 million noncash impairment charges related to goodwill and other intangible assets in Q1 2025. Net income for the first half was $179.4 million, or $3.59 diluted EPS.

Regionally, EMEA revenue increased 3% reported in Q2 2025, with D2C growth offsetting a wholesale decline due to timing shifts. The Americas saw an 11% revenue increase, driven by wholesale growth (including the Calvin Klein women's sportswear and jeans transition in-house) and flat D2C with strong digital commerce performance. APAC revenue declined 1% reported, but showed significant sequential improvement, with digital commerce growth partially offsetting declines in wholesale and stores amidst a choppy consumer environment, particularly in China. Licensing revenue decreased 3% in Q2, primarily due to the in-housing of certain Calvin Klein women's product categories.

Capital Allocation and Liquidity: Fueling Future Growth

PVH maintains a robust capital structure and active capital allocation strategy. As of August 3, 2025, the company held $248.8 million in cash and cash equivalents, a decrease from $748 million at February 2, 2025, primarily due to significant share repurchases and debt repayments. PVH had approximately $1.70 billion in available borrowing capacity.

The company is committed to returning value to shareholders, evidenced by its $5 billion stock repurchase program authorized through July 30, 2028, with $1.21 billion remaining. In April 2025, PVH entered into accelerated share repurchase (ASR) agreements totaling $500 million, receiving initial deliveries of approximately 4.60 million shares. This aggressive repurchase strategy aims to leverage current valuations and accelerate EPS growth. Capital expenditures for full-year 2025 are projected at approximately $200 million, focused on new stores, renovations, IT infrastructure, and distribution network enhancements, all supporting the PVH+ Plan. Approximately 80% of PVH's long-term debt is at fixed interest rates, providing stability in a rising rate environment.

Navigating a Complex Competitive Arena

PVH operates in a highly competitive global apparel market, contending with a diverse set of players ranging from luxury conglomerates to mass-market retailers. Compared to ultra-luxury groups like LVMH and Kering , PVH's Calvin Klein and TOMMY HILFIGER brands occupy a more accessible premium segment. While LVMH (LVMUY) and Kering (PPRUY) command superior pricing power and often exhibit more resilient revenue growth and cash flow due to their exclusive positioning, PVH's strategy emphasizes broad market appeal and diverse distribution channels, potentially offering greater volume-driven efficiency. PVH's brand versatility and extensive global reach provide an edge in operational execution and strategic adaptability, allowing it to penetrate various market segments more effectively than some luxury-focused rivals.

Against mass-market competitors like Gap Inc. , PVH's brands offer a premium edge, particularly in categories like denim and underwear, which can translate to enhanced customer loyalty. While Gap (GPS) may demonstrate strengths in operational efficiency and quick inventory turnover for affordable fashion, PVH's strategic focus on brand elevation and product innovation aims to drive higher average unit retail (AURs) and stronger margins. In the activewear and outdoor segment, where VF Corporation operates, PVH differentiates itself through fashion versatility and lifestyle branding, potentially appealing more to urban markets, whereas VF (VFC) excels in performance-oriented products. PVH's extensive licensing business, which contributes significantly to its revenue and profitability, also provides a competitive advantage by extending brand reach across complementary categories without direct operational overhead.

However, PVH faces vulnerabilities, including supply chain dependencies that can impact costs and margins during disruptions, and potential exposure to high customer concentration with key retail partners. These factors could be more pronounced compared to competitors with more vertically integrated models or broader customer bases. The company's strategic response involves continuous optimization of its global sourcing network across more than 30 countries to mitigate tariff impacts and supply chain risks.

Outlook and Strategic Trajectory: Building for 2026 and Beyond

PVH is reaffirming its full-year 2025 guidance, projecting constant currency revenue to be flat to increase slightly, operating margin at approximately 8.5%, and diluted EPS in the range of $10.75 to $11.00. This outlook incorporates significant headwinds, including an estimated $70 million (or $1.15 per share) unmitigated impact from tariffs and increased marketing investments, which are expected to be offset by favorable foreign exchange impacts and strategic mitigation actions.

For the third quarter of 2025, PVH projects revenue to be flat to a slight increase on a reported basis, and down slightly in constant currency. Gross margin is expected to decline approximately 175 basis points year-over-year, including an 80 basis point unmitigated tariff impact, but this represents a sequential improvement from the first half as Calvin Klein's operational challenges stabilize. SG&A as a percentage of revenue is expected to increase by approximately 75 basis points due to higher marketing investments aimed at capitalizing on key consumer moments. Q3 operating margin is projected at approximately 8%, with EPS in the range of $2.35 to $2.50.

A critical assumption for the full-year outlook is the successful resolution of the "transitory operational challenges" related to centralizing Calvin Klein's global product creation capabilities. Management has confirmed sequential improvements for Fall 2025 and on-time deliveries with improved go-in margins for Spring 2026, positioning the brand for a strong profit start in 2026. The Growth Driver 5 Actions are expected to deliver nearly 200 basis points of operating margin expansion by the fourth quarter of 2025, contributing to PVH's target of exiting 2025 with double-digit operating margins. This structural improvement, coupled with a smaller share count due to accelerated repurchases, is anticipated to drive a step-up in profit levels entering 2026.

Key Risks to the Investment Thesis

Despite the strategic progress, several risks could impact PVH's investment thesis. The macroeconomic environment, characterized by inflation and potential recession, continues to pose a threat to consumer demand globally. Tariffs, particularly the recently enacted ones in the U.S., represent a significant financial headwind, with an estimated $70 million unmitigated impact on EBIT for 2025. While PVH is implementing mitigation strategies, their full effectiveness remains to be seen.

The company's inclusion on China's Ministry of Commerce (MOFCOM) List of Unreliable Entities presents a unique geopolitical risk. With approximately 6% of 2024 revenue and 20% of 2024 income before interest and taxes generated in China, potential measures by MOFCOM could materially impact PVH's ability to operate, sell, or invest in the region. Foreign currency volatility also remains a persistent risk, given PVH's substantial international operations. Lastly, the highly promotional retail environment could continue to pressure gross margins, requiring ongoing strategic discounting and pricing actions to maintain competitive positioning.

Conclusion

PVH Corp. is actively executing a strategic transformation designed to elevate its core Calvin Klein and TOMMY HILFIGER brands, streamline operations, and enhance shareholder value. The PVH+ Plan, with its focus on product innovation, impactful marketing, and a data-driven operating model, is demonstrating tangible results, as evidenced by better-than-expected Q2 2025 performance and a clear trajectory for sequential improvements. While significant macroeconomic headwinds, including tariffs and a challenging consumer environment, persist, PVH's diversified global footprint, disciplined cost management through Growth Driver 5 Actions, and strategic capital allocation position it to absorb these pressures and emerge stronger. The anticipated resolution of Calvin Klein's operational challenges and the return to double-digit operating margins by year-end underscore management's confidence in building a foundation for sustainable, increasingly profitable growth into 2026 and beyond.