PVH Corp. Sees Modest Sales Drop in Q2, Takes Impairment Charge

PVH Corp., the parent of Calvin Klein and Tommy Hilfiger, reported a 3 percent sales decline in the second quarter due to wholesale softness largely due to taking major licenses in-house, but still topped guidance. Net earnings were impacted by impairment charges related to “changes in valuation assumptions associated with geopolitical and macroeconomic factors,” but also topped guidance excluding the charges. Full-year guidance was maintained.

Second-Quarter Highlights

• Delivered second quarter revenue of $2.1 billion, at the high end of guidance on a reported basis and exceeding guidance in constant currency
• Drove momentum in direct-to-consumer (DTC) with growth in both Americas and APAC; EMEA performance improved on a constant currency basis compared to the first quarter
• Grew second quarter e-commerce revenues 4 percent (3 percent in constant currency), led by Americas and EMEA, with growth across Calvin Klein and Tommy Hilfiger
• Delivered Calvin Klein and Tommy Hilfiger revenues in line with expectations, with consistent year-over-year revenue performance, excluding the impacts of Calvin Klein wholesale shipment timing and the transition in-house of previously-licensed ‘TOMMY HILFIGER’ product categories
• Delivered second quarter non-GAAP operating margin above guidance, reflecting stronger gross margin and higher AUR values in Americas and APAC and continued cost discipline across the business
• Drove DTC growth in multiple hero product categories across both Calvin Klein and Tommy Hilfiger, scaling the impact of stronger product, cut-through campaigns and an improved consumer experience
• Delivered major global campaigns including Jung Kook and soccer star Raphinha for ‘Calvin Klein’ and high-profile partnerships with Liverpool Football Club and the Cadillac Formula 1® Team for ‘TOMMY HILFIGER’
• Reaffirmed full year revenue, operating margin and EPS outlook on a non-GAAP basis

Stefan Larsson, chief executive officer, commented, “In the second quarter, we delivered revenue in line with our guidance and profitability exceeding expectations, reflecting our disciplined execution of the PVH+ Plan across our two iconic brands, Calvin Klein and TOMMY HILFIGER. We continued to build momentum in DTC, with growth in both Americas and APAC and improved performance in EMEA compared to last quarter. E-commerce grew across both brands, including strong increases in online traffic. In both brands we are seeing early momentum for the new fall season in product and marketing, with a very positive consumer response to our recently-launched campaigns featuring Tate McRae for Calvin Klein and Travis Kelce for TOMMY HILFIGER.”

Larsson continued, “Looking forward, we are reaffirming our top and bottom line outlook for the full year. We remain intensely focused on executing the PVH+ Plan, further strengthening product, consumer engagement and the marketplace experience. At the same time, we are stepping up our cost actions, and we continue to invest behind strategic priorities and brands, with more exciting campaigns amplified by global mega talent coming later this fall. We are also very pleased to welcome Alexis Rollier as our new Chief Financial Officer. Alexis joins us with deep financial and operational experience, including over 8 years as the global CFO and COO at Sephora, where he had a strong track record of driving disciplined growth with significant profit expansion. I look forward to partnering with him as we continue to build Calvin Klein and TOMMY HILFIGER into their full potential and drive long-term shareholder value.”

Melissa Stone, interim chief financial officer, said, “For the second quarter, we delivered or exceeded our guidance across all key financial metrics. Revenue across all three regions and licensing was in-line with our expectations and we expanded gross margin year-over-year, excluding tariff refunds. For the full year, we are reaffirming our outlook across revenue, gross margin, operating margin and EPS on a non-GAAP basis. As part of our ongoing PVH+ Plan execution, we remain focused on cost discipline and continue to strengthen our data- and demand-driven operating model, driving efficiency and productivity, while continuing high-value, brand-accretive investments, including stepped-up year-over-year marketing in the third quarter, to support the long-term growth of Calvin Klein and TOMMY HILFIGER.”

Key Highlights

• Second quarter:
  • Revenue: Decreased 3 percent to $2.097 billion compared to the prior year period, in line with guidance of a 3 percent to 4 percent decrease. Decreased 3 percent on a constant currency basis and exceeded guidance of a 4 percent to 5 percent decrease.
  • Operating margin:
    • GAAP basis: (9.1) percent, includes a $439 million pre-tax noncash goodwill impairment charge, which has been excluded from the company’s results on a non-GAAP basis. 
    • Non-GAAP basis: 11.1 percent, exceeded guidance of approximately 9.5 percent.
    • Operating margin on both a GAAP and a non-GAAP basis for the second quarter of 2026 includes an approximately 510 basis point benefit related to the $107 million of tariff refunds received as expected.
  • EPS:
    • GAAP basis: $(2.23), includes the pre-tax noncash goodwill impairment charge discussed above.
    • Non-GAAP basis: $3.70 exceeded guidance of $3.00 to $3.10.
    • EPS on both a GAAP and a non-GAAP basis for the second quarter of 2026 includes an approximately $1.80 per share benefit related to tariff refunds.
  • Inventory: Decreased 3 percent to $1.738 billion compared to the prior year period.
• Full year outlook:
  • Revenue: Reaffirms outlook of approximately flat (decrease slightly on a constant currency basis).
  • Operating margin: Reaffirms outlook of approximately 8.8 percent on a non-GAAP basis.
  • EPS: Reaffirms outlook of a range of $11.80 to $12.10 on a non-GAAP basis.

Second Quarter Revenues:

• Revenue of $2.097 billion decreased 3 percent compared to $2.167 billion in the prior year period (decreased 3 percent on a constant currency basis).Revenue performance for the company’s reportable segments compared to the prior year period was as follows:
  
  • EMEA revenue decreased 6 percent on both a reported and a constant currency basis compared to the prior year period, including the continued soft consumer demand due to the prolonged effects from the conflict in the Middle East and its broader macroeconomic impacts. The decrease in revenue was primarily driven by a decline in the wholesale business. In the DTC business, growth in digital commerce revenue was more than offset by a decrease in stores.
  • Americas revenue decreased 1 percent on both a reported and a constant currency basis compared to the prior year period. A slight increase in revenue in the DTC business compared to the prior year period was more than offset by a decline in the wholesale business. The decrease in wholesale revenue included (i) a decrease due to a shift in the timing of wholesale shipments, primarily in the Calvin Klein business, to the second half of this year as compared to the prior year period partially offset by (ii) an increase associated with the transition in-house of previously licensed TOMMY HILFIGER women’s product categories.
  • APAC revenue increased 3 percent compared to the prior year period (increased 1 percent on a constant currency basis). The increase in revenue on a constant currency basis reflected growth in the DTC business partially offset by a decrease in the wholesale business.
  • Licensing revenue decreased 13 percent compared to the prior year period due to the planned license transitions in North America partially offset by growth in the ongoing licensing business. The planned license transitions are expected to be complete by the end of 2026.

Revenue performance for the company’s global brand businesses compared to the prior year period was as follows:

• Tommy Hilfiger revenue was approximately flat on both a reported and a constant currency basis compared to the prior year period, which reflects an approximately 3 percent increase attributable to the transition in-house of previously licensed TOMMY HILFIGER women’s product categories in Americas.
• Calvin Klein revenue decreased 7 percent on both a reported and a constant currency basis compared to the prior year period, which reflects an approximately 4 percent decrease attributable to the impact of wholesale shipment timing in Americas as discussed above.

Revenue performance for the company’s directly operated channels compared to the prior year period was as follows:

• DTC revenue was approximately flat on both a reported and a constant currency basis compared to the prior year period.
  • Owned and operated store revenue decreased 1 percent on both a reported and a constant currency basis compared to the prior year period. Revenue growth in APAC was more than offset by declines in EMEA and Americas.
  • Owned and operated digital commerce revenue increased 4 percent compared to the prior year period (increased 3 percent on a constant currency basis). On a constant currency basis, revenue growth in Americas and EMEA was partially offset by a slight decline in APAC.
• Wholesale revenue decreased 6 percent on both a reported and a constant currency basis compared to the prior year period with revenue declines in all regions.

Second Quarter Profitability

• Gross margin was 63.0 percent compared to 57.7 percent in the prior year period. The 530 basis point increase includes the approximately 510 basis point benefit from tariff refunds. The remaining 20 basis point increase compared to the prior year period reflects lower product costs, including a positive impact of foreign exchange, and favorable mix, partially offset by an increased promotional environment in EMEA, increased tariff costs net of mitigation actions, and the impact of the North America license transitions.
• Earnings (loss) before interest and taxes (“EBIT”) on a GAAP basis was $(191) million compared to $133 million in the prior year period. Included in the second quarter of 2026 was the pre-tax noncash goodwill impairment charge of $439 million, which was primarily due to changes in valuation assumptions associated with geopolitical and macroeconomic factors. EBIT on a non-GAAP basis was $233 million compared to $178 million in the prior year period. The increase reflects the $107 million benefit from tariff refunds, partially offset by the impact of a planned increase in marketing and other brand-building investments compared to the prior year period. The company continues to take a disciplined approach to managing expenses, driving cost efficiencies while making these targeted investments to drive its strategic initiatives.The impact of foreign currency translation to EBIT in the second quarter of 2026 was immaterial.
• Operating margin on a GAAP basis was (9.1) percent compared to 6.1 percent in the prior year period. Operating margin on a non-GAAP basis was 11.1 percent compared to 8.2 percent in the prior year period.Operating margin on both a GAAP and a non-GAAP basis for the second quarter of 2026 includes the approximately 510 basis point benefit related to tariff refunds.
• GAAP EPS: $(2.23) compared to $4.63 in the prior year period.
• Non-GAAP EPS: $3.70 compared to $2.52 in the prior year period. EPS on both a GAAP and a non-GAAP basis for the second quarter of 2026 includes the approximately $1.80 per share benefit related to tariff refunds.
• Net interest expense decreased to $12 million from $22 million in the prior year period primarily due to an increase in interest income partially due to higher cash balances.
• Effective tax rate was 49.2 percent on a GAAP basis compared to (101.6) percent in the prior year period. The effective tax rate was 22.2 percent on a non-GAAP basis compared to 21.8 percent in the prior year period.

Stock Repurchase Program:
The company did not make any common stock repurchases under the stock repurchase program during the first six months of 2026. The company currently expects to repurchase at least $300 million of shares of its common stock for the full year 2026.

2026 Outlook:

The company is reaffirming its full-year revenue, operating margin and EPS outlook on a non-GAAP basis.

Full Year 2026 Guidance

• Revenue: Reaffirming outlook of approximately flat on a reported basis (decrease slightly on a constant currency basis).
• Operating margin: Reaffirming outlook of approximately 8.8 percent on a non-GAAP basis, flat compared to 8.8 percent in the prior year. Operating margin on a GAAP basis was 2.6 percent in the prior year.
• EPS: Reaffirming outlook in a range of $11.80 to $12.10 on a non-GAAP basis compared to $11.40 on a non-GAAP basis in the prior year. EPS on a GAAP basis was $0.52 in the prior year. The full year 2026 EPS projection includes an estimated positive impact of approximately $0.40 per share related to foreign currency translation, which is the same as prior guidance.
• Net interest expense is projected to be approximately $70 million compared to $79 million in the prior year period. Previous guidance was approximately $75 million.
• Effective tax rate is projected to be in a range of 22 percent to 23 percent on a non-GAAP basis compared to 22.2 percent on a non-GAAP basis in the prior year period. Effective tax rate on a GAAP basis was 83.3 percent in the prior year period.

Third Quarter 2026 Guidance

• Revenue:Projected to decrease low single-digits compared to the prior year period (decrease low single-digits on a constant currency basis).
• Operating margin: Projected to be approximately 7.5 percent on a non-GAAP basis, compared to 8.8 percent on a non-GAAP basis in the prior year period. Operating margin on a GAAP basis was 7.9 percent in the prior year period.
• EPS: Projected to be in a range of $2.50 to $2.65 on a non-GAAP basis compared to $2.83 on a non-GAAP basis in the prior year period. EPS on a GAAP basis was $0.09 in the prior year period. The third quarter 2026 EPS projection includes an estimated positive impact of approximately $0.05 per share related to foreign currency translation.
• Net interest expense is projected to decrease to approximately $18 million compared to $21 million in the prior year period.
• Effective tax rate is projected to be approximately 22.0 percent on a non-GAAP basis compared to 25.5 percent on a non-GAAP basis in the prior year period. Effective tax rate on a GAAP basis was 97.4 percent in the prior year period.

Image courtesy PVH