Manny Chirico - Chairman, Chief Executive Officer Mike Shaffer - Chief Financial Officer Dana Perlman - Treasurer, Senior Vice President of Business Development, Investor Relations Ken Duane - Chief Executive Officer, Heritage and North American Wholesale Businesses.

Bob Drbul - Nomura David Glick - Buckingham Research Group Joan Payson - Barclays Capital Erinn Murphy - Piper Jaffray John Kernan - Cowen & Company Michael Binetti - UBS Eric Tracy - Janney Capital Markets.

Good morning everyone and welcome to the PVH Corp. Full Year and Fourth Quarter 2014 Earnings Conference Call. This webcast and conference call is being recorded on behalf of PVH and consists of copyrighted material. It may not be recorded, rebroadcasted or otherwise used without PVH’s written permission.

Your participation in the question-and-answer session constitutes your consent to having anything you say appear on any transcript or replay of this call. The information being made available includes forward-looking statements that reflect PVH’s view as of March 25, 2015 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 a subject of this call.

These risks and uncertainties include PVH’s right to change its strategies, objectives, expectations and intentions and its need to use significant cash flow to service its debt obligations. Therefore, the company’s future results of operations could differ materially from historical results or current expectations.

PVH does not undertake any obligation to update publicly any forward-looking statements, including without limitation any estimate regarding revenue or earnings. Generally, the financial information and guidance provided is on a non-GAAP basis as defined under SEC rules.

Reconciliations to GAAP are included in the referenced 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 Mr. Manny Chirico, Chairman and CEO of PVH. .

Thank you, Anna. Good morning everyone. Joining me on the call this morning is Mike Shaffer, our Chief Financial Officer; Dana Perlman, our Treasurer and Senior Vice President in charge of Business Development and Investor Relationships; and Ken Duane, the CEO of our Heritage business and/or North American Wholesale businesses.

Overall we were quite pleased with our fourth quarter results which matched the top end of our earnings guidance despite the highly challenging market environment and foreign currency headwinds. In the fourth quarter on a constant currency basis revenues increased 5% and EPS grew 30%.

Mike Shaffer will take you through the details of the financials for the quarter and our guidance and I’ll also highlight some of the issues surrounding foreign currencies, which I know there is a lot of interest in. I’m going to get into the business right now and talk about Calvin Klein.

In the fourth quarter revenues on a constant currency basis increased 6%, while earnings increased about 9%, driven by strong sales performance in our North American business and higher international operating margins due to the elimination of clearance and off price sales in Europe and Asia.

Moving into the first quarter, we have seen a significant improvement in our international sales trends. Retail comp store sales are running ahead of plan in the first quarter and trending up high single digits in Asia with particular strength in China and South East Asia.

We are also seeing high single digit increases in our European businesses on a comp store basis, so both regions really are performing much stronger for us. In Europe the CK wholesale business continues to improve with our 2015 spring and fall order books, excluding Russia up about 10% over the prior year.

In North American our CK retail comps are running on plan up low single digits.

We are seeing strong sales in our domestic permanent population stores, while our stores located in international tourist destinations like Miami, Orlando, New York and Las Vegas are feeling the pressure from the weaker international tourist traffic, which we believe is a direct result of the strengthening U.S.

dollars impact on international travel to the U.S. .

We have seen a significant increase in the number of fans since the launch and we have generated well over 30 million fan interactions to-date. From a business perspective this has allowed Calvin Klein to engage with our existing and new customers and has helped to drive purchases of the brand.

Further to the initial My Calvin’s campaign, the spring 2015 campaign featuring Justin Bieber was the number one global trending topic on Twitter at launch. We have seen traffic more than double on calvinklein.com and the campaign in the first two weeks achieved over $350 million of publicity value.

We believe the campaign has helped to continue to fuel the momentum that we are seeing in our jeans and underwear businesses globally. From a product point of view I’m going to focus on the Calvin Klein underwear first. We have delivered new core product along with significantly improved and elevated packaging.

We have launched two new men’s programs globally, Intense Power and Air FX for spring 2015 and have seen very promising initial selling results. As a reminder, Intense Power is what Justin Bieber was featured in and has sold well at retail. Air FX is more of a performance underwear, which taps into what is happening more broadly in the active arena.

In the women’s area our modern cotton logo initiative leverages the best of what Calvin Klein underwear does for men and translates if for women with an active appeal. Modern cotton continues to drive the improvement in our woman’s business in North American and Europe.

We have also continued investing in our point of sale presentation, with new graphics and new fixtures. In addition, we have upgraded and installed new shops in key markets in the U.S., in New York, Miami, the West Cost, in California, San Francisco.

Additionally we have installed new shops in stores internationally in key markets throughout Europe and Asia. In the U.S. over the last six months our men’s and woman’s businesses have picked up market share across the department store landscape.

Average unit retails continue to be up about 10% year-over-year driven by full price selling of the new product launches. Overall underwear sales are running up high single digits at retail in the first quarter. In Europe men’s continues to outperform with the women’s performance driven by elevated fashion components added to the business.

Overall sales in the first quarter are running up mid-single digits at retail. In Asia we continue to see great performance on the elevated Black Label product across both men’s and women’s.

Our women’s bra business in Asia continues to outperform every other region and the Perfectly Fit collection for women is ranked as the number one or number two performing collection in all key Asian regions. Overall sales in the first quarter are running up high single digits at retails.

Moving to our Calvin Klein jeans; in the jeans area new product has been delivered and we are seeing a good reaction from consumers, particularly where we have installed new jeans shops. In North American we have installed 225 shops in 2014, 150 men’s shops and 75 women’s shops.

In the newly installed shops we’ve experienced a 40% retail sales increase over the prior year. For 2014 AURs were up about 15% and that trend has continued into the first quarter of 2015. We are targeting 150 new shop installations in the North American for fiscal 2015. In Europe we are in early stages of a turnaround in the jeans business.

We have sold over 60 new jeans shops throughout Europe. We have significantly improved the quality level of our jeans line with better fabrics, trims and packaging. We are effectively out of all off-price retailers in Europe beginning in the first quarter of 2015. We have closed approximately 40 underperforming stores over the last 18 months.

We have opened 11 Calvin Klein jeans free standing stores in the second half of 2014. During the first quarter of 2015, we are renovating our stores in London, Rome, Venus and Milan to our new jean concept shops and we expect them to open in the second quarter of ’15.

The jeans business in Europe is seeing improved sell-throughs and higher AURs in the first quarter with growth across all markets with the exception of Russia. At wholesale our 2015 European order books excluding Russia are up about 10% over the prior year.

Moving on to Tommy Hilfiger; on a constant currency basis revenues for the Tommy Hilfiger business increased 9% for the fourth quarter while operating earnings on a constant currency grew 10%.

In North American we posted a 1% comparable store sales increase and as we moved into the first quarter comp sales trends have basically continued at this level, running about flat to date primarily driven by lower international lower traffic in those key centers, while domestic permanent population centers are running up low single digits as well.

At wholesale, our European business continues to outpace the competition. As an indicator, our 2015 European order book ex-Russia is running up about 5% compared to the prior year. Internationally we are seeing growth on a constant currency basis throughout our international business.

The growth in the fourth quarter was driven by our strong European business, both at wholesale and retail. The European retail comp stores increased 6% in the fourth quarter. As we moved into the first quarter comps are on plan running up low single digits order-to-date.

From a brand perspective, for the Tommy Hilfiger brand we continued to focus on driving the brand globally to elevated product development and engaging marketing campaigns. In 2014 we successfully launched our new Tommy Hilfiger e-commerce site, which we believe effectively integrates commerce and brand experience.

Since the new site is launched, we have seen a significant increase in traffic and consumer engagement on our site, which has resulted in strong growth in our fourth quarter e-commerce sales. We continued to evolve our consumer engagement through increased digital marketing and media spend.

As we focus on driving some of our key brand initiatives, including growing our underdeveloped Tommy Tailored business and our Tommy Underwear business we recently announced that Rafael Nadal will be our brand ambassador for the fall marketing campaign.

This campaign will focus on those two key product categories, Tailored and Men’s underwear, which we believe we have significant growth opportunities to capture. Moving to our Heritage business; our Heritage business has a difficult fourth quarter with revenues down 3%, principally driven by poor performance of our dress shirt business.

Operating income declined $12 million in the fourth quarter as clearance mark downs were required to balance inventories and clear excess goods. We believe this dress shirt issue is behind us as we entered 2015 and we begin to see this business turnaround in fiscal 2015.

Moving in to the first quarter, our sportswear businesses have continued to perfume with retail comps running up about mid-single digits quarter-to-date. Before I turn it over to Mike, I just want to focus on the key initiatives as we move forward.

As we move over the next three years, our key objective will be capturing the long term revenue and profit opportunities for our Calvin Klein and Tommy Hilfiger brands. There are really five key initiatives that we hope to accomplish over the next three years and that you should be monitoring as we go forward.

The first is to continue to invest in product, presentation and the marketing of the Tommy Hilfiger and Calvin Klein brands. Second, we continue to invest in our global operating platforms to support our growth strategies, including key investments in our digital commerce systems and platforms.

Third, significantly improving the operating results of the Calvin Klein European business over the next three years, so that it is comparable to the strong operating performance of our Tommy Hilfiger business in Europe.

Fourth, continue to invest in the expansion of our presence in Asia and Latin America for both Tommy Hilfiger and Calvin Klein as we see these markets as our greatest growth opportunities for the band.

And finally, assuming more direct control over our Calvin Klein and Tommy Hilfiger license businesses over the next three years, where we can maximize our core competencies to increase sales and our overall profitability.

And with that, I’d like to turn it over to Mike to quantify the fourth quarter results and to put more color on some of the guidance that we gave..

Thanks Manny. The comments I’m about to make are based on non-GAAP results and are reconciled in our press release. I’m going to briefly touch on the fourth quarter of 2014 and move on to 2015.

Our overall 2014 revenues were close to plan and excluding the impact of foreign currency, the strong growth in Calvin Klein and Tommy Hilfiger businesses was offset by a decline in our Heritage business. Tommy Hilfiger revenues were up 9% on a constant currency basis in the quarter with strong wholesale performance in North American.

In Europe Tommy Hilfiger retail posted 6% comps from buying the square footage expansion, while the wholesale business recorded mid-single digit growth. Calvin Klein also had a strong quarter with revenues up 6% on a constant currency basis, driven in large part by North American wholesale, in particular our underwear business.

In addition, both Tommy and Calvin experienced increases in the fourth quarter operating margins versus the prior year. Heritage revenues were down 3% for the quarter due to poor performance in our Dress Shirt division.

Within our Dress Shirt business the short fall in revenue was coupled with the decline in gross margin due to heavy markdowns as a result of excess inventory levels, which significantly lowered our Heritage operating margins. Benefiting the fourth quarter versus the prior and our guidance was a decrease in the tax rate driven by discreet items.

Overall, we delivered earnings per share growth of 23%, even with the $0.10 per share negative impact from foreign currency exchange. As we look to 2015 we need to take a moment to understand the mix of our businesses, revenues and earnings and the impact of the strength in the U.S. dollar.

As we called out in our press release, our earnings before unallocated U.S. corporate expenses are about two thirds international, which heavily exposes us to exchange rate fluctuations on both the transaction and translational basis. Our exposure at a transactional level was mostly due to our international divisions purchasing their inventory in U.S.

dollars. To partially protect against this, we bought forward exchange contracts about 9 to 12 months out for about 80% of our projected inventory purchases made by our international divisions in U.S. dollars. Our exposure at a translation level is due to the converting the revenue and earnings of our international division into U.S. dollars.

Like most companies we do not hedge translation and we don’t believe we should be gambling on billing on currency fluctuations. In 2015 we are anticipating based on currency exchange rates that we will be impacted negatively by about $1.20 of earnings per share for foreign exchange.

The $1.20 impact was approximately two thirds driven by translation and one third driven by transaction. Our largest currency exposures are the Euro, the Canadian dollar and the Brazilian Real.

In addition to the impact of the strengthening dollar, the turbulent economic and political issues in Russia projected to reduce earnings in our Russian business by about $0.10. The business remains profitable, but at a much lower level than in the prior year.

Going forward we will be discussing these impacts on material and offering the constant currency view of our operations to measure the true health of our business. For the full year 2015 we are projecting earnings per share of $6.75 to $6.90.

If we exclude the negative impact of FX in Russia of $1.30 we have earnings per share growth of 10% to 12% over the prior year. Overall, we are projecting revenues of approximately $7.9 billion, which includes a negative impact of over $500 million related to foreign currency.

On a constant currency basis we are projecting revenues to increase about 3%.

Overall operating margins are expected to increase about 20 to 30 basis points, excluding the negative impact of about 60 basis points due to FX, driving the growth when excluding foreign currencies continued improvement in the Calvin business, which was projecting revenues to grow 5% on a constant currency basis.

We are also planning Calvin Klein operating margins to increase 30 to 50 basis points excluding a negative impact of 20 basis points of FX. Tommy Hilfiger revenues are planned to increase 3% on a constant currency basis with operating margins playing relatively flat excluding a negative impact of approximately 100 basis points of FX.

Our Heritage business has planned to have a revenue decrease of 4%, due mostly to existing the Izod retail business in 2015. Operating margins in the Heritage businesses have planned to increase about 60 to 80 basis points as our wholesale business continues to show gross margin improvements, particularly in Dress Shirts.

The impact of foreign currency in our Heritage business is immaterial. Interest expense for the year is planned to be between $100 million and $125 million compared to the prior year amount of $139 million due to our average lower debt balances.

Also favorably impacting interest for 2015 is the debt refinancing we did in the second half of last year’s first quarter. Our tax rate for the year was planned at about 22%, which is mostly in line with the prior year.

First quarter earnings per share are planned at $1.35 to $1.40 and includes $0.30 of estimated negative impact for foreign exchange and the decline in our Russian business. Excluding this impact we are expecting earnings per share to increase 12% to 16% for the first quarter.

Revenue in the first quarter is projected to increase 2% on a constant currency basis. Tommy Hilfiger revenues are planned at 2% constant currency increase and Calvin Klein is planned at 3% constant currency increase. Heritage Brands revenues are projected to decrease 1%.

Interest expense is projected to be $30 million and taxes to be about 25% to 26% in the first quarter and lastly, we currently expect debt pay down to be at least $425 million in 2015. With that we’ll open it up for questions. .

Thank you [Operator Instructions]. And we’ll take our first question from Bob Drbul with Nomura. .

Hi. Good morning Manny, good morning Mike. Hi Dana..

Good morning Bob..

Good morning Bob..

Manny, on the Calvin Klein jeans business, can you elaborate a little bit more in terms of like the progress that you have seen. What the response has been from both consumers and from the retail partners.

And as we sort of go through this year, like the biggest milestones that we should be focused on around pricing, around off price, and just around the product standpoints. .

So Bob I think it will be – I think in North American the real focus for the next twelve months will be improving the profitability of that business as we really focus on selling full priced merchandise here in North American, which heretofore had been a challenge for that business, particularly over the last three of four years.

So we really are turning the percentages upside down. We are really trying to drive growing full price selling and at the same time taking market share.

I believe when you look at the business, where you’ll see that manifest itself in the Calvin Klein North America business is on a constant currency basis seeing operating margins continue to improve in that business as we go forward and we will be reporting at retail with our key department store accounts, the fact that we are seeing strong sell thoughts of that product.

Hopefully you will also be seeing – because I know you shop, you will also be seeing in North America a much more elevated presentation at retail with our key accounts Macy's, Lord & Taylor, Dillard’s, both in the jeans and the underwear area and overall you should be seeing higher averaging at retails going out the door.

In our international business it’s probably even more transparent because a bigger component of that business for us is direct to consumer, where we are in control both the environment and selling space and we report those results on a retail basis.

So I think there the business particularly in Asia, which is a highly profitable business model, there it should be on top line growth in both of those categories as we go forward and we are starting to see that in the first quarter of this year with a real enhancement of product as we have rebalanced more of our selling into the full price area away from clearance and promotional sales.

That comparison in Asia is pretty much behind us now, so we are really getting an apples-to-apples comparison beginning in 2015. So for us that will be the driver. In Europe, we continue to focus on the order book, continuing to see our price points increase at retail and our presentation across the broad on the Calvin Klein brands.

So I think that profitability will be very transparent when we report results. .

And Manny, when you think about like the five year plan that you talked about on the Calvin Klein jeans wear business, where are we in sort of the profitability in the game plane that you’ve laid out.

Like where did we end ’14? How do we think about it for ’15 from your five year perspective?.

Well, I think fundamentally when you look at the business in Asia and in Brazil, that business is running at an optimal level from our operating margin point of view.

Mid-teens operating margins are a very healthy business, being impacted obviously by what’s going on with foreign currencies, but when you really get into the fundamentals of the business and what’s really driving it, that’s a very healthy business, both jeans, underwear, all product categories in those two regions as well.

So I believe the enhancements that you will see will be hopefully on a local currency basis you’ll see some continued operating margin improvement, but what you really should start to see beginning in ’15 is some top line growth as we’ve eliminated the off price clearance sales that existed in the business. In the U.S.

and European businesses, both of those businesses are basically a breakeven for jeans business model for us today. So we clearly believe that we have the opportunity there to bring those margins over the next four to five years to approach 10%.

Every other Calvin Klein business that we run in Europe and in North America are running at double digit operating margins for us.

So it’s really cleaning up the problems of the past, getting the brand presented, making those investments the last 18 months and continuing that into this year, but each year proceeding an improvement in the operating margins of our business as we go forward, so that when we get over the next three to four years you will start to approach those double digit operating margins for jeans in New York and North American.

.

And Manny, just one quick question, on the marketing front, can you just direct. There’s a lot of discussion in social media around Justin Bieber’s campaign.

Was there airbrush work there done or not?.

Could you just say the last part Bob, you broke up on the phone, I’m sorry. .

The Justin Bieber marketing campaign, could you just talk about the amount of airbrushing that went on in that campaign. .

It was his head on my body Bob. No look that campaign was totally legitimate. Justin Bieber is a controversial figure which we love. It created so much buzz, just that whole controversy around the campaign. It’s right up the heritage of the brand. It’s what we really want to stand for, getting parodied on Saturday Night Live.

So all of that I just think created marketing buzz around the brand. He is a terrific young man who is really turning his career around and we are trying to be as supportive as possible as he moves forward. .

Great Manny, thanks very much. Good luck this year..

Thank you. .

And we will take our next question from David Glick with Buckingham Research Group. .

Great, I get to follow that up. Okay Manny, first question – a couple of questions. First, the Tommy Hilfiger business obviously has been very strong since you acquired it and the revenue outlook a little bit shy of where Calvin is. I just was wondering if you could give us some color on why the top line in Tommy is planned a little bit below Calvin.

Are there any issues or challenges underlying that or maybe just a function of a tougher comparison?.

David, it’s a great question. I think from a macro point of view, we are really dealing with some headwinds going forward. The Tommy business, the strength of the Tommy business has been its geographic diversity and the strong brand positioning and the strong operating and financial characteristics that the European business carriers.

I think fundamentally when you think what’s going on with currencies around the world, in Europe in particular, but Brazil as well two big markets for both Calvin and Tommy, but in particular for Tommy in Europe there’s is a reason those currencies are under so much pressure. The underlying economic statistics there are just feeling the pressure.

So it’s the fact that our order book is running up mid single digits, 4% to 6% depending on the season, in and of itself is disappointing to us.

When we look on a historic basis where we had double digit increases in 2010, ’11 and ’12, but clearly from what’s going on from the macro point of view, we feel we are substantially getting market share during the same timeframe.

But that doesn’t change the dynamic that’s going on, that we’re only planning our comps to grow low single digit in Europe and we’re planning the wholesale business to also grow in that 2% to 4% range for the second half of the year.

So Tommy has consistently surprised us on the upside with their results and we are in a little bit of a period of now being up against some really tough comparisons last year and prior years and going into the headwinds of just a really challenging market. So I think that’s the biggest issue that’s facing us there.

I think as things start to improve, there’s no reason why that business doesn’t get back to a blended growth rate of closer to 6% to 7% to 8%, which we think we are very comfortable with and really for that brand there continues to be substantial opportunities for us to really directly controls some of the emerging markets throughout Asia and the Latin America as well.

So those are real opportunities for us as we go forward and none of that is really factored into the financial guidance that we’ve given..

Yes, great thanks.

Second question, obviously premature to talk about how FX has been impacted beyond this year, but can you talk about what strategies that you are contemplating, whether its pricing, average cost, unit cost reduction, expense cuts to offset some of the transactional impact you have going forward?.

Sure Dave. I think fundamentally we’re dealing with somewhat of an unprecedented situation given the volatility and the speed of some of these declines. The Euro move from parody at one point in 2002 to $1.35 and as in four months has gone from $1.35 to just the bulk parody just a couple of days ago.

So it’s been a shockingly fast move which you don’t usually expect to see in currency markets. So we are really trying to pull all the levers as we think about 2016. We’re also trying not to over react to the situation. So we’re clearly looking at potentially certain markets for more local production. That would be particularly for Europe.

We would like to see 1,000 basis points increase potentially in some of our local production that goes on, so instead of being around 30%, essentially moving to 40%. That does come with higher average costs than we experienced in 2014 and ’15, but at the same time gives us speed to market and efficiencies that we might be able to take advantage of.

Leveraging our overall purchasing power, we thought the end of days trying to more efficient there. That will clearly be a level we’ll look at. Opportunistically increasing average retail, that’s the one that we’re really focused on, we’re looking at, we’re trying to understand the competitive set there.

We’re also trying to understand market by market where we have the potential to raise prices given the fragility of the European market, especially some of the big markets that we’re in. It feels in the short term like we need to move cautiously as we really start to experiment with raising prices, but we will be looking at it very closely.

And then lastly, looking at expense controls across the board. Everywhere we clearly understand the situation we’re in and we manage against that.

So I think we’re really trying to focus on all of those points as we go forward, with a real balance to say we need to continue to invest in our brand, so that we could drive long term growth as this starts and hopefully some of this currency headwind starts to turn around over the next two years..

Great. Last question, your Heritage business obviously has been a headwind, which is a bit ironic given the improvement we’ve seen, particularly in the mid tier department store channel.

I’m just wondering what are you seeing in that channel in the department store channel overall that might in terms of trends and is that an opportunity for you guys as you start to turn around your Heritage business?.

Yes. Look, our sportswear businesses, I’ll talk about that specifically which we continue there to see good results, particularly with the Izod business and launch at Coles continues strongly. I think you’ll see operating margin improvement there and some sales increases.

The retail trend right now, the first six weeks of the quarter have been very satisfying to see what’s been going on in our own stores and at retail what we’re seeing. Our Dress Shirt business for us that was just a huge disappointment. That’s just not an area we should be missing. I mean we are the dominant player.

It is a tough category, but we got caught within some inventory and some movement of excess goods that we shouldn’t have gotten caught within. That’s been addressed, that’s behind us and I think you’ll start to see that business in ’15 getting back to its historical levels of profitability.

The real challenging business in that whole Heritage component has historically been a retail direct-to-consumer business in North America and we’ve addressed that over the last two years with the close down of the Bass business and now the close down of the Izod retail business, both representing a little bit over $300 million in sales at breakeven operating businesses.

So the efficiencies that we’re gaining from that will start to manifest itself in ’15 and in ’16. So a much more efficient business model. Historically our wholesale businesses have been at 10% or 11% operating margins.

Even last year in a very challenging market we were over 8% and believe we’ll get closer to 9% this year with the hope to reach that double digit level in the second half of this year. So it’s a focus area for us.

We clearly managed that business from a cash flow point of view with little investment going into the Heritage businesses besides working capital and some minor support for the brands that’s required and we’re able to take that cash flow from those businesses and reinvest it back into a high margin, higher growth Calvin Kline and Tommy Hilfiger business.

So that strategy just continues..

Thank you very much for the color. Good luck..

And we’ll take our next question from Joan Payson with Barclays Capital..

Hi, good morning everyone. So could you talk a little bit specifically about the Calvin Kline North America in wholesale business? It looks like it was performing very strongly.

So maybe if you could just touch on what the growth was for Calvin, North America wholesale in the quarter and also what you’re seeing in terms of the order book right now?.

Sure. Joan, I’m very cautious whenever I talk about the North American order book, because given the customer composition and the immediate cancellation of orders and margin support.

So sufficed to say it’s very strong, it should continue, but I don’t like quoting percentages, because sometime I might – it’s not unlike the international business where an order is really something that stood behind and moves out. I think here it’s more like a retail business for us, we really have to manage it.

So I’ll just focus on how we’re doing at retail and how that’s manifest. I think the Calvin Kline business overall in North America was up double digits from the sales point of view in the fourth quarter. That’s really been a strong performance for us and its really being driven by outsized performance of the underwear business.

The men’s at the bigger business just driving that, but also women’s also coming on very strong and really enhancing the overall brand presentation has been a big winner for us.

So the underwear business double digit increases in our wholesale business, the jeans business overall and the men’s sportswear business up mid to high single digits for us as we move forward, that trend we hopefully will continue.

It’s going to be driven principally out of a lot of reorder replenishment business that the supply chain is set up this way to really activate it today and fulfill at a higher percentage as we go forward. So I think we’re positioned really well.

At retail where we see the shops go in, I think I mentioned we’re looking at between 30% and 40% store on store kind of retail increases. That doesn’t translate fully into wholesale sales increases, but it does higher margin, higher profitability, less markdown in allowance support as we go forward.

At the same time we’re just seeing when you look at the overall business is that we’re really eliminating both in the off-price channel – not eliminating, but significantly reducing the amount of off-price in clearance goods that are going through the off-price channel, but also the sell-in of promotional items into the full price strategy as well.

So we’re really trying to enhance that overall business and it’s the only way to then drive the profitability of that business. So as we keep our inventories clean and with an ability to react on EDI basis, on core product, I think it’s all very healthy for us as we go forward..

Great, thanks Manny.

And then also just touching on the Tommy license opportunity and taking some of those licenses in-house, could you talk about which region or regions might be the nearest term target and also how those licensed regions have been trending more recently?.

Sure. I think we can say it’s really the international markets that we were focused on. I don’t want to get into the specificity on the retail market, but I will say the Tommy Asia business has a loyalty percentage increase which is comparable to what the business is growing.

That international royalty has been growing in the double digit rate for us throughout Asia, driven particularly by the strength of the China business. The only region that’s been soft in Asia for Tommy as well as Calvin has really been the Korea market, which has had its own economic issues surrounding it.

So really the opportunity in South East Asia, the opportunity in China and clearly even more long term, the opportunity in Latin America for the Tommy brand, potentially to be writing those businesses more directly either through direct operations or potentially with a strategic partner in a joint venture situation really gives us a tremendous amount of flexibility and we believe the best way to capture the growth in those regions..

Great. Thank you..

Our next question is from Erinn Murphy with Piper Jaffray..

Great, thanks. Good morning. Manny I was hoping you could talk a little bit more about kind of your forecast for Calvin Kline over the next three to five years.

How should we be thinking about the pace of constant currency revenue growth now that you’re starting to see some more traction both in the jeans and underwear business? And then secondly, as it relates to Calvin within Europe, when do you think it’s kind of the appropriate time to revisit developing the Calvin Kline bridge opportunity in that market?.

Okay, I think let me take the last part first, because it’s the easier part of the question. On the bridge opportunity, particularly on the women’s side which would be the big sales opportunity potential, I think the strategy in-house has been re-establish the jeans business, re-establish all casual sportswear business throughout Europe.

Get that operating on a level that we are comfortable that we can deliver against and then when that is at a level we get to introduce the bridge product.

We really want to introduce that product when the brand is at full strength at retail, when you have the operating platforms in place to support it and we don’t want to get ahead of ourselves and start to create short term losses in a business that is very challenging in that market. So I believe there is a real opportunity there.

I think it’s an easier road on the men’s side than the women’s side. So our focus will be in the next three years underwear, jeans, accessories and then men’s sportswear, along with the tailored component in men’s dress shirts, suiting, comparable to what we do in Tommy.

After that business is much more secure and established we’ll look at the bridge opportunity in Europe.

As far as forecasting the growth, I can’t deal with – when I say this, is I can’t forecast to you with all the currencies ups and downs, but when you look at the underlying fundamentals of the business, we continue to target high single digit growth, somewhere between 7% and 8% top line growth.

Any kind of growth like that on a local currency basis will drive double digits revenue growth.

Have to deal with the vagaries of each of the market, the macro dynamics that are going on, but fundamentally looking at the opportunities for the Calvin Kline brand, there is no reason that the brand giving its growth prospects globally that that brand shouldn’t continue to grow at that kind of a level overall.

I think North America will be somewhat smaller just because it isn’t well developed as it is and where the opportunities are and clearly the opportunities in Europe, Asia and Latin America are closer to double digit kind of growth.

When you put it together, I think that’s where we get that 7% to 8% target that we talked about that really should drive double digit EBIT growth for the segment..

Okay, that’s helpful. And then just a second question. On the strength of the order books that you’re seeing in Europe in the back half, where are you seeing the most traction from a regional perspective with Calvin Kline checking towards that 10% and then also with Tommy Hilfiger checking towards that 4% to 5% range..

Sure.

For Calvin the strength is really the biggest growth that we’re seeing on a percentage basis is the UK, France and to its strength, the German market, even though the German market is challenging overall as a market, which is significantly under developed there, so the opportunity to take advantage of our infrastructure in Germany where Tommy is by far the largest sportswear business in Germany.

We really are able to take advantage of that strength to move Calvin Kline into that market. So I would say those are the three key markets for Calvin.

Where we’re seeing challenges continues to be Italy and Russia, which for Calvin in particular the Russia market, Moscow, that whole surrounding area, we had a very strong franchisee partner there and which is a very strong business for us. That business in 2015 is under pressure.

So its muting some of the growth, but even with that you could see the kind of sales growth that we are talking about for the brand moving forward.

On the Tommy side of the business, the most challenged market is Italy, followed by one of our bigger markets which is Germany, which is flattish right now given its extraordinarily high market share that we have there. I think we’re actually on a market share basis growing.

I have seen statistics that talked about German apparel sales overall down about 3% last year in that same period, but the Tommy Hilfiger business was up about 2% to 2.5%. So I think we’re growing and as that economy hopefully improves, we should start to see some results there. So the two brands, that’s how I would describe what’s going on..

Thank you guys and best of luck..

Our next question is from John Kernan with Cowen & Company..

Hey, good morning everyone. Congrats on the elevated product in marketing Calvin Kline. Clearly we’re starting to see some of the benefits of that..

Thank you..

Can you remind us how far below peak you are for Calvin Kline AUR specifically in the jeans business and how big this opportunity is? I know you talked about being at a breakeven rate in terms of profitability in North America and Europe, but really just a matter of getting back a certain level of AUR to get back to that double digit operating margin..

Yes. The brand in 2013, 2014 was operating with average unit retails out the door of $23 to $25, which is horrific. Percentage wise I can quote you at 20%, but this reality is in that business we are approaching $30 today, both men’s and women’s, which is very good progress to where we are, but we need to be closer to $40.

Our AUR in our men’s sportswear business to just put it in comparison is about $45 out the door and that’s a full seasonal AUR, including clearance markdown zeroing out the whole shebang.

You would expect the jeans to be slightly less than that, more casual, much more of a T-shirt business driven there, so anywhere between $38 to $40 for Calvin Kline would be a healthy business.

So we need to move AURs 30% to 35% over the next three years to get to that level of profitability that we’ve achieved in every other product category that we operate in. So I always want to reiterate that the issue that we have in North America is not a brands issue.

It’s a product category issue that’s under pressure on a macro basis and has been really mistreated as a product category from a quality level and presentation and we’re just starting to make those investments and seeing – we’re just starting to see the turnaround in those businesses and where we not to belabor it, but I mean we get the presentation, where we are able to show the product.

We’re clearly in Herald Square we have the shop presentation that’s comparable to everything else we have. We are clearly already delivering that $40 to $45 AUR.

So for us that’s what we’re going back to, our retail partners and demanding more square footage, better doors on really improving our EDI replenishment capabilities with jeans to really have a supply chain that supports our jeans business.

So a lot of building blocks that are there and some still getting there, but I believe over the next 12 months we are really making headwind and hopefully as each quarter progresses, I can continue to be optimistic about where we’re heading with that business..

Thanks, that’s really helpful. And then can you just remind us, the size of the licensed Tommy business in Asia and how this would effect – bringing some of these licenses back in-house, how that would affect your financials over the next few years..

Sure. At retail that business is about $1 billion. I’m sorry, that’s the international piece, that’s Asia and all Latin American pieces, so we kind of look at those two markets together. So the opportunity for us is to bring that business in-house. It’s not all retail business. It’s probably about 50/50 retail, wholesale.

So I would say the sales base is probably closer to $650 million and we believe that our licensing partners are operating in the range of somewhere around at least a 10% operating margin.

We believe we probably could enhance that just given the scale and size and the synergies that would exist with the existing Calvin Kline businesses in those territories from clearly a back office synergy point of view, not a front of the house synergy. So that’s the opportunity that we potentially see.

We believe those businesses can be bought at attractive prices considering where the market is and considering where currencies are today. So we think obviously those would be accretive transactions with two brands that we clearly understand, in markets that we clearly understand as well.

So from a risk profile it would be a lower risk kind of acquisition as well. So I think that’s where our focus and the use of our cash over the next three years will really be. .

Okay, that’s really helpful. Thank you..

Our next question is with Michael Binetti with UBS..

Hi, can you hear me okay? Sorry..

Yes Mike..

Hey guys. So on the Calvin business you spoke into the longer term guidance for that.

But I’m curious with the guidance for this year at 5% of the revenue line, I think you’ve spoken about that longer term at 7% or 8% and I guess it’s not intuitive to me why it would be below that in the early phases of the turnaround considering a little momentum you guys have putting assets in the ground to accelerate that business.

And the same I guess point on the margin guidance this year for 2015 at 30 to 50 basis points of an improvement. As you’ve talked about how far below what you think the opportunity is on the jeans side for Calvin Kline.

Are there things that hold the margin back or is there an inflection point on the horizon that you look at to say this is what actually starts accelerating it beyond the margin improvement rate for this year?.

I think Michael you know us well and we try to be prudent when we’re projecting the business and we’re projecting top line growth in particular. I tried to touch on the first quarter trends which are internationally better than what we’ve seen, it’s better than what the plans would indicate.

Before we start projecting that we’d like to see a little bit more time, it’s really six weeks, seven weeks and we’d like to see a little bit more time understanding the Easter shift and what’s going on, understanding… You know in North America one of the biggest challenges we’re dealing with and I think you’ll probably hear more of this as more retailers start to report, is how this international tourism is really impacting our retail sales, particularly if you have big stores in key cities in the United States, be it North East, Florida, Vegas, the West Coast, I think you’re going to probably hear from ever major retailer that attracts the international tourists of North America that that business in those markets would be under the pressure, while it seems at the same time the permanent population centers, the Midwest, the mid Atlantic, the West Coast outside of LA and San Francisco and then the whole Southern tier of the country Texas, those businesses are actually pretty strong indicating that the local consumer there is doing well.

So its balancing that in North America as well as we go forward, especially with this Easter shift its very hard to read, the weather, everything that’s going on. We’re really trying to just understand more and trying to build a projection for this year that hopefully we could outperform. .

And I guess the other part of the question was, is there an inflection point on the horizon where you guys start seeing an accelerating trend in the margin based on maybe some of the headwinds this year as you continue to puts assets in the ground and become less intense over time..

Well Michael, it would be a lot easier if we weren’t dealing with so much currency noise, both translation and transaction, it would be a lot easier to be bullish about everything. You know I find myself, before I’m checking retail sales in the morning, I’m checking currency on CNBC. So as crazy as it is that is kind of got everybody’s head spinning.

Again, we could just get some stability. Nobody is looking for dramatic improvement. With some stability I think it would give us a better sense as we start looking close to product going now for the fourth quarter in a row, 2015 and beyond.

That story hasn’t been written yet and we’re in the midst of that as we go forward, particularly since we’re at January year end.

So all those things are really stopping us at this point from… Potentially if the world was normal and we were talking instead of talking about currency this way, we’re just talking about $8 plus of earnings per share growth if currencies were level, I think you’d see a different posture from the management team and I don’t think it would just be us.

I think it would be a number of people. So that has got everybody really just sitting back trying to evaluate what it normally needs and trying to manage against it as well..

Right. So one final question on since you brought up CNBC. On TV last night you mentioned share repurchases and in the past when we’ve spoken, it hasn’t really seemed like a priority for you. You’ve always preferred something strategic like the licenses you mentioned. Maybe just some thoughts on capital deployment this year.

Do you see yourself saying we might buy back some shares this year or if we look back in your transcripts to pre Warnaco, there is just a lot of velocity around the license that you guys are rolling up back and there do you see the business going back towards that over the next year or two instead as you think about how to deploy cash. Thanks..

Look, it’s a great question.

I think we’re at a moment in time and 2015 is really that transition year that we really need to look at that as we go forward and where we are in this moment of time is the priority has been given the acquisition of Warnaco pay down debt and we’ve done that for two years, exceeded our expectations of paying down debt and targeted to pay down about $425 million and get debt again this year, which I think is really critically and important to position ourselves to grow, to make those acquisitions that I’ve been talking about this morning.

At the same time, the free cash flow of the business after the investment spending in for systems and platform and our CapEx expenses and our retail growth and even if you couple in debt repayment and a level of licensing acquisitions that was rational year by year as opposed to a major acquisition in one chunk, if we did it that way, we’re generating, once all the integration restructuring is now behind us, we’re probably generating $500 million plus of free cash flow after those investments to pay down debt as we go out.

So this year I think the number will be $500 million and its really because of the opportunity to look at – potentially looking at stock buyback end of 2015 going into ’16, depending what the opportunities that are out there from a strategic point of view.

Our first priority will be to invest and invest in licensing acquisitions once the balance sheet is squared away, which I think it will be in ’15. So I hope that gives a little color on where we are. .

Very helpful, thank you. .

Okay, this will be our – operator we’ll take this as our last question please. .

We will go next to Eric Tracy with Janney Capital Markets..

Hey guys, thanks for squeezing me in. I guess if I could turn to the Tommy Hilfiger strategy, you guys seem like you are focused on not getting caught up in the promotional environment, particularly in Europe. That translated really nice, both top and bottom line growth for that business.

As we think about maybe the tougher environment generally speaking as evidenced by the sort of 3% growth outlook, how are you going to manage through that business and what is the sort of help of the landscape from a channel perspective that you guys have to deal with. .

I think that’s really the balancing act. It’s trying to drive healthy growth, not necessarily just to drive growth at the expense of brand or brand positioning in the market or authenticity with the consumer. We want to be a full price, particularly in Europe we want to be a full price retail resource.

There is a lot of competitors out there that are trying to grow in that market and you see an overexpansion into the outlet business and over expansion into the off price and promotional business and I think that feels good in the short term, because that could be a really profitable business and we saw what happens with that.

Warnaco deployed that strategy into 2006 and 2007 and reported great financial results and really just completely damaged the Calvin Klein jeans business in Europe and in North American. And so this short term game is to be gotten by doing that, but that’s not a game we want to play in Europe or internationally at all. We are not really wide [ph].

We understand how to make money, we understand what our responsibilities are, but going overboard in that area just to drive some incremental growth, they will come back to bite us later. It’s not an area where we want to be. .

Yes. And so in that same vein, as we think about the domestic jeans wear category and you guys have clearly made great strides, PVH and CK specific. But speak to again the health of that category from a competitive standpoint and the potential restraints you have to continue to migrate those AURs higher..

Look, the denim business last three years has been a category that’s been under pressure, particularly in the active performance inspired area. So if you look at Calvin Klein performance business at resale that’s approaching $150 million business in North America.

The G3 just does an outstanding job of operating for us and we believe internationally where we, PVH controls that business though that’s a growth area for us as we move forward both in men’s and woman’s.

I think on the denim side, on the men’s side with denim the business has stabilized from a category point of view and I believe you are starting to see some positive trends in men’s denim. I can’t say that for women’s.

We are seeing some growth and we are seeing some positive results, but I think as a category I’d bet the business is flattish overall and we’ve seen most competitors, I think they really continue to talk about negative growth and what’s on. So space is being reallocated in some cases.

So it’s critical that given our historical position in denim with Calvin Klein jeans, the brand has started to design a jeans craze, we need to really be an authority on department store floors in America and I think we are reestablishing ourselves in that area on the men’s side and on the women’s side and I think the road has got some challenges in North American on the woman’s side because of the category, but I believe on the men’s side we really start to see some overall improvement..

Okay, perfect. Thank you guys. That’s all..

Okay everyone. I really appreciate the time this morning. Allow us to get back to focusing on the business. We look forward to speaking to you in May on the first quarter press release and updating you on business trends. Have a great day. Thank you..

That concludes today’s conference. Thank you for your participation..