Stefan Larsson
Chief Executive Officer at PVH
Thank you, Sheryl and good morning, everyone and thank you for joining our call today. I would like to start by thanking all our associates around the world for delivering another quarter of strong performance. Your passion, your creativity and hard work makes all the difference. I feel very good about how we are delivering on our near-term commitments, while steadily steering towards our long-term vision to build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world and make PVH one of the leading brand groups in our sector.
We delivered our first quarter in line with our revenue expectations and achieved a stronger than expected double digit EPS growth year-over-year, driven by our disciplined execution of the PVH+ Plan. We drove 3% growth in our direct to consumer business on a constant currency basis, which was offset by declines from a cautious wholesale channel and our proactive strategic quality of sales initiative. Importantly, we drove 350 basis points of gross margin expansion and increased our EBIT margins by 80 basis points on a non GAAP basis year-over-year, exceeding our guidance.
Looking ahead, we are reaffirming our revenue outlook for the full year and raising our EPS guidance reflecting the confidence we have to continue to execute with impact, while being prudent given the continued macro headwinds. For the year, this translates directly into growth in Asia and North America, while in Europe against a tough macro, our focus is on quality of sales to further strengthen our unique market position in the region for long-term brand accretive growth.
In all that we do, building brand desirability for both Calvin and Tommy is the most important and it is the foundation to all five of our growth drivers. It's exciting to see how much traction our PVH+ Plan execution is already achieving in the consumer facing parts of the plan. We now have multiple proof points showing how we consistently in a systematic and repeatable way drive some of the strongest engagements in the industry, all by going back to the unique brand DNA of each of our brands and connecting them to what's relevant today.
Calvin is driving some of the highest consumer engagement in the history of the brand, fueled by cut through campaigns with globally relevant mega talent. We saw the impact of this work earlier this year with the launch of our spring campaign featuring Jeremy Allen White and we are excited to build on this strong momentum as Calvin's global product engine takes hold.
Tommy is also cutting through on a new level and increasingly participates in the most relevant cultural moments in the world, connecting back to the brand's classic American cool DNA and making it hyper relevant for today. Tommy's return to New York Fashion Week was named one of the top ten fashion shows of the season globally and at the Met Gala, Tommy dressed all eight members of K-pop band Straykids for their first appearance on the Met Steps and generated more conversation online than any other brand at the event.
The strong brand and consumer engagement across both Calvin and Tommy is a result of our disciplined PVH+ execution, where the lead times for consumer engagement impact are shorter than our product lead times. Even though we are already seeing early product traction leading to double digit growth in key categories with pricing power and gross margin improvement, most of our product improvements will come over time, starting with fall 2024 and then continue to strengthen season-by-season.
A critical enable to our product strength is the development of our data and demand driven operating model where we continue to optimize inventory to better match demand, with inventory currently down 22% versus the same time last year. We are constantly improving how we plan, buy and allocate our inventory and taking concrete actions to move the needle here. One such action is during this year and next we are rolling our source tagged RFID in both brands across all of our channels globally, which will drive incremental revenues, another area we are improving its allocation where we have already reduced initial allocations from 90% to 70%, which means that 30% of our inventory is now directly allocated based on consumer demand signals in season.
As I mentioned before, each of our five growth drivers is important on its own and it's when we increasingly play them all together that the real power of PVH+ comes through. Now, let me share some highlights from the first quarter on how we executed across our two iconic brands and three regions, starting with Calvin Klein.
The global brand continues to gain strength across all consumer facing parts of the PVH+ plan, from product and marketing to how we show up in the marketplace. Calvin entered the quarter with unprecedented momentum following the highly successful launch of our spring campaign. We build on that momentum through the quarter with global talent like Kendall Jenner, Jung Kook and Jennie Kim. Kevin also teamed up with actress Zendaya to tease the launch from Spring collection, creating a custom look for her Challengers movie premiere in Rome. We continue to elevate our direct-to-consumer experience with a new global store concept, which recently launched in Dusseldorf and Rome. Next week, we'll launch a global flagship store on the iconic Champs Elysees in Paris.
And on the product and brand side, I'm thrilled to welcome Veronica Leoni as Creative Director for Calvin Klein collection and equally delighted to share that Calvin Klein plans to return to the Runway in 2025. Calvin Klein has always had a unique positioning in the market, with a strong consumer following from underwear, fragrance, jeans to more refined dressing all the way to the Runway. The collection and the Runway will create aspirational halo for the brand, adding new dimensions of desirability to the already strong foundation in product and marketing.
Turning to Tommy Hilfiger, after having kicked off the spring season with a historic return to the Runway, Tommy followed up with a spring campaign featuring Kendall Jenner and Friends wearing some of our best seasonal must haves, including the iconic Tommy Polo. In Europe alone, the campaign drove polo sales up by over 30% compared to last year, reinforcing the relevance of this hero product to the consumer's wardrobe. The highly anticipated StrayKids campaign also launched during the quarter, first in Asia, then followed by a global release, which drove significant social engagement globally.
Last month, we solidified our presence in the world of sports and entertainment at the Miami Grand Prix, headlined by Kendall Jenner, Lewis Hamilton and George Russell. And looking ahead, we will continue to drive brand desire and consumer engagement, spotlighting the best of Tommy's summer lifestyle through a special event in Mykonos, with global talent, all hosted by Tommy himself. It's early days for Lea in her role as Tommy Hilfiger Global President and she's already making a big positive difference and together with her team leaning in to take the brand to the next level.
Now let me turn to our regional performance, starting with North America. I'm very proud of our team continue to drive strong PVH+ execution in a tough macro, achieving high quality revenue growth led by D2C which increased mid single digits and followed by growth in wholesale which for Calvin and Tommy increased 2%. Our Tommy and Calvin businesses together delivered 3% revenue growth, which was fueled by strength in higher average order value and commercial, as well as lower promotions year-over-year.
I'm pleased with how our Tommy and Calvin businesses combined achieved a 10.5% EBIT margin, marking another quarter of double digit margin and making it the third consecutive quarter of delivering over 500 basis point margin improvement compared to the prior year. In D2C, both brands delivered positive comps driven by strength in product category offense, hero products and much improved shopping experience.
It's exciting to see the elevation of our digital shopping experience leading to double digit demand growth in the channel. For wholesale, we also delivered high quality positive comps for Calvin and Tommy through continuing to work very closely with with our key partners to improve product, presentation, staffing and inventory availability. Both brands are very well positioned to continue to win share with the North American consumer and drive significant EBIT margin expansion in a brand accretive way.
Let me now turn to our international business in Europe. Consistent with our plan, revenue was down low double digits year-over-year. Importantly, as a result of our actions, we're driving much higher gross margins and are further strengthening our unique brand position and pricing power in the market. Our quality of sales focus had an approximate 6% revenue impact in the quarter, which represented roughly half of the revenue decline.
We continue to expect the full year quality of sales revenue impact to be approximately 5%. As we shared previously, we have seen tough macro conditions, especially in our two biggest markets, the UK and Germany, where consumer sentiment is challenged and our wholesale partners are cautious. And in this tougher macro, our focus continues to be on quality of sales to set ourselves up for profitable brand accretive growth over the long-term.
As a reminder, the three main quality of sales actions we are taking in the region include, from mid-year we'll stop all third party sales of our brands on digital platforms. We have also significantly reduced the number of digital platforms that we sell to, while at the same time strengthening our collaboration with our best partners. We're also improving inventory in relation to sales overall to avoid having too much inventory. While still early in the year through these actions, we have already made significant progress.
We have lowered clearance sales by nearly 50% as we began the year with much improved stock freshness. In D2C, where we have the most direct control over the consumer experience, in full price channels across both stores and e-commerce, we drove a double digit increase in spring 2024 product sales, while prior season clearance sales and inventory were down double digit.
In wholesale, as we shared previously, our fall order book finalized at down high single digits versus the prior year, reflecting the cautiousness in the channel. However, we're seeing encouraging sequential improvements for pre spring 2025 orders and next week we'll kick off the market launch of the main spring 2025 season and I'm very encouraged by the product innovation and newness our teams are bringing across key categories for both Tommy and Calvin.
Finally, as we shared yesterday, Martijn Hagman, CEO of Tommy Global and PVH Europe will be leaving the business and I want to thank Martijn for his 15 years of loyal service to PVH, helping to build our European region into the market leading and highly profitable business we have today. I feel very good about Lea Rytz Goldman, now officially on board as Tommy Hilfiger Global President, reporting directly to me and David Savman, our Chief Supply Chain Officer, becoming our interim CEO for Europe. Since David joined us, he has played a unique role in the company, being a key leader driving PVH+ performance all the way from product creation to marketplace execution. He has already spent a lot of his time in Europe together with our regional leaders, so he will have a running start. In parallel, we have started a search for our permanent European leader.
Moving on to Asia Pacific. The region delivered overall revenue growth of 3% in constant currency, led by high single digit growth in D2C. China delivered high single digit growth in local currency with double digit growth in Japan and Korea, also in local currency. We continue to drive high relevance with our consumers in Asia by connecting our strong product category and hero product defense with mega talent and rising stars. Our brand ambassadors Jung Kook and Jennie Kim continue to fuel Calvin's brand engagement across the region and for Tommy, the Formula one Shanghai Grand Prix with Lewis Hamilton and Tommy himself, as well as local celebrities and influencers boosted brand heat in the market.
Revenue and market share for our business continue to set new records on Douyin as we further explore new ways to engage consumers. On Tmall, Tommy the man hosted it's first live stream shopping experience for the brand, which ranked number one on the channel. Following a successful Lunar New Year this past quarter, we are now in the early days of the big consumer moment 618, which will be followed by Chinese Valentine's Day in July. Recently I spent a week with our teams in China and Japan, walking stores across multiple cities and firsthand was able to see how much untapped growth potential we still have in the region.
In closing, for the first quarter, we again delivered on our plan. We drove high quality growth in both Asia and North America, while we in Europe given the tough macro, took the long-term view of increasing quality of sales, strengthening our market position for the long-term. We continue to build out the PVH+ execution momentum, led by significant strength in consumer engagement and brand desirability across both Calvin and Tommy, resulting in high quality D2C growth with strong margin expansion.
The build out of our data and demand driven supply chain continues to generate value and we are investing in growth, while driving increased cost discipline. Through our PVH+ plan, we're moving PVH into leading brand builder with two of the most desirable lifestyle brands in the world. What's making all this happen is our strong leaders and teams across the company and I want to again thank you for the great work you do.
And with that, I'll turn the call over to Zac to discuss the financials in more detail.
