Good morning, everyone and welcome to the PVH Corp Fourth Quarter and Full Year 2018 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, rebroadcast 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 reflects PVH's view as of March 27, 2019 of future events and financial performances.

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 the subject of this call.

These risks and uncertainties include PVH's rights 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 on the non-GAAP basis as defined under SEC rules.

Reconciliations to GAAP amounts are included in PVH's fourth quarter 2018 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 is Mike Shaffer, our Chief Financial Officer, Dana Perlman, our Treasurer and Head of Investor Relations and Ken Duane, CEO of our Heritage businesses. Our fourth quarter and full year 2018 performance exceeded our expectations demonstrating the power of our diversified business model.

Fourth quarter revenues declined 1% including the $125 million negative impact of the 53rd week from last year or up 4% without it and our EPS grew 16% in the quarter. We grew our 2018 revenues 8% for the year to $9.7 billion and posted 2018 non-GAAP earnings per share of $9.60 representing a 21% increase year-over-year.

We believe that these results are spectacular and demonstrate the incredible make-up of our organization that encompasses our powerful brands, our talented teams and our wide range of global growth opportunities. I would like to highlight a few key themes from our performance.

First, our international businesses continued to be a highlight and they currently represent over 50% of our revenues and 65% of our EBIT.

Europe in particular continues to be an exceptional market for both Tommy Hilfiger and Calvin Klein despite the soft macro environment across the region as our products, price positioning and brand experiences are resonating with the consumer. Our order books are outstanding speaking to the power of our brands.

We believe that we continue to gain market share for Tommy Hilfiger and Calvin Klein and that Europe represents the largest near-term regional growth opportunity for Calvin Klein. Asia experienced healthy performance for our brands despite the softer macro retail trends in China in the second half of 2018.

We continue to grow our businesses and expand the breadth of categories that we offer for Tommy Hilfiger and Calvin Klein, while investing to create exciting brand activations and tell brand experiences for the Chinese consumer.

While we continue to monitor the consumer climate there in China, we see meaningful opportunity to expand our businesses in the region over time.

Moving to North America, our retail performance improved over the third quarter with an acceleration in our Tommy Hilfiger and Calvin Klein comparable store sales and healthy performance in both of those brands especially for Tommy. Another key point to highlight is the continued outperformance across our Digital businesses.

Digital continues to be critical and we introduced collaborations globally with a number of pure play digital commerce retailers. For the year, our reported Digital revenues increased by more than 20% and broke the $1 billion mark representing over 10% of our total revenues. We are also excited about our two recent acquisition announcements.

The first one to acquire Gazal shares that we did not already own. Australia is a great market with a healthy business and volume mix and a solid management team. We look forward to accelerating the growth we see in this market over the next few years across all of our brands.

We are also pleased to finally takeover our Hong Kong, Macau, Taiwan, Singapore and Middle Asia license of the Tommy Hilfiger brand and run it directly leveraging our strong Asia platform. Both transactions should close in the second quarter of 2019.

We believe we continue to grow our global footprint by leveraging our strong regional platforms and leadership teams. Moving to Calvin Klein, before I talk about the brand highlights, I am pleased to report that Calvin Klein’s performance in the fourth quarter exceeded our revised expectations.

Speaking about the brand, Calvin Klein’s brand health remains very strong despite some of the business challenges we faced in 2018. Over the past few months, I hope you’ve noticed the repositioning of our Digital First approach in engaging the consumer.

I am pleased to report that Calvin Klein was one of the Top-10, most talked about brands in February according to Tribe Dynamics.

We believe that our marketing campaigns, products and global activations are sparking cultural conversations about us and we have seen a noticeable increase in Calvin Klein’s relevancy and considerations to purchase from consumers over the past few months.

Our exciting new campaigns for spring 2019 launched in February and I hope you have had a chance to see it across social media. The campaigns featured Kendall Jenner, Shawn Mendes, A$AP Rocky and Noah Centineo in Calvin Klein jeans and Calvin Klein underwear.

We believe the campaigns goes back to Calvin Klein’s roots highlighting our iconic products with a more seductive and provocative aesthetic. The impressions and engagements experienced with this campaign has been amazing and it has generated ten times the buzz of the Kardashian-Jenner campaigns from last year.

We have more excitement planned as Calvin Klein will be activating at the Coachella music festival this April as the exclusive apparel sponsor. An immersive Calvin Klein brand on-site activation will take place on the festival ground bringing to life the brand’s spring 2019 campaign.

On our last call, I mentioned some of the areas that we were addressing on the Calvin Klein side of the business to improve its overall performance. We are pleased the way these are progressing as we took quick and decisive action.

We continue to see a margin opportunity of 200 basis points over the next two years with about half of that coming in 2019. First, we have made the decision to exit our top-tier business of Calvin Klein, the 205 West 39th Street collection including the closing of our flagship store on Madison Avenue.

We believe this was the right decision for the long-term health of the brand as the existing high-end business was not resonating with our core consumer. Second, we continue to enhance our Calvin Klein Jeans product assortment.

We believe that the balance of core versus fashion product was improved in the first quarter and that you will start to see more fashion right products in the second half of the year.

Third, we reorganized our Calvin Klein marketing organization bringing together all facets of consumer marketing experience from consumer engagement to data capabilities to the shopping experience.

I believe that our 2019 campaign really speaks to the brand’s new marketing direction and that the influences we are using around the world to complement our campaign will drive brand’s heat with iconic sexy campaigns with a Digital First mentality.

We believe that this enhanced marketing approach will help us build personalized relationships and tailor the overall consumer experience through the specialized themes. Lastly, we are discussing with G-III, our women’s wear partner in North America about the potential for them to takeover our Calvin Klein Women’s Jeans business in North America.

This is being planned hopefully for the second half of the year and it demonstrates our high degree of confidence in G-III’s ability to drive the women’s jeans business in the North American region. Moving to the business overview, revenues for the fourth quarter were flat on a constant currency basis.

Earnings increased 7% with operating margins up 80 basis points year-over-year, all ahead of our revised expectations. For the year, Calvin Klein posted growth of 8% and despite the challenges we had, we posted earnings growth of about 2%.

We observed strength in our higher margin, international businesses for both the quarter and the year with strong growth in Europe. Notably, the Calvin Klein European business achieved its target of $1 billion in revenues well ahead of our plan as we continue to see a very positive response across the business despite softness in jeans.

Our new product lines including, Performance, and men’s and women’s apparel also performed quite well. As a reminder, our spring 2019 order book is up 20% and we are pleased that our fall 2019 order book is up about 15%.

We continue to believe that Europe remains the brand’s single largest growth opportunity in the near-term with the potential for it to double over time. Calvin Klein’s growth also continued across Asia.

China was healthy during the fourth quarter and we were pleased with our performance during the Chinese New Year period including the consumers’ response to our Chinese New Year capsule collection. That said, the overall consumer backdrop in China remains weaker than it was during the first half of 2018.

So we are closely monitoring the consumer overall environment as well as we see Korea continues to remain a softer market as it has been all year. Lastly, our Calvin Klein North America business had a relatively healthy holiday season. Our retail comps were down 1%, a slight improvement versus third quarter.

We have made key changes to our North America’s structure and streamlined operations. We are increasingly focused on driving improved productivity in our stores, and we believe this will drive our business forward.

We also continue to work through our denim inventories in-store and feel that we are in better position than we were entering the third quarter.

We saw overall healthy trends in wholesale all year, but as planned we experienced some weaker trends in the fourth quarter in our North America Jeans business as we cleared two products that was too fashion forward for our core consumer.

In summary, we have taken swift action to reposition the direction of the Calvin Klein business seeking to offer a more commercial product and exciting brand experience for our consumers. This will allow us to capture the top and bottom-line growth opportunities we see for this incredible brand.

Moving to Tommy Hilfiger, the Hilfiger brand’s health and relevance only strengthened in 2018 with brand awareness now exceeding 80% globally. Tommy experienced a phenomenal fourth quarter and full year demonstrating the broad based momentum we see across all product lines, regions and channels of distribution.

This was fueled by a strong product offering and a consistent brand execution around the world which we believe is driving our results.

Driven by our commitment to excite and engage our consumers, we are embarked on an exclusive high profile partnership to reach new younger audiences while also satisfying our core consumers, of course all of our marketing efforts. We continue to balance global and regional brand ambassadors to cater an increasingly global consumer base.

We delivered engaging marketing campaigns featuring Lewis Hamilton on the men’s side and those geared towards the female consumers including Hailey Baldwin and Winnie Harlow for our full 2018 icons campaign. We recently announced that American actress, Zendaya as our female brand ambassador beginning in spring 2019.

Her authenticity and belief for the power of the inclusivity and diversities have always been at the heart of the Tommy Hilfiger brand and we believe it will help us reach a broader consumer base in 2019.

Leveraging our belief in local ambassadors and unique product experience for key markets, we also introduced a Chinese New Year Capsule collection for men’s and women’s starring Shawn Yue and Maggie Jiang as the faces of the campaign.

The capsule collections were usually successful with a 117 million total impressions and website traffic exceeding 1.5 million visitors. Along with our celebrity partnerships, 2018 saw us offer exciting new brand activations from KITH with [Indiscernible] and most recently our expanded collection with iconic ski brand Rossignol in fall 2018.

These partnerships underscore Hilfiger’s vision to continuously elevate and expand the brand in key markets and further drive global growth bringing the next generation of fans to the brand.

Moving on to the business from a business perspective, Tommy sales increased 5% on a constant currency basis for the fourth quarter and 12% for the year with earnings up about 25% for both the fourth quarter and the year.

We continue to be extremely pleased with our results as we are gaining market shares with our existing consumer base, while connecting with and converting to a broader, younger audience. We continue to be extremely pleased with the response from consumers and are benefiting from market share gains in all regions around the world.

Performance in the Tommy Hilfiger International business was robust as international revenues increased 7% on a constant currency basis in the fourth quarter and 15% for the year. Retail comps were up 16% for the fourth quarter and 13% for the year. Our Tommy Europe outperformance continued.

We continue to see strong business across all markets with sell-throughs at retail with lower year-over-year promotions benefiting our overall gross margin. Our order books are truly outstanding as we continue to gain market share.

As a reminder, our spring summer 2019 order book is up over 10% and I am quite happy to report that we are seeing four winter orders up close to 15% which is truly incredible given the size of the business in Europe. Moving to Tommy Asia, which accounts to close to 10% of our overall Tommy Hilfiger revenues.

Results in China continue to be strong as we invested in our retail and digital businesses including taking back certain Tier-1 and Tier-2 cities during the year. We advanced our marketing efforts including the use of new regional ambassadors and brand activations.

We introduced interactive brand events including our fall 2018 TommyNow Fashion Show in Shanghai. In collaboration with this, we held a Super Brand Day on TMall that offered a seamless consumer experience including order delivers within 24 hours in key cities. Additionally, our Japan business was another highlight.

We experienced healthy revenue growth and our operating levels continued to exceed our expectations driven by investments in products, marketing and the overall consumer experience in Japan. Now, for North America, the business continues to outperform.

Retail comps for the quarter improved and were plus 5% year-over-year with an improvement of full price selling benefiting gross margins. Our wholesale business had another quarter with strong sell-throughs across all categories. In the first quarter of 2019, we made a strategic decision to grow Tommy Hilfiger’s sportswear outside of Macy’s.

You will start to see our product in new Tier-1 distribution including Bloomingdales and Nordstrom. You will see a presence in Bealls and our department store and other department stores during the second half of 2019. We are excited about the additional wholesale distribution for the brand and the ability it will give us to reach new audience.

With regard to licensing, we saw strong results across the board including the Tommy Hilfiger women’s business that is being operated by G-III that continues to perform at over our expectations.

In line with our strategic objective to further reach and engage with a digital savvy North American consumer, we are focusing on next-generation retail expansion on pop-up shops and brand collaborations.

As such, we are closing our New York City 5th Avenue, Tommy Hilfiger Store and the Tommy Hilfiger Store on Collins Avenue in Miami, Florida to focus our marketing efforts on targeting a younger, more digitally savvy consumer in North America.

Finally, in our Heritage businesses, revenues for the quarter declined 5% with flat comp store sales and our earnings was up $8 million reflected the weaker than expected performance across the business. For the year, revenues rose 1% with comp stores also up about 1% and earnings declined about 13% over the prior year.

We were pleased with our Heritage business for the first nine months of the year. However the fourth quarter saw the business under pressure, especially in our Dress Furnishings business was our softest business continuing to be neckwear.

As we look ahead, we see opportunities for the Heritage business as we gain market share, develop new products that contain certain innovative technologies and leverage our supply chain to produce further efficiencies. We will also continue to evaluate ways to optimize our portfolio in order to generate enhanced returns and better cash flows.

Looking out to 2019, overall, I believe our results in 2018 demonstrate our strong execution and our continued commitment to investing in and driving our business against our strategic priorities.

From a regional perspective, in North America, we have seen a softer overall retail environment since January with some business experiencing better business in May and March as weather started to turn. As such, we remain cautious on the North America landscape for 2019.

Our own North America stores are experiencing comps down, high-single-digits at Calvin Klein and Heritage and down low-single-digits at Tommy Hilfiger.

Our international businesses continue to see great momentum quarter-to-date with Tommy Hilfiger International comps up high-single-digits and Calvin Klein International comps running down mid-single-digits as the timing of Chinese New Year negatively impacted Calvin’s international business more than Tommy.

In particular, factoring out Chinese New Year for Calvin Klein, Calvin Klein International comps would have been trending closer to down low-single-digits for the quarter. Our initial earnings per share guidance range implies a year-over-year EPS growth of about 8% on a reported basis and 10% on a constant currency basis.

Our outlook prudently reflects the macroeconomic and geopolitical volatility around the world and the uncertain global retail landscape that we see both here in North America and in China. And with that, I will turn it over to Mike to quantify our fourth quarter and full year 2018 results and the 2019 outlook. .

Thanks, Manny. The comments I'm about to make are based on non-GAAP results and are reconciled in our press release. I will briefly touch on 2018 and then move on to 2019. Our reported revenues for the fourth quarter were negatively impacted by the 53rd week in 2017 to $125 million.

In the fourth quarter, we lost $80 million of revenues due to the one last week in 2018 versus 2017 and $45 million of revenue shifted out of the fourth quarter of 2018. Our fourth quarter comp sales are more appropriately compared with the 13-week period ended February 4, 2018. The fourth quarter comp sales I am reporting are on that shifted basis.

Our reported revenues were down 1% and up 2% on a constant currency basis and revenues were better than our previous guidance. In spite of one less week in 2018, Tommy Hilfiger revenues were very strong, up 2% as reported and up 5% on a constant currency basis and above our previous guidance.

Tommy Hilfiger International revenues increased 3% as reported and were up 7% on a constant currency basis. The Tommy Hilfiger International revenue increase was driven by strong performance in all regions and channels with comp store sales up 16%. Tommy Hilfiger North America revenues increased 2%, North America comp sales were up 5%.

Our Calvin Klein revenues were down 2% as reported and were flat on a constant currency basis and were above our previous guidance. Calvin Klein International revenues increased 2% as reported and were up 6% on a constant currency basis. Our international comp store sales were up 6%. Calvin Klein North America revenues decreased 7%.

North America comp store sales were down 1%. Our Calvin Klein operating margins increased 80 basis points for the quarter and reflected the positive benefits from the recently announced initiatives. Heritage revenues were down 5% for the prior year and below our previous guidance.

By Heritage retail business, comp store sales were relatively flat for the prior year. Our non-GAAP earnings per share of a $1.84 was16% higher than the previous year and $0.09 better than the top-end of our previous guidance.

The EPS dip versus previous guidance was driven by strong business or approximately $0.06 favorable FX of $0.02 and favorable interest of $0.01. We ended the full year 2018 with record revenue of $9.7 billion, an increase of 8% versus the prior year and non-GAAP earnings per share of $9.60 which was 21% higher than the prior year.

Moving on to 2019, for the full year 2019, we are projecting non-GAAP earnings per share to be $10.30 to $10.40, 7% to 8% growth over the prior year. Included in our earnings per share is a negative impact of foreign currency of $0.22. Earnings per share excluding the negative impact of foreign currency is projected to grow approximately 10% to 11%.

Overall, we are projecting revenues to grow approximately 4% as reported and 5% on a constant currency basis. Included in our revenue guidance for the year is the addition of approximately $150 million of revenue related to the pending Australia and Greater China acquisitions.

This is partially offset by a decrease of approximately $100 million of revenues related to our intent to license the Calvin Klein Women’s Jeans business in the second half of 2019 and the closure of our Calvin Klein Collection business. Overall, operating margins are expected to increase approximately 20 to 30 basis points for the company.

Tommy Hilfiger revenues are planned to increase 6% as reported and 8% on a constant currency basis. Tommy Hilfiger operating margins are planned to decrease 10 to 20 basis points including the negative impact from the pending Australia and Greater China acquisitions as these businesses shift from a licensing model to a directly operated model.

We project Calvin Klein revenues to grow 2% as reported and 3% on a constant currency basis driven by strong international growth. We are also planning Calvin Klein operating margins to increase 80 to 90 basis points.

Our Heritage business is planned to have revenue growth of about 3% and operating margins are planned to increase 10 to 20 basis points. Interest expense for the year is planned to be about $128 million compared to the prior year amount of $116 million.

The increase is primarily the result of higher interest rates coupled with higher borrowings as a result of the transactions of Australia and Greater China. In 2019, we are planning to pay down at least $150 million of our debt. Stock repurchases in 2019 are planned to be about $200 million.

Our tax rate for the year is estimated to be at about 14.5% to 15.5%, which at the midpoint is approximately 150 basis points versus 2018 with most of the increase coming in the first quarter. The increase for 2018 is a result of changes in U.S. tax code.

First quarter non-GAAP earnings per share is planned at $2.40 to $2.45 and includes approximately $0.14 of estimated negative impact for foreign currency translation. The largest negative FX impact for 2019 is reflected in the first quarter. Revenue in the first quarter is projected to increase 2% as reported and 6% on a constant currency basis.

Tommy Hilfiger revenues are planned at 4% increase reported and 10% on a constant currency basis. Calvin Klein revenues are planned at a 1% increase as reported and 5% on a constant currency basis. Heritage revenues are projected to increase 1%.

Interest for the first quarter is projected to be about $31 million and taxes to be 21% to 22% in the first quarter. And with that operator, we will open it up for questions. .

[Operator Instructions] We will take our first question today from Bob Drbul from Guggenheim. Please go ahead. .

Hi, Manny, Mike, Dana. Good morning. I guess, Manny, could you talk a little bit about the update on where you are with replacing rafts and sort of how you are approaching that from the caliber perspective, you’ve seem to be making a lot of progress on the performance there, be my first question. .

Sure, I think our focus is really been on first and foremost, getting the commercial businesses fully aligned. So a lot of our effort has gone into restructuring or marketing organization to align with the regional requirements. We have restructured our merchandizing organization and focused on that from a product area.

So we've made significant investments on the merchandizing side of the business and we continue now to think about how are we going to bring in the design focus together and align as we move forward.

We have a process in place I think does that well and we are looking for a creative head from a product point of view as we move forward in the design area. So, at this point, that piece of it is still a work in process.

But I feel very comfortable that we have the right regional commercial teams in place, designing products, totally appropriate for those – the markets that they play in and I think that’s going to help drive our business particularly in the second half of the year. .

And then I like to just ask on China, can you just elaborate what you are seeing there? Has it slowed down at all for you? Any just updated thoughts on that market would be really helpful to us. Thanks. .

Sure, I think, when you look at it on a macro basis, we get a lot of information from our landlords there and we share information with a number of our competitors there on retail sales trends.

I really think we are outperforming what’s going on in the market, but fundamentally, beginning I would say around, July of 2018, we started to really see that business slow down as lot of the store pressure on the consumer in China overall was overall. And I think clearly, the trade tensions between U.S.

and China are impacting that and then the ripple effect that had on stock market valuations and consumer sentiment has made the business more challenging. On the positive side, we haven’t seen any slowdown on our Digital business.

From an ecommerce point of view, we continue to see very healthy growth in China there, that’s probably our most penetrated market over – globally. And I think that’s a positive sign how the brands are resonating both Calvin and Tommy is resonating with the consumers there.

But fundamentally, business is softer than you saw in the first half of 2018 and that trend has just continued into the first quarter of 2019. So, I think we have to plan right to be fairly conservative in our estimate.

We are looking for that trend to continue into the – throughout the first half of 2019 and then as we start to lap comparisons, we should get back to seeing a more positive trend we hope. Finally, again, I don’t have a crystal ball, but looking at what’s going on with some of the trade negotiations, I am more optimistic today than I was 90 days ago.

So, based on discussions and a sense of what I have going on with those trade negotiations, I feel that that could be a positive catalyst as we move through the second half of the year. .

Great. Thank you very much. Good luck. Have a good day..

Thank you..

Thank you. Our next question today comes from Erin Murphy from Piper Jaffray. Please go ahead. .

Great. Thanks, Good morning. Manny, just my first question is for you. With some of your comments regarding the North American environment I am curious if you see kind of a soft part of the year is more that noise, given the weather, government shutdown earlier in the quarter or do you see kind of a start to a broader slowdown in the U.S.

consumer? And then, just given how spring trends have been here in the North American market, what are you hearing from retailers in terms of how they are planning their fall receipts?.

Okay. Look, I don’t think it’s any secret. I have talked to a number of our key customers and see our business and our competitors is, the first quarter is slightly softer than the fourth quarter.

Overall traffic seems to be down in most of the centers and I think there is a couple of things going on and you touched on them is, I think, the consumer sentiments being impacted by a lot of the noise around trade, even Brexit as people hear more and more about this.

There seems to be more uncertainty in the market and that always impacts the consumer in discretionary categories like apparel. I think you touched on the weather. I think that clearly was an impact in February which was a soft month.

And then, the later Easter, I think is really playing a bit of havoc with the retail calendar and if you think about it, particularly in our business, the outlet environment which is driven in the first quarter significantly by vacation and school, holidays and when spring break is with the calendar is just not aligned.

Easter this year is three weeks later that clearly has an impact and I think, we’ve got to wait and see how that whole situation resolves itself. But I think it’s fair to say, compared to first quarter of last year which was very strong is we are seeing a consumer backdrop that’s weaker than that right now and we’ll have to see how it all plays out.

I think we have a – we PVH, we have a plan fairly conservatively. We are expecting April to be much stronger and I think that just naturally will happen given the Easter holiday and then it’s a real question of what’s the second half of the year looks like.

But just to remind that we want to particularly broad even though our business was strong, we clearly saw a bit of a slowdown in the second half of 2018 compared to the first half of 2018. So, I think the comparisons for us get a little easier as we enter the second half. .

That’s helpful. Thank you. And then, just my second question is really on the Tommy Hilfiger business in Europe. I mean, it’s a pretty incredible order book number for fall. It's already a strong spring, that number, I am just curious what’s driving that.

If there is a specific region or a category or kind of account that’s driving that? Thank you very much. .

Look, again, that’s kind of a 15% growth, we are really seeing – we are seeing across the board and I think we are seeing some – there is some new product launches particularly Tommy performance and that’s off to a unbelievably strong start. So that whole at leisure trend that's been so strong here in North America is starting to take off in Europe.

And I think given Tommy’s position, they are in a really advantageous position to take advantage of that as we move forward and it seems to be a really strong response both from retailers and consumers there. So, that’s been a nice part of our growth as we move forward. But to be honest, we see strength in men’s sportswear, women’s sportswear.

The tailored business as we move forward our footwear and accessories business as well and even denim as a category continues to be really well for us with Tommy Jeans. So, it’s across the board. I remind everybody all the time it’s a very big business.

The largest sportswear business for any global lifestyle brand in Europe and I think, the double-digit growth is not what we really factor in and planning for the business. So, it’s really just the sense of the business.

We are gaining market share against all of the major competitors both the local European brand the global players that are positioned in Europe. And we see it consistently account-by-account and we see it in our retail comps as well. So, the team has just done a phenomenal job. .

Great. Thank you guys. .

Thank you. Matthew Boss from JP Morgan has our next question. Please go ahead. .

Thanks and congrats again on a nice quarter. .

Thank you..

Thank you..

I guess, first on the margin front, can you just touch on what your guidance embeds for gross margin both for the year and the first quarter and how to think about the drivers by brand?.

Okay. I guess, when you think about the company for the year, we are looking at 20 to 30 basis point improvement in operating margin. We are looking at about 70 to 80 basis point improvement in gross margin and that’s the components.

We do have a shift towards a significant increase in the international business, which is also fueling that gross margin increase. The Calvin Klein business and the turnaround that we are projecting there at 80 to 90 basis point improvement is a piece of the puzzle on the year.

On the first quarter and the way the margin improvement will lay out, we will see some operating margin improvement in the first quarter, but we won’t see gross margin improvement in the first quarter.

You will predominantly see the gross margin improvement in quarters two through four and nearly in the first quarter we are seeing a real heavy penetration on the wholesale selling in the business which is a lower gross margin component to the business.

Also, we have a Chinese New Year headwind, as Chinese New Year has less weeks than you see in last year and that business is a very high gross margin business. So it’s putting a little pressure on the first quarter margins, gross margins. .

Okay, that’s helpful. And then, just the bottom-line earnings growth, stripping out the headwinds from foreign exchange interest impacts, basically calls for double-digit growth this year.

I guess, can you speak to the confidence in that plan and any change for double-digits as the multi-year earnings growth algorithm that we think beyond this year?.

I think when you think about that, you touched on some of the headwinds, below the line headwinds that we are facing. But based on the momentum in the business, the wholesale order books that we see we are fairly confident and I think we have a track record of trying to be prudent how we project the year.

I mean, we try to underpromise and overdeliver. All that said, I think we are in really good position here and the one thing that I think everyone was just concerned about is the macro environment is particularly in Asia and North America where we are seeing some softness right now.

We think some of that is just the retail calendar and we touched on that with the Easter shift. But that’s the only concern we would have and it’s more of a macro global concern versus PVH-specific.

So, everything I see tells me that in the – with our key customers where we see a lot – we have a great visibility, we are outperforming the competitive set. So, with that said, it gives us real confidence to deliver the numbers we are talking about. .

Great to hear. Best of luck. .

Thank you. .

Thank you. Our next question today comes from Bernard Boruchow from Wells Fargo. Please go ahead. .

Hey. Good morning everyone. Let me add my congrats. I guess a quick one, Manny or Mike, I am really interested in the Tommy wholesale opportunity in North America now that the Macy’s arrangement is an offer.

I guess, what I’d love to understand is how should we think about the phase-in of the whole sell-in opportunity in the back half of 2019? And then, does that ramp into next year? And then, I guess, at a higher level, do you guys have some sort of sense of what the underlying demand is for the brand across North America, outside of Macy’s? And does that help you kind of frame a larger revenue opportunity for Tommy North America today versus years past?.

Okay. So, I guess, for – I’ll take it in pieces, let me talk about 2019 first. The decision we made about moving away from the Macy's exclusive, that decision was made in mid-fourth quarter. So, just to put that into perspective, the ability then to go out and capture open to buy dollars in 2019 was somewhat limited there.

So from that perspective, we are opening some doors. We are starting to ship fall holiday 2019. So, I think it’s – relatively speaking, very minimal impact on 2019 and in fact, probably with the investments in order to position the brand, it’s in fact a little bit of a headwind for the Tommy business to 2019 on a bottom-line basis.

Moving into 2020 and beyond, obviously, when we went out to speak to the market about the appetite for the brand, there was a significant demand for the brand outside of Macy’s. We wanted – the plan is to keep it in Tier-1 department stores, meaning Macy's up from a competitive set point of view.

So we touched on discussions with Nordstrom and Bloomingdale and also obviously Bealls looking to expand particularly in women’s with Dillard's. And I think those create opportunity as we go forward.

And then finally, I have to say is, clearly, Amazon is excited about the exclusivity being taken off and the availability in North America to sell Tommy Hilfiger products. So, we think it could be meaningful, but again, I think it’s more of a 2021 kind of issue as we move forward.

We did it as much as a brand positioning – from a brand positioning perspective as we did it from a financial driver, because I think we will really be able to position the brand in great shop and shops and some of the major department stores to present the brands in the best way and it’s also part of that – part of the decision to close the 5th Avenue Store.

We think we were confusing the consumer here in North America with our international product line in 5th Avenue and we think there is better ways to use those marketing dollars to connect with the North America consumer directly to really target that to a younger consumer and the opening of the distribution channel outside of Macy’s was a key initiative in the decision process to close that 5th Avenue Store as well.

So, we are excited about and I think it really positions the brand well as we move forward. .

That’s really helpful. .

Thank you. Next question..

Thank you. Our next question now comes from Tiffany Kanaga from Deutsche Bank. Please go ahead. .

Hi, thanks for taking our questions.

Would you dig into the cadence of your Calvin Klein guidance which assumes a softer back half despite easier compares and your initiatives hopefully gaining traction and how that’s being impacted by your plans around the women’s CK team’s business in North America?.

Well, I guess, Tiffany, I am a little confused. I don’t feel it’s a softer backdrop in the third and the fourth quarters.

And again I feel like, we got the first quarter planned more conservatively, first half planned more conservatively and I think, the only issue is, that we really had a such a – we had a better fourth quarter this year that we expected. So, it’s – so that’s a challenge.

The FX is really a first quarter headwind for the company overall, and I think that’s explained in the guidance. So, I think we actually see opportunity in the fourth quarter. I guess, from a top-line basis, we are not seeing the third and fourth quarter growth.

A big piece of that is the elimination of the collection business and moving of the Calvin Klein G’s business to G-III that does have a negative impact on the fourth quarter – third and fourth quarter sales. But I think it’s a healthy move for us as we move forward and improve profitability as we move into 2020. .

Okay, thanks. I was just hoping today again to how your constant currency assumption for the first quarter was for 5% growth, but only 3% for the quarter. So, thank you. That was helpful. .

Okay. It’s a – but I think that the 3% is really being impacted directly by the jeans elimination of sales in the third and fourth quarter of the year. So I think that has the biggest pressure on this I guess why 5% is down to 3% and I think, maybe just to take a step back on Calvin Klein.

Overall, the way we’ve tried to really manage the business in 2019 is, I think, with all the change that we have going on, the way we’ve tried to project the business is, overall on a top-line basis, trying to be fairly conservative about the top-line turnaround, because we think there is such a margin opportunity in the second half of the year and even in the first half of the year for that matter, both from a gross margin point of view and an expense restructuring that’s going through.

So, we are taking a really prudent approach on the top-line going with the assumption that this year is a transition year as we bring new creative directions to the product and moving forward, but it really try to secure both the gross margin benefit that will come as we shouldn’t have nearly the promotional selling in the second half of the year that we had in 2018, particularly around jeans.

And in our own retail businesses here in North America, as well as, the expense leverage that we should be able to attain throughout the year given the restructuring initiatives that went in and around the collection business in particular. So, it gives us a great deal of confidence that we are planning it right. So, operator, we have – it’s after 10.

We are going to just take one more question please?.

Thank you. Our last question will now come from Heather Balsky from Bank of America. Please go ahead. .

Hi, thanks for taking my question. I was hoping you could elaborate on the kind of digital investments you are making for 2019.

Where – I guess, where this dollar is being focused?.

Okay. I guess heavy investments are being made in systems as you would - success with really thinking – fundamentally, the distribution channels from a sales point of view really changing and the way to service our consumer is changing and investments are being made there systemically warehousing and distribution.

Our IT systems and support, our marketing, which has moved significantly to a digital marketing focus has completely changed and moved forward. From the way we can talk business, 3D design is really moving forward. We are making advances there. That will not only make us more efficient and cost-effective.

But it gives us time to really be making decisions on products later and later in the supply chain and I think it will create more nimbleness and also allow us hopefully to improve our overall gross margins.

Consumer data continues to be key for us and how we connect directly with our consumer how we gather the information systemically corporate-wide in both globally and region-by-region and then connect back with that consumer, really making investments there as well, and then the whole planning process on how we manage inventories and the product cycle.

So, look, I think as we will look back over this last year-and-a-half and going forward the next two years, I think our industry is one that is just gone through a fundamental change in the way business is conducted.

And I really, truly believe, if you are not making the investments now, you are falling behind your competitive sets and you will pay a price as you move into 2019 and 2020 and scale becomes more and more important, efficiency becomes more and more important and then the way you can communicate with your consumer is critical.

If you are not making those moves today, I think you are going to be behind the 8 ball as you move forward. And with that, I am going to close the conference. Thank you for your time today. We look forward to speaking with you in June about our first quarter results. Have a great day. Take care. .

Thank you. That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect..