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PVH Corp. (NYSE:PVH) Q3 2023 Earnings Call Transcript

PVH Corp. (NYSE:PVH) Q3 2023 Earnings Call Transcript November 30, 2023

Operator: Good morning, everyone, and welcome to today's PVH Third Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note this call will be recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn today's program over to Sheryl Freeman, Senior Vice President of Investor Relations. Please go ahead.

Sheryl Freeman: Thank you, operator. Good morning, everyone, and welcome to the PVH Corp. Third Quarter 2023 Earnings Conference Call. Leading the call today will be Stefan Larsson, Chief Executive Officer; and Zac Coughlin, Chief Financial Officer. This webcast and conference call is being recorded on behalf of PPH and consists of copyrighted material. It may not be recorded, rebroadcast or otherwise transmitted without PVH's written formation. Your participation constitutes your consent to having anything you say appear on any transcript or replay of this call. The information to be discussed includes forward-looking statements that reflect PVH's view as of November 30, 2023, of future events and financial performance. 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 subject of this call.

These include PVH's right to change its strategies, objectives, expectations, and intentions and the company's ability to realize anticipated benefits and savings from divestitures, restructuring, and similar plans such as the planned cost efficiency action announced in August 2022, the 2021 sale of assets of, and exit from, its Heritage Brands menswear and retail businesses and the November 2023 sale of the Heritage Brands women's intimate apparel business to focus on its Calvin Klein and Tommy Hilfiger businesses. PVH does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimate regarding revenue or earnings. Generally, the financial information and projections to be discussed will be on a non-GAAP basis as defined under SEC rules.

Reconciliations to GAAP amounts are included in PVH's third quarter 2023 earnings release which can be found on www.pvh.com and in the company's current report on 8-K furnished to the SEC in connection with the release. At this time, I'm pleased to turn the conference over to Stefan Larsson.

Stefan Larsson : Thank you, Sheryl, and good morning, everyone, and thank you for joining our call today. For the third quarter, we drove strong performance led by the strength of our two global iconic brands, Calvin Klein and Tommy Hilfiger. And our disciplined execution of brand building growth plan, the PVH+ Plan. Despite an increasingly choppy macro backdrop, particularly in Europe, we grew overall revenue in line with guidance, up 4% on a reported basis and up 1% in constant currency, while expanding our gross margins, and we beat our guidance for the bottom line. We drove high single-digit growth in our direct-to-consumer business with growth across both brands in all regions. This included double-digit growth in our owned and operated e-commerce and mid-single-digit growth in our stores.

Partially offsetting the strength in B2C trends, we experienced incrementally more challenging trends in wholesale brought by the tougher macro environment. As a company, we are driving a much more profitable business. On a non-GAAP basis, in Q3, we grew EBIT by 13% versus last year with strong margin expansion. And in Q4, we project to grow EBIT by over 30% versus last year, with an approximate 12% EBIT margin. Looking ahead, we are reaffirming our EBIT margin, and we are increasing our EPS guidance by $0.10 for the full year on a non-GAAP basis. By focusing on what's within our control for the full year 2023, we remain well-positioned to buy meaningful margin expansion and double-digit EPS growth. We just came out of the important Thanksgiving and Black Friday week, one of the key consumer moments during the holiday period.

And I'm pleased to share that in both North America and Europe, we beat our growth plans versus last year and delivered a strong start of the holiday season. We continue to make strong progress and gain increasing traction across all five growth drivers of the PVH+ Plan. And we relentlessly lean into the execution on winning with product, winning with consumer engagement, winning in the marketplace, as well as developing a data and demand-driven supply chain and investing in growth while driving efficiencies. And as I mentioned on our last call, each of our growth drivers plays an important role. And it's when we play them all together, that's something really powerful happens. And let me share some concrete examples on how we made that come to life this quarter.

First, our strong D2C growth was fueled by increased product and supply chain strength that drove higher gross margins. The sales growth was supported by a nearly 20% increase in marketing investments with strong cut-through campaigns and global talent amplification. From a regional perspective, we drove constant currency revenue growth for our combined Calvin and Tommy businesses for all regions. Our outperformance in the quarter was driven by North America, which is a very important proof point for how we are already positioning both Calvin and Tommy for long-term sustainable growth in the region through strong execution of the PVH+ Plan. For the second consecutive quarter, our EBIT margin for our Calvin and Tommy businesses in North America together took a sizable step forward and expanded to 13.1% in the quarter, with significant gross margin expansion in both our direct-to-consumer and wholesale business.

Inventory continues to be in great shape, both in composition and in levels, down 19% at the end of the quarter, as we made significant progress increasing overall inventory productivity as part of our actions to lower inventory in relation to sales by 25% by the end of fiscal 2024, all while improving availability. For the first half of 2024, we also see decreases in our AUC with more than 5%. This is partly driven by favorable macro but even more importantly, it's driven by an improved approach to our costing process, the first results of a better raw material strategy and early returns on a much sharper assortment productivity. We continue to invest in growth while driving cost efficiencies and are improving our cash flow, increasing share buybacks, showing our confidence in our ability to execute over the long term.

During the quarter, we further sharpened our focus on our two core brands with the divestiture of heritage brands. The proceeds from the transaction will be used to repurchase stock and we now expect to repurchase approximately $550 million of our stock, up from $400 million previously. Finally, it will be the strength of our brands, our consistency in direction, and our relentless execution of the PVH+ Plan that will set us apart over time. And this will, in turn, be driven by the quality of the management team, which we have strengthened significantly over the past year. I'm happy to share the addition of Leah Goldman, who will join us as Global Brand President of Tommy Hilfiger in spring 2024. Lea is a uniquely strong and experienced brand and business builder with an outstanding track record building brands globally.

Under Leah's leadership, the Tommy Hilfiger brand will operate in the same way our global Calvin Klein business operates today under Eva Serrano, creating a consistent and unified global brand structure. Each of our two brands now has one leader who sets the vision, leads product creation, brand marketing, and consumer experience globally, working closely with our regional teams who inform those strategies and lead the brand to win in the marketplace. Now let me share a bit more of what drove our performance in the quarter, both from a global brand and regional perspective. Starting with Calvin Klein. Throughout the third quarter, Calvin continued to focus on driving very strong consumer engagement globally through our most important hero products and driving a strong category offers with growth across our refined performance and underwear categories.

It was another quarter where we delivered cut-through campaigns globally and continued to amplify our talent partnerships. When we last spoke, the brand has just launched its fall campaign, which included our long-term ambassadors, Jennicam, John Cook, Kendall Jenner, wearing our most essential underwear, denim, and refined women's wear styles. Cut through with nearly 4 million average video views on TikTok and over 20% engagement rate on Instagram. As part of the fall campaign, the brand also launched a surprise performance with John Cook in Times Square New York. The concept was announced only 30 minutes beforehand and tens of thousands of fans gathered within minutes. John Cook and his whole crew were dressed in iconic Calvin Klein, and their locks were immediately shoppable on our side.

It was a perfect example on how we amplify global talent win with consumer engagement. For holiday, the brand campaign features Haley Beaver in iconic Calvin Klein stars, where our hero products are prominently featured on social through shoppable content to drive commercial impact. Finally, I'm excited about the progress we are making to align Calvin Klein to one global brand vision. Since joining, Eva has been focused on tapping into Calvin's core DNA to make the brand more current than ever. As part of this work, we are expanding the capabilities of our global product teams here in New York, to drive a more unified product vision across key categories to win serving all markets. Let me now share a few examples from Tommy Hilfiger. This fall, the Tommy brand reinforced its core DNA.

Going back to classic American cool and iconic Tommy Lifestyle through our family-focused seasonal campaign. As part of this campaign with a special focus on Asia, we celebrated the K-Pop band Straight Kids VMA win with a warm welcome to the Tommy family, breaking our record of social media engagement in the first 30 minutes. When we connect the brand in authentic ways with global talent like this, our fans respond, and we expand our reach and influence. We combined another culturally relevant moment with aspirational talent when Tommy campaign Star CISA, hosted a New York Fashion Week brunch with over 100 VIP guests and influencers generating over 800 million impressions on social. And just two weeks ago, at the Las Vegas Formula One Grand Prix, we expanded our partnership with Formula One by welcoming one of Hollywood's biggest rising stars, Damson Idris, to the Tommy Hilfiger brand family as our newest men's ambassador.

Together with Damson, Tommy hosted a number of events with key influencers featuring day and night Tommy looks. For the holiday, our Tommy campaign celebrates the happiness of returning home, families and friends are captured in Tommy's classic American prep with the twist as they unite to celebrate the season, all amplified by very strong talent. Now let me turn to our regional performance. I'd like to start with North America, which is a big proof point for us this quarter. As I mentioned earlier, we made significant progress building the foundation for sustainable, increasingly profitable brand accretive growth for the region, and I'm very encouraged by the major initial traction we are gaining. Our Tommy and Calvin businesses together delivered high-quality, low single-digit revenue growth and most importantly, a 13.1% EBIT margin in the quarter, including higher gross margins and higher AURs. We drove outperformance for both our direct-to-consumer businesses and our wholesale business, which showed meaningful sequential improvement, and this is with still a big part of the pre-pandemic tourism, not yet back.

Let me share a few highlights. For Tommy, our D2C growth continues to be driven by our best premium Style Essentials, which increased by over 50% compared to last year, supported by elevated in-store execution. For Calvin, leading with our category offense, we delivered our third consecutive quarter of double-digit growth in the refined category, the expanded Essentials focus was also once again a standout, supported by an integrated marketing campaign and elevated execution on CK.com. Across both brands, we drove another quarter of double-digit growth in our owned and operated e-commerce businesses. This was driven by the elevation of our brands through stronger storytelling improved site merchandising and new conversion tools. Within wholesale, while our partners remain conservative we continue to see strong gains resulting from our efforts to build a much stronger business with our key partners such as Macy's.

Let me share some examples. We drove double-digit year-over-year growth in Tommy test stores, where we have invested together with Macy's in stronger field team coverage. And we are driving double-digit AUR growth at Macy's through the ongoing success with our improved product assortment, including our Polo offense and seasonal categories. For Calvin, our men's Essentials business increased over 50% at Macy's with investments in the right premium essential base assortment. We also saw strength in refined categories, which grew 25%. I'm very proud of our North American team's execution this past quarter, and we now have the team, the plan, and the disciplined execution in place to unlock our full potential in the region. Turning to Europe. We continue to drive growth this quarter, building on our historically large business, market-leading awareness, and overall brand strength in the region.

In the third quarter, we delivered high single-digit revenue growth on a reported basis and low single-digit growth in euros against a record-breaking quarter last year. Our revenue exceeded EUR1 billion, led by mid-single-digit growth in D2C for each brand. In wholesale, we confirmed our pre-spring '24 order book at low single-digit growth on a constant currency basis with pre-spring already shipping in Q3, leading to timing differences versus Q4 last year. Like others, we have seen a more challenging macroeconomic backdrop in Europe, and that is impacting consumer confidence and the wholesale channel. Additionally, this quarter, just as we were about to kick off the fall season, we saw the longest streak of record-setting warm weather in Europe since the 1800s.

Both factors have driven an increasingly promotional environment in the marketplace. And for us, the heat wave in September was a double whammy, given our historical strength in outerwear, sweaters, and heavyweight nets. Weather aside, going forward, we anticipate this challenging macro backdrop and an increasingly cautious wholesale channel to continue into 2024. In this environment, we are not sitting still. We are leveraging our market-leading strength, and driving much-increased profitability and proactively adjusting how we operate. We're taking our PVH+ Plan execution to the next level, and we are doing this in two main ways. First, against the current macro backdrop in the wholesale channel, we feel that it's critically important to avoid having too much inventory in the market.

Even if that means less selling in to secure strong sellout with high margin and less discounting. Our main priority independent of macro for both brands will always be to strengthen our position for long-term sustainable brand accretive growth. Second, we will lean into the next level of PVH+ execution through DTC and with our key wholesale partners, leveraging our key strengths in product, consumer engagement, and marketplace management. I'll highlight a few examples of how you will see this in action. Across both brands, we have product innovation coming for 2024. In technical fabrics, dress casual, more choice of our best premium essentials, more transitional products to become less weather dependent and all while we continue to cut the unproductive assortment tail.

A customer trying on a sports jacket in-store, showcasing the company's sportswear range.
A customer trying on a sports jacket in-store, showcasing the company's sportswear range.

In consumer engagement, we just shot very strong cut-through campaigns for both Tommy and Calvin that we launch for Spring 2024. And in the marketplace, you will see us continue to invest in our stores, shop-in-shops, and digital experiences to keep elevating the consumer experience. You can already see the positive effects of our next level PVH+ execution in our D2C channels, where we have more control between product and consumer and can execute with impact more quickly. And in wholesale, thanks to the much-improved inventory management this season, despite the tougher conditions, you will already in Q4 be able to see a significantly improved profitability versus the same quarter last year. I have personally spent more time in Europe over the past few months.

I visited over 50 stores in six countries to work with our teams as we adjust to market conditions and put the next level of PVH+ execution into action. Standing out the most from this work is the foundational strength we have in both brands with consumers across the region and the opportunity to continue leveraging this as we navigate the current environment. Moving on to Asia Pacific. We continue to drive strong performance, which included double-digit constant currency growth in our direct-to-consumer businesses across the region, including China. We continue to win in key consumer moments such as Chinese Valentine's Day and Tmall membership day, fueled by strong hero products and successful capsule launches. And both Calvin and Tommy continue to move up to rankers on Tmall.

Most recently, we delivered double-digit growth in GMV during China's important 11-11 activation. Leading with a product category offers, we focused on growing live stream sales and leveraging talent in innovative and engaging ways. We also captured market share on Douyin as consumers increase spending on these newer formats of shopping. We leveraged our global mega talent to expand brand awareness in the region. In October, Calvin celebrated fall 2023 collection in Tokyo, featuring brand ambassador John Cook, the ventral strong brand awareness across the region and globally. And Tommy's fall campaign reached a total fan base of over 130 million with regionally relevant ambassadors, including top group kids, in addition to new ambassadors, Lee Chen and Greg Su, who drove over 430 million impressions in China alone during the campaign period.

Overall, we are doing a great job executing the PVH+ Plan in the region, and we are very optimistic of the long-term growth opportunity for both of our brands. In closing, I feel very good about the strong performance we delivered in the quarter and how we keep gaining traction through our brand-building PVH+ execution. Before I turn the call over to Zac, I would like to thank all of our associates around the world for their hard work and important contributions this year. And I wish everyone a happy and healthy holiday season.

Zac Coughlin : Thanks, Stefan, and good morning. My comments are based on non-GAAP results and are reconciled in our press release. As Stefan discussed, we are pleased with our results for the quarter, driven by our iconic brands and disciplined execution of the PVH+ Plan. We continue to build on our track record of performance, delivering our top-line guidance while exceeding bottom-line guidance as we compete to win in this highly dynamic global environment. We delivered revenue growth of 4% on a reported basis and 1% on a constant currency basis, in line with our guidance with significant strength in DTC and in spite of an increasingly challenging macroeconomic environment, especially in Europe. On the bottom line, we once again exceeded our earnings guidance with earnings per share of $2.90, driven by strong expense management.

We delivered operating margin of 10.5% for the quarter, up 90 basis points versus last year, delivering on our commitment of sequential second-half improvement. Also, importantly, our inventory at quarter end is down 19% compared to last year as we continue to proactively manage our inventory levels. As I mentioned last quarter, we expect to end the year with inventory significantly lower than last year, with improvement to continue through 2024 as we make progress on our previously announced goal of a 25% reduction in inventory as a percentage of sales. We also completed the sale of our Heritage Brands intimate apparel business earlier this week for $160 million in cash, which was yet another important step as we accelerate our focus on our core global brands, Calvin Klein and Tommy Hilfiger.

We plan to utilize approximately $150 million of net proceeds from the sale for share repurchases in 2023. This increases our planned share buybacks for the year to approximately $550 million compared to up to $400 million previously. We expect the sale to be slightly accretive to our operating margin in 2024. As we head into the fourth quarter, we see continued strength in our DTC business and also expect pressure in the wholesale business to continue. This is especially true in Europe as the macro environment continues to be challenging, exacerbated by record-high temperatures in September, as Stefan discussed, causing retailers to take a cautious approach. This as well as the impact from the sale of our Heritage Brands intimate apparel business is reflected in our revised revenue outlook of 1% growth for the year on both a reported and constant currency basis.

Our prior guidance was an increase of 3% to 4% as reported and 2% to 3% on a constant currency basis. On the bottom line, we are reaffirming our approximately 10% operating margin outlook and increasing our non-GAAP EPS outlook for the year to a record high $10.45 compared to $10.35 previously, despite our lower revenue outlook, as we further strengthen our focus on driving profitable sales and disciplined cost management. I will now discuss third quarter results in more detail and then move on to our outlook. Revenue was up 4% for the quarter, which reflected a 3% positive impact from exchange. Third quarter revenue for our international businesses was up 1% on a constant currency basis. Revenue in our European business was up 1% in euros despite the increasingly challenging macroeconomic environment with mid-single-digit growth in the DTC business, partially offset by pressures in wholesale and an unseasonably warm start to the fall season.

Revenues for Asia Pacific were up 1% on a constant currency and down 2% on a reported basis. Strong demand across the region drove low double-digit constant currency growth in the DTC business, which was largely offset by timing of wholesale shipments compared to last year. In North America, revenue for our Tommy Hilfiger and Calvin Klein brand businesses combined grew 2% as we delivered another quarter of growth in both our retail stores and owned and operated e-commerce business with total DTC up low single digits. Our owned and operated e-commerce sales were up double digits for both brands again this quarter as the investments we have made in the platform and overall site experience continue to resonate with consumers. Wholesale sales for our Tommy Hilfiger and Calvin Klein brand businesses combined in North America were also up low single digits.

Although retailers continue to take a cautious approach, retail sales trends improved sequentially compared to the second quarter, particularly at Macy's as we focus on driving sell-through and healthy inventory across the channel. Importantly, our quality of sales is improving significantly in North America as we grow that business. Gross margins were up over 500 basis points with increases across both brands and all channels. Looking at our overall third quarter revenue from a channel perspective, we continue to drive strong performance across all regions in our direct-to-consumer business. Our total DTC revenue was up 6% on a constant currency basis and up 8% on a reported basis in the quarter and up approximately 150 basis points as a percentage of our total revenue compared to last year.

We delivered another quarter of strong growth in both our stores and our owned and operated e-commerce business with constant currency revenues up 4% and 12%, respectively, compared to last year. Total wholesale revenue was down 3% on a constant currency basis for the reasons I previously outlined. On a reported basis, wholesale revenue was up 1%. Our Global Brands delivered another solid quarter with Calvin Klein revenues up 6% and Tommy Hilfiger revenues up 4% as reported. On a constant currency basis, revenue for Calvin Klein was up 3%, and Tommy Hilfiger was flat as macroeconomic challenges impacting Europe weigh more heavily on the Tommy business. Importantly, our DTC business was up in both brands and in all regions. In the third quarter, we delivered gross margin of 56.7%, an increase of 80 basis points compared to last year despite a 100-basis point negative impact to product costs due to exchange.

Gross margin reflects a significant favorable shift in mix with our higher gross margin DTC and international businesses making up a larger portion of total revenue and a favorable impact from lower ocean freight rates compared to last year. SG&A expense as a percentage of revenue for the third quarter was better than planned at 46.2% and flat versus the prior year. We continue to take a disciplined approach to managing expenses while making targeted investments to drive the PVH+ Plan, including a nearly 20% increase in marketing compared to last year to fund cut through brand campaigns. These investments and the impact of the shift in mix to our DTC and international businesses were offset by an approximately 150 basis point improvement in expenses versus last year due to savings realized from the actions we have taken to reduce people costs and prudent management of expenses.

In total, EBIT for the quarter was $249 million, exceeding our expectations. Operating margin was 10.5% and expanded 90 basis points compared to last year despite the 100-basis point negative impact of exchange on our gross margin. And importantly, our operating margin for the quarter reflects a significant improvement in our North America business to 13.1% for Tommy Hilfiger and Calvin Klein combined. Earnings per share increased 12% to $2.90 compared to $2.60 in last year's third quarter and exceeded our guidance by $0.20, driven by the improvement in EBIT. Our tax rate for the quarter was approximately 22%. And now moving on to our outlook. Starting with the fourth quarter. We are projecting fourth quarter revenue to decline 3% to 4% compared to last year on both a reported and constant currency basis with projected strong high single-digit growth in our direct-to-consumer businesses more than offset by a decline in wholesale revenue, including the revenue reduction from the sale of the Heritage Brands intimate apparel business.

Excluding the sale, the decline in wholesale revenue is mostly in Europe, where the wholesale revenues are projected to be down approximately 15% versus last year. Approximately two-thirds of that decrease is due to one-time shipment timing differences compared to last year when supply chains were still normalizing and about one-third is due to a decrease in sales to lower-margin accounts as we remain focused on quality of sales. Looking forward, as Stefan mentioned, we do expect the tough macros to continue into 2024. As a result, and combined with our continued focus on quality of sales, we now expect lower sell-in for wholesale next year with a higher quality sell-through. The benefit to the fourth quarter from the 53rd week in 2023 to our overall revenue is mostly offset by the revenue reduction from the sale of the Heritage Brands intimate apparel business.

While fourth quarter revenue is projected to be lower than last year, importantly, profitability is expected to be significantly higher. EBIT is expected to increase over 30% compared to last year, and operating margin is expected to expand to approximately 12%, up nearly 350 basis points compared to last year. And importantly, Europe profit has planned up significantly as well with regional margin up over 500 basis points versus last year and close to all-time highs. The overall increase in operating margin is almost entirely due to an approximately 400 basis point improvement in gross margin. The improvement is comprised of an approximately 150 basis point benefit due to a favorable shift in channel and regional mix, approximately 125 basis point improvement in freight expense, and approximately 125 basis point improvement due to the raw material costs for spring '24 product being significantly lower.

We expect all of these impacts to carry forward beyond the end of 2023. We also expect a modest increase in SG&A expense as a percentage of revenue in the fourth quarter compared to last year, with the higher expenses of DTC, mostly offset by the significant efficiencies we're driving in spending. Our fourth quarter earnings per share is projected to be approximately $3.45, up approximately 45% compared to $2.38 in the prior year, driven almost entirely by higher EBIT due to the significant profitability improvement. Our tax rate for the fourth quarter is estimated at approximately 22% and interest expense is projected to be approximately $25 million. And now bringing that all together for the full year 2023. As I mentioned, we are updating our full-year revenue outlook and now project revenue to increase by approximately 1% on both a reported and constant currency basis.

We are reaffirming our operating margin guidance for the year of approximately 10% and raising our non-GAAP EPS guidance by $0.10 to approximately $10.45, up 16% compared to 2022 and a record high for PVH. Regionally, our full-year revenue outlook for North America for Tommy Hilfiger and Calvin Klein combined is unchanged. But our overall outlook for the region is now planned down mid-single digits compared to down low single digits previously, due entirely to the impact from the sale of the Heritage Brands intimate apparel business. Our outlook for Asia Pacific on a constant currency basis is also unchanged, planned up mid-teens. While on a reported basis, our revenue outlook for Asia Pacific has been negatively impacted by exchange, with growth on a reported basis now planned up high single digits compared to up low teens previously.

In Europe, we are now planning full-year revenue approximately flat in euros compared last year. This compares to our prior guidance of up-low single digits in euros. Our DTC business in Europe continued to be planned up mid-single digits but is mostly offset by a decrease in wholesale versus last year given the macroeconomic challenges I mentioned earlier. On a reported basis, Europe was planned up low single digits compared to up mid-single digits previously. We continue to expect our full-year gross margin rate to increase over 100 basis points compared to 2022, despite approximately 100 basis points of higher cost due to exchange. As we've indicated previously, the improvement in our gross margin reflects an approximately 100 basis point benefit from a favorable shift in mix and approximately 100 basis points of improvement due to lower freight costs.

We also continue to expect that SG&A expense as a percentage of revenue for the full year will increase approximately 70 basis points compared to 2022 with our investments in DTC and mix of international business driving higher expenses. Additionally, as I've discussed in prior quarters, we continue to invest in key areas that drive growth, including increased marketing with our full-year target continuing to be approximately 6% of revenue. These impacts are partially offset by cost efficiencies, primarily due to the people cost actions we have taken. As a reminder, in the third quarter, we completed our targeted 10% people cost reduction with annual savings ahead of our targeted $100 million of savings. Our full-year operating margin projection continues to be approximately 10% and continues to reflect high single-digit EBIT growth.

Interest expense is projected to be approximately $93 million versus approximately $100 million previously, and we continue to expect our tax rate will be approximately 22%. Before we open up for questions, I want to reiterate that we are pleased with our third quarter results. We continue to work relentlessly to drive results. And as Stefan talked about earlier, we are laser-focused on delivering our commitments by executing the 5 key growth drivers of the PVH+ Plan, bringing together the consumer-facing value drivers of product, consumer engagement, and marketplace with our underlying operating engines to deliver consistent results in a systematic and repeatable way. And with that, operator, we would like to open it up to questions.

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