Stefan Larsson
Director & Chief Executive Officer at PVH
Thank you, Sheryl, and good morning, everyone, and thank you for joining our call today.
For the second quarter, we delivered another strong performance. We grew revenue by 4% on a reported basis and 2% in constant currency, and we beat the expectations on our bottom line on a non-GAAP basis driven by our disciplined execution of the PVH+ Plan, our long-term brand-building growth plan. In the quarter, we again drove double-digit growth in our direct-to-consumer businesses with double-digit increases in both our stores and in our owned and operated e-commerce, which are the channels where we are able to impact the shopping experience the fastest. Our D2C business will increasingly create a halo for our brands, that benefit the entire marketplace and we are excited about the accelerated momentum we are building there.
Looking ahead, we are increasing our full-year outlook for our non-GAAP EPS guidance based on the confidence we have in our ability to execute to PVH+ Plan in the back half of the year. By focusing on what we can control, for the full year 2023, we remain well-positioned to deliver solid top-line growth in addition to double-digit EPS growth. We have strong conviction in the long-term potential of our brands and business and one of the ways we show it is through our share buybacks. In just the second quarter alone, we completed $200 million in buybacks, which was our initial plan for the full year. We are now planning to increase our buybacks for a total of up to $400 million for the full year.
Independent of the macro-climate, the PVH+ Plan combined with our strong ability to execute will enable us to drive profitable long-term brand accretive growth, and geared towards our vision to build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world and made PVH one of the highest-performing brand groups in our sector. Each of the five key growth drivers of our PVH+ Plan plays an important role on its own. And when we make them play altogether, which we increasingly do, we create something really powerful. Let me bring this to life across both brands with a few examples of how we are activating our consumer-facing growth drivers to win with product, win with consumer engagement, and win in the digitally-led marketplace. First, within Tommy, the team is doing a lot of exciting work around our talent amplification, which is starting to create a flywheel effect across product and consumer engagement, all the way through commercial impact.
For Q2, the team connected our most iconic Tommy products like the Polo shirt, the Oxford shirt, and the Chinos with the network of the most influential talent and some of the spring and summer's biggest cultural events, ranging from New York Fashion Week to Formula One Grand Prix around the world to really cut through in the marketplace. One example where the team executed this really well was with a focused activation with talent toward our iconic Oxford shirt, styled in their unique way at the Tommy New York Fashion Week Dinner and Formula One Grand Prix in Miami, and they then engage their own audiences through personal and authentic social content, which in turn drove significant engagement on our channels and ultimately drove traffic into our stores and e-commerce.
And through the network effect of this initiative, the brand drove triple-digit increases in sales of the Oxford shirt, which were up nearly 170% in the week following our campaign. In parallel to this, our talent partnerships continue to gain momentum in the quarter as part of the launch of our Mercedes AMG Formula One and Awake collaboration, we rolled out dedicated activations across Europe and the US, including a launch event in Miami with super talent like Lewis Hamilton. In addition, retail activations were held across Europe with personal appearances by George Russell in Budapest and Lewis Hamilton in Milan. Approximately 70% of Mercedes AMG Formula One fans, named the Tommy Hilfiger Awake collaboration as the most exciting and memorable partner content of the weekend, with half of fans highlighting they are much more likely to consider purchasing Tommy Hilfiger as a result of seeing the collaboration.
And to cap it off, with super relevant timing, we are leveraging the sports rising popularity to connect on new levels with our customers, boosted by Netflix' Drive to Survive and our recently announced Formula One film sponsorship featuring Brad Pitt and Damson Idris. So what you can see here from these Tommy examples is how we leverage the unique strength of our iconic Tommy brand. Combined with very engaged long-term ambassadors who love the brand then we supercharged everything by connecting it all to culturally relevant global events to really cut through in the marketplace. This is a systematic and repeatable approach, but we are only just in the beginning to tap into. So looking ahead, we will continue to build out this work, starting with Tommy's fall campaign, which is right now underway, featuring seasonally relevant key categories and iconic American families.
Let me now share a few Calvin Klein examples. The Calvin Klein brand is continuing to generate historically high levels of impact and engagement with our consumers in all key global markets. Propelled by our strategy of launching cut-through campaigns and igniting the talent engine. And in May, the brand launched a highly successful collaboration with Jennie Kim, sold through globally within days. They also launched an exciting partnership with some of the world's most iconic female athletes ahead of the much viewed World Cup. Across the quarter, this strategy generated a significant PR and social reach. Specifically, in Q2, the Calvin Klein influencer engine was ignited by brand ambassadors, including Jennie Kim, Kendall Jenner, Jungkook, Kid Cudi and more. These digital first campaign initiatives drove a stunning 828 million social impressions and 770 million PR impressions, both up significantly versus last year.
Calvin added 1.7 million new followers to Instagram and now has well over 1.5 million followers on TikTok. The brand recently launched its fall 2023 campaign, highlighting iconic underwear denim. And in the first time in many years, more refined sportswear products that we know our Calvin Klein consumers really love. When looking specifically at Calvin product progress, and we have a lot of progress coming there. As we focus on winning with the best product in the market, our teams have created the best global hero products for men's and women's that will be consistent across global assortments, which together with Core Essentials will account for 20% of the SKUs and a much bigger share of the total sales from the fall '24 season and onwards. We're also accelerating innovation within our core product categories.
For example, in underwear, we're bringing new fabrication platforms and performance elements into established programs, such as the iconic modern cotton. Just like in the example from Tommy, Calvin is fueling a very strong product category focus, creating the best hero products in the market than engaging their long-term talent partnerships and combining both to cut through in the marketplace. In parallel to improving the consumer-facing growth drivers, we're also committed to develop a demand and data-driven supply chain for both brands and we are making a significant progress here. Our supply chain improvements continue to accelerate and will provide us with drastically improved inventory to sales ratio over the coming years with much higher on-time and accuracy in deliveries, shorter transportation lead times, more responsive production models and more data-driven planning tools across our supply chain, we are now targeting a 25% decrease of our inventory levels as percent of sales. This decrease will be accomplished progressively as we move through the balance of this year and throughout 2024.
And the exciting part with this is that we will be able to do this while at the same time, improving product availability for our consumers across channels and geographies. Importantly, this will significantly improve our ability to match inventory to demand, one of the highest value drivers in our business. There are several additional positive outcomes of this, including improving our cash flow and capital employed ratio from a financial perspective and even more importantly, reduce the pressure on operational cost of our logistics infrastructure. Lastly, as we are investing to fuel growth, we remain focused on driving cost efficiencies, enabling us to reinvest in the key growth drivers I just took you all through. During the quarter, we took the concrete actions we have previously shared in rightsizing our organization to simplify how we work, allow us to get even closer to the consumer and increased speed in our decision-making. Now turning to our regional performance and how we are connecting our brands and executing the PVH+ Plan across each region.
Let me start with Europe. We continue to intensify our execution of the PVH+ Plan to further strengthen our market position in the region. For the second quarter, we delivered high single-digit year-over-year growth on a reported basis and low single-digit growth in euros. Our European business is now nearly 30% larger than pre-pandemic levels in euros. For the quarter, we drove strong performance in our direct-to-consumer business, where we continue to focus our efforts around elevating the consumer experience. For Tommy, through our hero product focus, we drove success in our key categories, like the shirt category, which was tied to impactful summer marketing programs around key essentials. We also continued to reinforce our key product categories by leaning into our top performers, such as the 1985 program.
And at the same time, continuously evolving our essential product programs across men's, women's and kids. And for Calvin in Europe, we are further sharpening our hero product focus, and exciting with newness across categories. We are deepening our hero product offer and lifestyle expansion with cut through marketing, while at the same time, creating brand heat for exclusive product activations in power cities like London, Paris, Milan. A notable highlight for the region in Q2 was the grand opening of the Tommy Hilfiger store in Rome, Italy. It's our first ever owned and operated store in the city, situated on Via del Corso, Rome's Prime and best shopping street at the heart of the Italian capital. Looking ahead, our forward wholesale order book for the spring 2024 season, on a constant currency basis, is expected to increase low single-digits on top of very strong high single-digit growth this past year as accounts remain conservative. And as we have mentioned before, we are well positioned to capitalize on stronger demand in season through our never-out-of-stock products.
Moving onto Asia Pacific. The region continues to deliver very strong performance by engaging consumers with product campaign launches and driving brand heat with locally relevant talent, underpinned by our hero product strategy, which generated double-digit increases at higher gross margins. Our strong execution drove revenue growth of 16% in the second quarter on a constant currency basis, including over 20% growth in China in local currency and continued strong double-digit growth in Japan and Korea. We drove very strong e-commerce performance of nearly 25% growth in constant currency as we successfully captured key consumer moments including 6/18. During the holiday, both brands moved up the rankings on digital platforms and achieved live streaming records of over $10 million.
Newer digital platforms, such as Douyin continue to drive engagement. Looking ahead, we will continue to supercharge e-commerce and are gearing up for major consumer moments such as Double 11 and the Year of the Dragon with exclusive product capsules. We are driving consumer excitement with product-led campaigns featuring regionally relevant and global impact for talent such as Jennie and Jungkook for Calvin to expand brand awareness in the region. In China alone, we are leveraging more than 100 talent catalysts to amplify Calvin Klein hero product storytelling.
And for Tommy for fall, we are looking forward to introducing new brand ambassadors as part of the global campaign. We're also seeing proof points in Japan as international tourists are starting to rebound. We recently refit our Tommy Omotesando flagship store in best location in Tokyo, which has generated strong improvements in sales with our central business growing plus 70% versus last year. By leaning into the core growth drivers of the PVH+ Plan in Asia, we continue to have major untapped growth potential for both our brands by tapping into the underpenetrated brand awareness in China and across the region.
Turning to our business in North America. We continue to strengthen our North America PVH+ Plan execution across both brands, led by our direct-to-consumer businesses, which increased mid-single digits across Tommy and Calvin, driven by much stronger execution across all key elements of the PVH+ Plan. We have also enhanced experience and performance of our owned and operated e-commerce businesses and we drove double-digit growth there. All this drove significantly improved profitability across the North America businesses in the quarter.
And we are gaining very good traction in building a sustainable foundation for profitable brand accretive growth for the region. We're driving increased product strength with pricing power and improving the overall consumer experience and marketplace execution. Beyond D2C, we continue to drive progress with key wholesale partners, working very closely with them to improve our brand's presentation in top doors and drive consumer demand by sharpening our category offense and leaning into our hero products and securing the inventory we need to fuel that demand.
Let me share some important proof points, which highlights how our efforts to build our brands and businesses in North America driving positive results. First, we are advancing our category offense with a re-established base of key essentials and hero products that resonate strongly with our domestic consumer and driving growth across Tommy and Calvin stores as well as e-commerce sites. At wholesale, while our partners are more conservatively managing their business in a choppy macro, we are building a much stronger business with key partners such as Macy's. In fact, for Tommy indoors where we have strategically increased investments behind the brand to improve the consumer experience and inventory availability on the floor, we generated high single-digit growth versus the prior year. Also for Tommy, we drove over 20% year-over-year increases in key categories such as tees, woven shirts, underscoring the success of our global best seller initiative that we have scaled over the last year in D2C and now scaling in wholesale. Polos were once again the number one category, up over 30% year-over-year with higher AURs as we are elevating these key essentials.
For Calvin, core premium essentials in D2C where the standout up nearly 30%. And as we have done with Tommy, we have expanded this initiative to wholesale where the performance has also been strong. Similarly, we also drove double-digit growth in refined product in D2C as well as continue to strengthen our offering in performance, very well received by the consumer, and we will further expand both these areas as we move forward. Operationally across the regions, we have made significant progress with our delivery times, now shorter than pre-pandemic levels. Lastly, with respect to bringing our North America women's business back from G3, we have made very strong progress, and we're in a great place with a multiyear integration work, both related to product development and the sourcing aspects needed and we are working very closely with our wholesale partners on co-creating the take back plan.
Looking ahead in North America, we continue to focus our efforts around the domestic consumer to drive the business forward and see significant opportunity to unlock our full potential in the region. And before I close the Americas section, I would like to take a moment to address the recent wildfires in Maui, where we operated a Calvin Klein store that was completely destroyed in the fire. All our team members are safe, luckily, our hearts go out to our Lahaina team and the entire Maui community. We are doing everything we can to make sure our associates, their families and the broader community have the support they need during this incredibly difficult time.
In closing, we executed another strong quarter. I feel very good about how well our teams continue to deliver on our long-term PVH+ growth plan with a relentless focus on driving brand desirability for both Calvin and Tommy, where we connect a very strong product offers, highly engaging marketing with a winning marketplace execution. We are encouraged by our results, particularly our continued strong growth in D2C. And we are looking forward to tapping into the more than 90% of potential that still lies ahead of us. With half of the year behind us, the other half still to go, we will continue our disciplined execution and successfully navigate this choppy macro environment as we have done so far. All while keeping our eyes locked on the long-term opportunity ahead of us to build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world, and make us one of the highest performing brand groups in our sector.
And with that, I'll turn the call over to Zac.
