Stefan Larsson
Chief Executive Officer at PVH
Thank you, Sheryl, and good morning, everyone, and thank you for joining our call today. We are pleased to report that we drove strong fourth quarter financial performance, ahead of expectations for both the top and bottom line led by strength in our direct-to-consumer businesses. Revenue exceeded our expectations on both a reported and constant currency basis. And underlying growth excluding the impact of currency and the Russia-Ukraine exit was plus 9% in the fourth quarter, driven by better-than-expected results for both Tommy Hilfiger and Calvin Klein. We are coming into 2023 with strong momentum and expect to continue to grow our top-line led by outsized D2C growth, while planning to deliver EBIT margin expansion and double-digit EPS growth.
The growth in 2022 was driven by strong consumer response to our product, marketing and marketplace execution across both brands and across all regions. We showed that we were able to compete to win in what proved to be a much more challenging macro environment than any of us expected going into the year. And I would like to highlight some of the proactive choices we made to make that happen. Last April, we shared our long-term vision and multi-year growth plan at our Investor Day. The PVH+ Plan is our brand focused direct-to-consumer and digitally-led growth plan that will over time build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world.
And in parallel, making PVH one of the highest performing brand groups in our sector. The clarity of our direction and plan have provided a very strong focus for everyone in the Company. We know where we're going, we know how we will get there, and we've made great progress in the first year of execution. This stronger execution focus is gaining traction across the Company and we will continue into this year. In 2022, both Calvin and Tommy delivered increased strength in product with hero products across key categories. And in our consumer engagement, we've cut through campaigns, collaborations and world-class talent partnerships. This strength in product and consumer engagement is a big reason we drove high quality plus 9% underlying revenue growth with increased pricing power.
For 2022 from a regional perspective, Europe continued to grow from a position of strength in a challenging environment and delivered a very strong plus 10% growth in euros when adjusting for the Russia exit. In Asia, we are sending out to accelerate our growth. We were able to drive outstanding performance in the markets that were not in COVID lockdown driving plus 11% constant currency growth for the total region and plus 23% constant currency growth outside of China. And in North America, we were able to start to win more with our domestic consumer driving plus 9% growth for Tommy and Calvin together in a brand accretive way, recognizing that this is the beginning of a multi-year unlock.
From a supply chain perspective, we successfully navigated through the COVID-related challenges. Over the year, we increased our on-time deliveries from 60% to 95%, which have and will continue to deliver positive impact on both availability and cost. And we are now about to unleash the next steps in building our supply chain to become a real strategic value driver. We are creating a strong data-driven sourcing approach that will return not only efficiencies and cost reduction opportunities, but also enable us to invest back into great products. In addition, we are optimizing our SKU breadth to create higher productivity by cutting the unproductive assortment tail.
We also came into the year knowing that an important underlying driver of the PVH+ Plan is to become more cost competitive in a way that simplifies how we work, increase our speed in decision-making and empowers our team to execute and enables us to drive new growth by making strategic investment in areas such as marketing, supply chain and technology. I'm pleased to share that we've made significant progress here during the year. Perhaps the most important improvements we have made this past year was to continue to strengthen our management team with the capabilities needed to translate our PVH+ Plan to impact. From my experience, the strength of the leadership team is the single most important factor in successfully translating a value creating plan into action and impact.
I'm proud to share that we made significant progress in this critical area. Zac Coughlin joined as our CFO, David Savman as our Chief Supply Chain Officer, and Sara Bland as our Chief Strategy Officer. All three bring highly relevant experience, and we are already seeing the positive impact from their leadership. And then as of this month, Eva Serrano joined as Calvin Klein Global President, having spent 20 years as one of the key leaders behind the growth of Zara and Inditex.
And Donald Kohler joined as Calvin Klein Americas President, having spent a big part of his career on the team that turned around Burberry, both from global roles and as Head of North America for them. With these appointments complementing our strong existing leadership team, we have the capabilities, experiences and a competitive mindset needed to deliver on our long-term PVH+ growth commitments. Finally, I spent a big part of my time in 2022 traveling to experience our markets and stores from the consumers' perspective, and I continue to be impressed by our people and teams around the world. I want to thank all of our associates for their hard work during 2022 and give a special recognition to our store managers. Their incredible work ethic, expertise and their passion to everyday go out there and win with the consumer is an inspiration to all of us.
Now turning to our regional performance and how we are connecting our brands and executing the PVH+ Plan across each region. Starting with Europe, our Europe team continued to drive very strong performance, reflecting the power our brands have with consumers in the region. Despite macro headwinds, we really leaned into the business that finished the year strong. We delivered double-digit year-over-year growth for the fourth quarter and had another record quarter, exceeding EUR1 billion in revenue. For the year, Europe also delivered double-digit underlying revenue growth, adjusted for FX and our Russia exit including growth in every quarter of 2022.
Growth in the fourth quarter was led by our retail stores, which generated very strong performance during the holiday selling period. We also saw strong early wholesale shipments of spring 2023 collections, which have been very well received by our partners. Growth was enabled by better product availability, increased operational efficiencies and faster product deliveries.
Our Tommy product strategy continues to be driven by product elevation, winning assortments and product stories true to the Tommy DNA, all with a focus on reaching the aspirational consumer. This was supported by our hero product strategy, which was a strong enabler of growth in 2022, and in 2023, we are further increasing our category offense and with that amplifying our iconic products. For Calvin, we continue to leverage our proven playbook from Tommy to further build out Calvin as a lifestyle brand across product categories.
We see strong growth momentum in footwear, accessories, next, our established Calvin Klein underwear and jeans businesses. We have seen favorable demand from consumers for our spring collection with on-plan early sell-through at wholesale. Looking ahead, adjusting for Russia and improved delivery performance compared to last year supply chain disruptions, our shipped order book for fall is expected to be up low single-digits. While our wholesale partners are taking a conservative approach, given the potential for macroeconomic volatility, we are well positioned to capitalize should stronger demand continue through our best-in-class operating model and strong Never Out of Stock program.
Moving onto Asia-Pacific. Our Asia team continued to deliver solid growth in constant currency in the fourth quarter outside of Greater China. In Greater China, we generated stronger-than-expected 11.11% [Phonetic] performance, which was offset by the widespread COVID impact. For the year, the region generated strong double-digit constant currency growth, and both Calvin and Tommy continued to increase their brand awareness. Our focus on key growth categories and hero products and ongoing efforts to refine the product assortment through regionally relevant products with SKU rationalization are driving results.
In the fourth quarter, our hero products outperformed with higher AURs and lower discounts. We continue to lean in and win key consumer moments such as Lunar New Year by driving engagement and performance above plan, fueled by successful product capsule launches and consumer activations. Both brands continue to move up the rankings on Tmall, underscoring the strength of our brands and product in the market and how well they are resonating with consumers. For the holiday, we launched the Tommy Miffy capsule collection, which feature the iconic cartoon character, Miffy. The omnichannel campaign and capsule launch was brought to life across retail, social media, influencer collaborations and e-commerce partnerships, fueling strong brand heat.
Calvin also launched a dedicated capsule and consumers have the opportunity to dress virtual avatars in the collection called Ready Player Me. As we look toward 2023, we are working to further expand the region's digital capabilities and to enable a single consumer view across channels as well as faster digital execution. We continue to make investments in newer channels such as Douyin live-streaming and collaborations with the Tmall Innovation Center, which leverages big data and consumer insights to offer customized starts. We're also laying the foundation for new and enhanced capabilities in our supply chain through Asia for Asia sourcing as well as improving our demand planning to focus increasingly on core replenishment and a read-and-react model to enable shorter lead times with higher in-season buying.
Looking ahead, our brands have a clear premium brand and product positioning with the opportunity to grow further in all markets. We continue to lean into further increasing overall brand awareness, especially in China, where both Calvin and Tommy are underpenetrated. Lastly, shifting gears to our business in North America. Step by step, we are getting early traction in growing the business in a brand accretive way, underpinned by a clear category and product focus to deliver sustainable profitable growth with an increased focus on the domestic consumer. Our Tommy and Calvin businesses delivered mid-single-digit growth in the fourth quarter, led by our D2C stores. We delivered strong performance despite a very promotional holiday period, given elevated inventory levels across the market. For the year, our Tommy and Calvin businesses increased high single-digits.
Our D2C stores delivered high single-digit positive comps in the fourth quarter, driven by improved product assortments and in-stock levels. Most importantly, we continue to drive improved domestic consumer comps. Our assortment and product improvements continue to yield results. For Tommy, our global bestseller initiative, which focuses on combining global winning design, scaled quickly to 70% of our D2C business. This initiative is generating higher AURs, stronger sell-throughs and higher gross margins compared to the balance of the assortment.
One great example that we shared with you last quarter pertain to our expanding Polo business. Building on the prior quarter success in this key category, in the fourth quarter, our three biggest Polo product franchises were up plus 21% versus 2019. We also saw significant progress with on-time deliveries in the region with over 90% of our spring season on time compared to a year ago where we were just 32% on time at the start of the year. This improvement is a direct result of our improved supply chain leadership.
Looking ahead to 2023, we are focused on applying our learnings from 2022 and further scale our growth initiatives in North America. We are doubling down on the performance drivers in our D2C stores through rigorous assortment building and editing, even better matched to demand with a focus on in-stock improvements in key categories. For Tommy, we're expanding the Tommy global bestseller initiative to the wholesale channel. And for Calvin, we're building market share in CK Underwear by improving replenishment execution and in-stock levels across all channels coupled with our impactful marketing execution. At the same time, we are making investments in store upgrades to ensure our stores deliver an elevated consumer experience.
Next, I'll share a few global brand highlights and how we are bringing both brands to life for the consumer, beginning with Calvin Klein. Jonathan Bottomley, our Global Calvin Klein CMO and our Calvin marketing team have done a fantastic job in going back to the iconic DNA of Calvin Klein and made it highly relevant to today. During the past few months, we have been able to see this work come to life under the campaign umbrella of Calvins or nothing. In January, the campaign launched with global tennis star, Carlos Alcaraz, in our signature cotton underwear styles wearing our classic straight jeans and it drove strong results.
More recently, the spring chapter of the campaign was launched globally starring ambassadors and friends of the brand, including Michael B. Jordan, Jennie Kim, Kendall Jenner, FKA Twigs and the Aaron Taylor-Johnson. Dressed in the latest underwear and jeans, the full cast introduced a wide range of new styles for the season. The campaign launched with Michael B. Jordan timed to the release of his highly anticipated film, Creed III. The campaign images quickly went viral across social media and generated very high engagement. The Collab post between Calvin and Michael B. Jordan is now one of our highest performing post to date with a total reach of 8 million on own social. We saw incredibly strong organic broadcast and digital coverage across entertainment, pop culture and fashion outlets, including on Jimmy Kimmel Live! for a total reach of 1.3 billion in the 24 hours after launch.
And the campaign pickup didn't stop there. The brand's Collab post with Kendall Jenner is now the highest reaching post of the year with 13.4 million in reach, again, a testament to the power of the right imagery and the right talent to cut through. Also launching this week, Jungkook, a member of the extremely popular South Korean boy band, BTS, will join the brand as global ambassador for Calvin Klein jeans and Calvin Klein underwear.
Moving on to Tommy Hilfiger. Tommy, with its unique classic American cool DNA, continued to drive strong brand visibility and relevance among our target consumers. The brand generated approximately 4 billion impressions from November to January. Tapping into a moment of strong consumer relevance, the brand's Miffy collaboration, which I just spoke to, although developed for the Lunar New Year celebrations, was leveraged globally, and it was one of our strongest performing capsules. Looking ahead, our Tommy Spring Campaign, Classics Reborn with Shawn Mendes recently launched globally. And as part of that, Tommy and Shawn just hosted a tour of immersive events in London, Berlin, Milan and Mexico City.
Selected flagship stores held in-store activations. Sustainability stands at the heart of this collaboration with the collection incorporating a broad range of recycled and other sustainable materials. The TOMMY JEANS label is also fostering new consumer connections through the upcoming Tommy Aries collaboration, which features a bold and creative play on all things TOMMY JEANS. The collection is inspired by archival Tommy Pieces and will in the coming days be available for early access online in our own stores and in key streetwear retailers globally. For both brands, we are looking forward to an exciting 2023. It will be a year to take another big step forward in delivering on our PVH+ commitments towards our long-term vision of building Tommy and Calvin into the most desirable lifestyle brands in the world, all while becoming one of the highest performing brand groups in our sector.
I recognize the macroeconomic environment will likely continue to be tough. So we will be relentless in executing our five PVH+ growth drivers across both brands and all regions. In winning with product, we will advance our category offense and create the best hero products in the market. In winning with consumer engagement, we will deliver seasonal cut-through campaigns charged by an increasingly strong network of aspirational talent. You will also see us improve the aspirational presence of all consumer touch points ranging from social media, e-commerce to in-store. We're also investing more into marketing as a share of sales to make sure we continue to cut through with our initiatives.
In winning in the digital marketplace, we will continue to drive D2C offense across both the e-commerce and stores with improved productivity, all while we strengthen our partnership and business with our key wholesale partners and increasing our full price penetration. We are continuing to drive e-commerce strength, both owned and operated and with key partners. We are only in the beginning of developing our demand-driven supply chain. And this year, we will make progress in cost of goods, delivery accuracy and leveraging our scale across both brands, all while we take big steps to become cost competitive going after efficiencies while investing behind our growth drivers.
I look forward to building on the strong momentum we started in 2022 to win in 2023 and beyond. We are starting to get real traction around the vision, the plan, the execution and most importantly, the team and the mindset needed to get it up. Over time, there is enormous power in the compounded effect on being consistent in direction and value-creating focus through the PVH+ Plan.
I'll now turn the call over to Zac to discuss the financials in more detail.
