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| And the way we take advantage of that consumer engagement wise is twofold, just shot two very strong marketing campaigns for spring 2024, with mega talent amplifying the improved product strength |
| And what we see already now is inventory in great shape, probably the best shape we have ever had it, minus 18% versus last year with improved availability |
| Despite an increasingly choppy macro backdrop, particularly in Europe, we grew overall revenue in line with guidance, up 4% on a reported basis and up 1% in constant currency, while expanding our gross margins, and we beat our guidance for the bottom line |
| In total, EBIT for the quarter was $249 million, exceeding our expectations |
| So very encouraged |
| So, an incredible awareness in very strong consideration and very strong brand lab |
| On a non-GAAP basis, in Q3, we grew EBIT by 13% versus last year with strong margin expansion |
| But when we start to break that down into North America and in Macy's, we see the incredible strength that both Calvin and have Calvin and Tommy has with the Macy's consumer |
| So overall, we are in a tough macro in Europe leveraging better the strength, the market-leading strength we have for Tommy in particularly in Europe, and then we have the strength of having one of the biggest growth brands in Europe in Calvin |
| By focusing on what's within our control for the full year 2023, we remain well-positioned to buy meaningful margin expansion and double-digit EPS growth |
| And I'm pleased to share that in both North America and Europe, we beat our growth plans versus last year and delivered a strong start of the holiday season |
| We continue to make strong progress and gain increasing traction across all five growth drivers of the PVH+ Plan |
| Then in consumer engagement, having in a tough macro having market-leading brands, is a huge advantage |
| And then you see another to the demand growth in Europe is the strong D2C growth despite a tough macro |
| And that growth was on a very strong base |
| First, our strong D2C growth was fueled by increased product and supply chain strength that drove higher gross margins |
| So, we have market-leading strength in Europe and very strong partnership with the strongest wholesale retailers |
| So, I'm very pleased by seeing how the team is coming together and breaking this old-school sequential handover way over and breaking it down and starting up front working together cross-functionally |
| Our outperformance in the quarter was driven by North America, which is a very important proof point for how we are already positioning both Calvin and Tommy for long-term sustainable growth in the region through strong execution of the PVH+ Plan |
| For the second consecutive quarter, our EBIT margin for our Calvin and Tommy businesses in North America together took a sizable step forward and expanded to 13.1% in the quarter, with significant gross margin expansion in both our direct-to-consumer and wholesale business |
| And coming back, Michael, one more thing when it comes to the inventory, better inventory demand-driven supply chain, what I see happening that I want to share as well is that having Eva Serrano come in and build the strength in the global product engine in Calvin, and now coming in for Tommy, both highly experienced brand builders and very strong in product, you have that David Salmon and his team's work upfront with them on leveraging that strength in products |
| This is partly driven by favorable macro but even more importantly, it's driven by an improved approach to our costing process, the first results of a better raw material strategy and early returns on a much sharper assortment productivity |
| We have a better and more sharp assortment productivity |
| Finally, it will be the strength of our brands, our consistency in direction, and our relentless execution of the PVH+ Plan that will set us apart over time |
| Better costing process, better discipline in the costing process, more data-driven |
| Lea is a uniquely strong and experienced brand and business builder with an outstanding track record building brands globally |
| On top of that, we're driving significant improvement, with improved raw material management |
| And seeing what David has been able to do with his team in a very short period of time is really encouraging |
| Throughout the third quarter, Calvin continued to focus on driving very strong consumer engagement globally through our most important hero products and driving a strong category offers with growth across our refined performance and underwear categories |
| So Black Friday, which has now become Black Friday week, Thanksgiving week -- weeks we delivered a stronger start than planned for both Calvin and Tommy in North America |
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| This is especially true in Europe as the macro environment continues to be challenging, exacerbated by record-high temperatures in September, as Stefan discussed, causing retailers to take a cautious approach |
| Like others, we have seen a more challenging macroeconomic backdrop in Europe, and that is impacting consumer confidence and the wholesale channel |
| Then the heat wave hit in September, right as us and all of our competitors were setting fall season and sales were down 7% in September |
| Total wholesale revenue was down 3% on a constant currency basis for the reasons I previously outlined |
| Weather aside, going forward, we anticipate this challenging macro backdrop and an increasingly cautious wholesale channel to continue into 2024 |
| And we see over the Q3, we see an increasingly cautious macro backdrop in Europe and with the biggest impact on the wholesale channel |
| Partially offsetting the strength in B2C trends, we experienced incrementally more challenging trends in wholesale brought by the tougher macro environment |
| For the first half of 2024, we also see decreases in our AUC with more than 5% |
| But our overall outlook for the region is now planned down mid-single digits compared to down low single digits previously, due entirely to the impact from the sale of the Heritage Brands intimate apparel business |
| Excluding the sale, the decline in wholesale revenue is mostly in Europe, where the wholesale revenues are projected to be down approximately 15% versus last year |
| What you also see is that AUC is coming down |
| Looking forward, as Stefan mentioned, we do expect the tough macros to continue into 2024 |
| Stefan Larsson And this -- just to build on what Zac was saying here, this is on top of quite a tough macro in North America as well |
| Approximately two-thirds of that decrease is due to one-time shipment timing differences compared to last year when supply chains were still normalizing and about one-third is due to a decrease in sales to lower-margin accounts as we remain focused on quality of sales |
| And I think as Stefan said, one, yes, macros are moving from negative to positive as raw materials are coming down |
| So, if we look at the first half of 2024, AUC will come down with more than 5% |
| While on a reported basis, our revenue outlook for Asia Pacific has been negatively impacted by exchange, with growth on a reported basis now planned up high single digits compared to up low teens previously |
| We are projecting fourth quarter revenue to decline 3% to 4% compared to last year on both a reported and constant currency basis with projected strong high single-digit growth in our direct-to-consumer businesses more than offset by a decline in wholesale revenue, including the revenue reduction from the sale of the Heritage Brands intimate apparel business |
| We recognize the tough macro we are navigating |
| Also, importantly, our inventory at quarter end is down 19% compared to last year as we continue to proactively manage our inventory levels |
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