Emanuel Chirico - Chairman, Chief Executive Officer Michael Shaffer - Executive Vice President, Chief Financial Officer, Chief Operating Officer Dana Perlman - Senior Vice President, Business Development and Investor Relations

Bob Drbul - Nomura David Glick - Buckingham Research Group Joan Payson - Barclays Erinn Murphy - Piper Jaffray Eric Tracy - Janney Capital Michael Binetti - UBS John Kernan - Cowen & Co. Dave Weiner - Deutsche Bank Eric Beder - Wunderlich Securities

Good morning everyone and welcome to the PVH Corp. First Quarter 2015 Earnings conference call. This webcast and conference is being recorded on behalf of PVH and consists of copyrighted material. It may not be recorded, rebroadcast or otherwise used without PVH’s written permission. Your participation in the question and answer session constitutes your consent to having anything you say appear on any transcript or replay of this call. The information being made available includes forward-looking statements that reflect PVH’s view as of June 1, 2015 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 the subject of this call. These risks and uncertainties include PVH’s right to changes its strategies, objectives, expectations and intentions, and its need to use significant cash flow to service its debt obligations. Therefore, the company’s future results of operations could differ materially from historical results or current expectations. PVH does not undertake any obligation to update publicly any forward-looking statements, including without limitation any estimate regarding revenue or earnings. Generally, the financial information and guidance provided is on a non-GAAP basis as defined under SEC rules. Reconciliations to GAAP are included in the referenced earnings release, which can be found on www.pvh.com and in the company’s current report on Form 8-K furnished to the SEC in connection with the release. At this time, I am pleased to turn the conference over to Mr. Manny Chirico, Chairman and CEO of PVH.

Thank you, Dana. Good morning. Joining me on the call are Mike Shaffer, our Chief Financial Officer, and Dana Perlman, our Treasurer and Senior Vice President on Business Development and Investor Relations. Overall, we were quite pleased with our results for the first quarter, which exceeded our earnings guidance by $0.10 per share. In the first quarter on a constant currency basis, revenues increased 3% and EPS grew 20%. This outperformance was driven by strong underlying results in our international Calvin Klein and Tommy Hilfiger businesses. At the same time, we did see softness in our U.S. Calvin Klein and Tommy Hilfiger businesses where a strong U.S. dollar negatively impacted international tourist spending. Moving on to Calvin Klein, on a constant currency basis revenues increased 5% while operating earnings increased 25% in the first quarter, driven by the strong performance of our international businesses. The Calvin KIein brand initiatives are taking hold, and we continue to be pleased with our latest Justin Bieber spring campaign and our recently announced denim series featuring Kendall Jenner. We believe we are beginning to connect with a much younger consumer. Moving into the second quarter, our international businesses continued to post strong sales gains. International retail comp store sales are running ahead of plan in the second quarter and are trending up high single digits in Europe while our Asia business is posting mid-single digit increases. We are seeing particular strength in China, France, the U.K., and the Middle East. In Europe, the Calvin Klein wholesale business continues to improve with our 2015 spring and fall order books, excluding Russia, up about 10% over the prior year. In North America in the second quarter, our Calvin Klein retails comps are running flat and on plan. We are seeing strong sales in our permanent population stores while stores located in tourist destination locations like Miami, Orlando, New York and Las Vegas are feeling the pressure from weakened international tourist traffic and spending. Speaking on some product initiatives, on Calvin Klein underwear globally we continue to drive our iconic basics while delivering new elevated product. In men’s, we have launched two new programs globally for spring, Intense Power and Air FX, and we have seen very strong first quarter selling which has continued into the second quarter. Overall, the Calvin Klein North America men’s underwear business has gained 300 basis points of market share in the first quarter. As a reminder, Intense Power is what Justin Bieber was featured in and which has sold so well at retail. Air FX is more of a performance underwear, which taps into what’s happening broadly in the active arena. In the women’s area, our Modern Cotton logo product leverages the best of what Calvin Klein underwear does for men and translates it for women’s with an active appeal. Modern Cotton continues to drive the improvement in our women’s business in North America and Europe. Overall, our Calvin Klein North America women’s intimate business has gained over 200 basis points of market share in the first quarter of 2015. We continue to see great performance from our elevated Black Label product across both men’s and women’s in Asia and Europe. Our women’s bra business in Asia continues to outperform the competition through the tailored bra category in both the push-up and solutions category. Overall sales for Asia in the first quarter ran up mid-single digits at retail, and that strong sales trend has continued into the second quarter. Moving into Calvin Klein jeans, the new product that we have delivered, we are seeing a strong reaction from the consumer, particularly where we have installed new jeans shops. We continue to see men’s outpace women’s across North America and Europe, but women’s continues to see an improvement. In North America in the newly installed shops, we experienced a 25% retail sales increase over the prior year. First quarter overall AURs were up about 10% and that trend continues into the second quarter of 2015. We are targeting 150 new jeans shops installations in North America for fiscal 2015. In Europe, we are in the early stages of a turnaround in the jeans business. We have significantly improved the quality level of our jeans line with better fabrics, trends and packaging. This has resulted in strong sell-throughs and higher AURs in the first quarter with growth across all European markets, excluding Russia. Second quarter jeans sales trends in Europe had continued to improve and are running up high single digits. Moving to our Tommy Hilfiger business, revenues on a constant currency basis increased 1% in the first quarter. The increase was driven by solid performance in our international business, including a 2% increase in European retail comp store sales. In North America, revenues declined 1%, resulting from a 3% decrease in retail comp store sales. As with Calvin Klein, we experienced a decline in international tourist traffic and spending in our Tommy U.S. stores. Operating earnings on a constant currency basis decreased 6% in the first quarter due to weak international tourist traffic in the U.S. which drove more promotional selling and higher markdowns. Moving into the second quarter, we have seen significant improvement in our Tommy Hilfiger sales trends. Retail comp store sales at Tommy have accelerated in the second quarter with international comps up mid-single digits and North America comp store sales up low single digits. In Europe, we have seen a significant improvement on our men’s side of the business across all key categories, in particular in our largest market, Germany. We believe we continue to outperform in men’s and denim relative to the market, and our women’s wear business is also seeing improvement quarter to date. At wholesale, our Tommy European business continues to outperform the competition. As an indicator, our 2015 full-year European order books, excluding Russia, are running up about 5% for the year. The strongest performing regions continue to be Germany, France and the Middle East. Moving to our heritage business, first quarter revenues for the heritage business increased 5% while operating earnings increased $5 million over the prior year. This increase is principally driven by the shift in the timing of shipments into the first quarter of 2015 from second quarter of this year, and also driven by a strong retail comp store increase for our Van Heusen business of about 14%. Our heritage sportswear business continues to perform very well, both at wholesale and retail. We expect that our dress shirt business will continue to underperform through the first half of 2015; however, we believe that this business will significantly improve in the second half of the year. Finally, we were very pleased to announce a $500 million three-year stock buyback program which reflects our confidence in our ability to generate strong free cash flow. Our first priority will be to continue to strategically invest in our two global powerhouse brands in order to fully maximize our organic growth opportunities. That said, given our strong balance sheet and growing free cash flow, which we estimate to be at $450 million in 2015, we are confident that we have the financial flexibility to, one, acquire and take more direct ownership in certain Calvin Klein and Tommy Hilfiger license businesses, continue to pay down debt, and return capital to our shareholders through our new stock buyback program. With that, I’m going to turn it over to Mike Shaffer, our CFO, to quantify further some of these results.

Thank, Manny. The comments I’m about to make are based on non-GAAP results and reconciled in our press release. On a constant currency basis, revenue for the first quarter was up 3% versus the prior year, and ahead of our guidance. Driving revenues was our Calvin Klein business, which delivered a 5% increase over the prior year fueled by an 8% increase in our Calvin Klein international business with comps of 10% benefiting in part from the timing of Chinese New Year. On a normalized basis, international comps were mid-single digits. Also favorably impacting the current quarter at Calvin Klein was the timing of wholesale shipments. Our Calvin Klein strategies are taking hold and we are seeing improved performance particularly in our international businesses. Our heritage business revenues were up 5%, also ahead of plan but heavily influenced by earlier than planned wholesale shipments. Tommy Hilfiger revenues were up 1% and missed plan due to softness in the U.S., where a strong dollar negatively impacted international tourist spending. Earnings per share for the first quarter was $1.50 and included a $0.27 negative impact related to foreign currency and expected weakness in our Russian business. Excluding this negative impact, EPS would have increased 20% over the prior year. Our quarter one EPS was $0.10 ahead of the top end of our guidance. The $0.10 beat versus our guidance was driven by $0.02 of taxes, $0.02 of favorable foreign currency, and $0.06 related to the business performance, which was predominantly Calvin Klein and favorably impacted by the timing of shipments. For the full year 2015, we raised our guidance to a now projected earnings per share of $6.85 to $6.95. If we exclude the negative impact related to foreign currency and weakness in our Russian business of $1.25, our earnings per share growth is projected to be 11% to 12% over the prior year. Overall, we are projecting revenues of approximately $8 billion, which includes the negative impact of about $500 million related to foreign currency. On a constant currency basis, we are projecting overall revenues to increase 3%. Overall operating margins are expected to increase about 20 to 30 basis points, excluding a negative impact of about 60 basis points due to foreign currency. Driving the growth when excluding foreign currency is the continued improvement in the Calvin Klein business, which is projecting revenues to grow 6% on a constant currency basis. We are also planning Calvin Klein operating margins to increase 70 to 80 basis points, excluding the negative impact of approximately 30 basis points of FX. Tommy Hilfiger revenues are planned to increase 3% on a constant currency basis with operating margins planned slightly down, excluding the negative impact of approximately 80 basis points of FX. Our heritage business is planned to have a revenue decrease of 3% due mostly to our exiting of the Izod retail business in 2015. Operating margins in our heritage business are planned to increase about 60 to 80 basis points, driven by the second half planned turnaround of our dress shirt business. The impact of foreign currency on our heritage businesses is relatively immaterial. Interest expense for the year is planned to be between $100 million and $125 million compared to the prior year of $139 million, due to the average lower debt balances. Also favorably impacting interest for 2015 is the debt refinancing we completed in the second half of last year’s first quarter. We currently expect to generate approximately $450 million of free cash flow in 2015, which will be used to pay down debt of about $350 million and allow for license buybacks and stock repurchases under our newly announced plan. Our tax rate for the year is planned at about 21.5% to 22%, which is in line with the prior year. Our revenue and earnings comparisons for the second quarter are heavily impacted by launches in the prior year for our Calvin Klein underwear business, which had a major repackaging initiative in last year’s second quarter, as well as the initial sell-in of Izod at Kohl’s in our heritage businesses. In addition, we saw earlier shipments in this year’s first quarter versus the prior year and recognized about 25 shipments in quarter one that shipped in quarter two of last year. These launches coupled with earlier shipments are driving flat overall revenues in the second quarter on a constant currency basis. By business, we’re estimating second quarter revenues on a constant currency basis to increase 3% for Tommy, flat for Calvin, and to decrease 8% for heritage. Second quarter earnings per share is planned at $1.25 to $1.30 and includes approximately $0.30 of estimated negative impact for foreign currency and a decline in our Russian business. Excluding this negative impact, EPS is projected to increase 3% to 6% over the prior year. Interest expense is projected to be $30 million and taxes in the quarter about 19 to 20%. With that, we’ll open it up for questions.

[Operator instructions] We’ll go first to Bob Drbul with Nomura.

Morning. I guess Manny, when you think about the jeans business and some of the performance that we’re seeing, the improved performance that we’re seeing, when you look at the women’s business, can you just talk a little bit about what else needs to happen there, what you’re most optimistic about in terms of the overall jeans business, but how can the women’s business continue to improve, what needs to happen there?

Sure, Bob. I think the thing I’m most optimistic is about the product improvements that I see in the pipeline. I think we’ve consistently talked about the fact that we saw that the men’s product initiatives around quality and fit were six months ahead of where the women’s initiatives were, so I really feel as we get into the second half of this year and into ’16 as well, that you’ll see more dramatic improvements in that business because of those initiatives. In addition, I think when you think about the overall market, the women’s denim category has been under just greater pressure around this whole active leisure trend in the market, so I think that’s also pressured the women’s business in a much stronger way. I guess really we’re starting to really better understand our consumer on the women’s side, what drives their purchasing decisions, and I think that our marketing campaigns are really starting to align with that, particularly with the Kendall Jenner campaign that just kicked off in the last month or two. I think that’s really starting to connect even more directly with our female consumer. So I feel very optimistic about what’s going on, but clearly we’re seeing bigger improvements on the men’s side of the business today.

Manny, with the Kendall Jenner marketing, do you have any plans to include Caitlyn Jenner in any of the marketing programs?

No, Bob - thanks.

Alright, just one more question. When you think about ’16 and you look at the foreign exchange pressures, can you just give us an update on how you’re thinking about pricing and some of the transactional pressures as we go forward?

Sure. We’re raising prices. I think now the question is to what degree, what opportunity that presents, what’s the competitive positions that are out there. I think there’s two things that go on. First is you raise ticket prices, sit down with your retail partners, and that’s what we’re really in significant discussions with our key retail partners about what they’re seeing and where we are, and then also particularly in North America but around the globe, in Europe in particular, how much do we have to promote off of that and how much regular priced selling will come off of that. So there’s a number of levers to press, and we’re really going to determine that over the next three to six months as it plays itself out and try to give ourselves as much flexibility as we go forward. We’ll also be testing in fall and holiday some price increases as we go forward to see how the market is receiving that. Competitively, we know a number of our competitors, particularly in Europe, are starting to move prices up for fall. We’re following that trend and watching it very carefully, but we also want to make sure as a market leader and in a turnaround situation with Calvin Klein, market share gains are critical to us, so we want to make sure that we’re not overpricing ourselves in the market. So we’re really trying to bring a balance to it, but clearly there will be an opportunity to raise prices in the spring 2016 time frame, given what’s going on competitively.

Great. Thank you very much, Manny.

We’ll go next to David Glick with Buckingham Research Group.

Thank you. Manny, just to start off on the Tommy Hilfiger business, obviously the Calvin business had a very strong quarter, a little softer on the Hilfiger side. You talked about some of the issues in North America. What’s driving the improvement in Q2, and how are you feeling about the potential to re-accelerate the Hilfiger growth as you close 2015 and head into 2016?

I think a couple of things, David. Let’s talk about Europe first. I think--we have on the Tommy side of the business in our own retail stores, each month in the first quarter as we move through the quarter, the retail comp performance improved, and as we’ve moved into May and we’ve just finished the month of May, that was by far the strongest month. So I think we’re really starting to see improvements in the European overall environment. Our men’s business is really working very strongly, both on the sportswear side and the denim side of the men’s category, and I think we’re getting paid real dividends given our strong position in the market. Inventories are very clean. There’s not a need to be overly promotional. So in Europe, given what’s gone on in the external environment, Tommy’s significant exposure to that European market, it’s by far our largest market. For Tommy, it’s about 45% of our sales, so it has a much bigger impact to the business as we went through what I would describe in 2014 a softer kind of environment, second half of the year into the beginning of this year. That overall economic backdrop seems to be improving, and our business seems to be capturing that. Hopefully that continues. In North America, I think we are going to potentially struggle with this international tourist spending. The Tommy business has such a strong following internationally in the United States, but that business I think, particularly in our biggest, most profitable stores, we’re seeing traffic trends down in the 8 to 10% area in the Tommy Hilfiger business, although in the second quarter that trend improved, and I think some of that has to do, we believe, with the World Cup that we were up against last year when we saw a softer second quarter. I think that trend will probably continue into the third quarter this year. As we get into the fourth quarter, which is by far our largest quarter for our retail business, the comparisons start to get easier. The differential from a currency point of view also starts to balance out a little bit, so we’re hopeful as we get into the late third quarter and into fourth quarter that that trend will start to improve. We’ve gotten a little bit more promotional in those tourist destination locations, and we’ve seen a reaction to that and have been able to drive the comps on a very profitable basis there. So from the first quarter where our retail comps in the U.S. and within North America were down about 3%, we’re actually seeing them up 2% to 3% in the second quarter, so hopefully that’s a sign that we’re starting to see an inflection point, but we’ll have to watch it for a little bit more data as we move forward.

The timing of this improvement in Europe, Manny, you have--I guess you’ll be working this month with your European wholesaler partners, so does that give you an opportunity potentially to see an acceleration in your wholesale order book for this next booking period?

Yes, we go on sale in about two weeks. I think there is--in general I would say the European market, there is more optimism at the consumer level. I guess you’d have to go country by country - there’s a story everywhere, but I think clearly the backdrop is better today than it was six months ago, so we are more optimistic as we go forward. The retailers are still being cautious, I believe, as they buy. Our At Once [ph] business both in Calvin and Tommy Europe continues to be very strong. We have gotten behind those businesses with inventory even more significantly in order to try to drive opportunities that we see, so clearly I think there is opportunity in the second half of the year and we are more optimistic about the business in general in Europe than we’ve been for the last nine months.

One last follow-up on the transactional pressure you’re going to be feeling into next year. You talked about pricing. Are there other strategies you can employ, such as pushing down AUCs, maybe controlling SG&A, so that you could potentially offset perhaps up to half of that transactional pressure?

Yes, I think that’s a good call. I should have mentioned that on the last question. There’s three key areas. One is raising prices and doing it in a very thoughtful but aggressive way. Two is looking at the supply chain both logistically and also with our partnership with our key sourcing partners and vendor base throughout the world. We believe there is opportunities on the core side of that business, and we’re also looking at potential expense savings that might exist. We’re targeting to try and offset 50% of that transactional problem in those three areas, so we’ll see where that takes us at this point. But again, it’s a little too early to get ahead of it, but we’re feeling good about the initiatives that we have in place and also the way the market seems to be addressing the issue. There’s a clear understanding that retail prices need to move up, and that’s what seems to be happening.

Thank you very much. Good luck.

We’ll go next to Joan Payson with Barclays.

Hi, good morning. Could you talk maybe a little bit, Manny, about the Calvin Klein margin expansion, because there was some strong margin expansion there despite the currency headwinds, particularly internationally. Based on how the business is trending at this point, are your expectations changing at all for how the overall Calvin EBIT margin could ultimately look, but also how the European margins could ramp up?

Sure. I think the European--just purely on an operating basis, operating margin basis, I think the biggest opportunity is Europe to see a significant improvement in the Calvin Klein margins. We have a $500 million Calvin Klein European business that is marginally profitable today from money-losing over the last two years, so our long-term target in Europe is to get that to about a 10% operating margin within the next four years. I think we’re on track to deliver against that. The currency headwinds are just causing us some caution on that as we continue to look at the pressure that it’s going to put from a costing point of view, but clearly there is opportunities from pricing and better sell-throughs to significantly improve the Calvin Klein European operating margins. To put it into perspective, Tommy Hilfiger European operating margins for full-year of 2014 were at 14% operating margins, so clearly with a well-run business of some scale there should be the opportunity to get to double-digit operating margins in Europe. Overall, I think we continue to talk about 15% operating margins for the Calvin Klein business, and as we bring in some of the licensing businesses, which carry almost 100% operating margins today, convert those into much larger direct control businesses, in those parts of the world you would expect that our operating margins in Latin America and Asia should be in the high teens as we go forward. So again, I think there continues to be that opportunity and overall goal to get our operating margins in Calvin Klein to about 15%, and then take it from there.

Okay, great. Then in the context of the overall denim category in North America, it sounds like maybe trends are improving a little bit, so could you talk about what you’re seeing in the category more broadly and how Calvin Klein jeans compared to the rest of the marketplace?

Sure. I think on the men’s side, you see the category has improved. The negatives have now turned to low positives, so the bleeding has stopped and I think the business feels better. I think retailers have planned it more tightly, so it’s becoming a category that should be nicely profitable because there’s not a real issue for us. We’ll focus on fall with all the retailers on the denim area, so I think you’ll see a lot of marketing around denim by retailers and the wholesale community, and I think there’s an appetite on the consumer side in men’s to really refill their closets, some real fashion statements that are going on there, that I think that category overall will start to improve over the next two or three years, and see significant improvement in 2015. Calvin men’s business in particular, I think I called out the numbers - we’re seeing double-digit increases, so clearly we’re gaining market share, but we have to be honest with ourselves, we’ve lost about 50% of our market share from where we were four or five years ago. So really, recovering that, getting new doors that are opening in North America, and larger footprints in some of the key doors in North America, I think will be critical as that business goes forward. On the women’s side, I think the improvement from a category point of view has not been as strong as on the men’s side, but it has been an improvement. I think it’s kind of flattish at this point, the best data that I see. You hear different things when you talk to different retailers, but I think there the pressure from the active wear and leisure side has been more intense on the women’s side, and I think we’re really seeing that business start to turn around on the women’s side but I think it’s going to be behind the men’s turnaround as we go forward. Our women’s business, we’re really seeing a lot of improvement. We’re seeing it in denim bottoms, but we’re also seeing it in non-denim bottoms with a jeans construction, so really seeing a big change there and we’re trying to really take advantage of that, both from a supply chain and logistics point of view to really capture some of that innovation that’s going on on the women’s side of the floor. So it’s better than it’s been, but I still wouldn’t characterize the jeans denim area as a hot category at this point. It’s just not bleeding like it was, and it’s actually slightly growing.

Great, thank you.

We’ll go next to Erinn Murphy with Piper Jaffray.

Great, thanks. Good morning. I guess Manny, on the buyback, I do believe this is the first buyback you guys have done since the end of 2007. Can you just talk about your philosophy behind that, and does that change the interest in pursuing and bringing back some of the global licenses? And then just maybe remind us where you’re at from a priority perspective on some of those international license take-backs. Thank you.

Sure. I think, one, philosophically I don’t think anything has really changed, with the one caveat that over the last 27 months since the acquisition of Warnaco, we’ve paid back about a billion dollars in debt. I think that’s just given us more financial flexibility as we’ve gone forward. We really look at it as a balanced approach to return capital to our shareholders as appropriate and also to take advantage of what we see as the growth both in our Calvin and Tommy Hilfiger businesses. The opportunity to bring back licensed business, we think is our number one priority that we really have to go after. The way that lays itself out, given the nature and length of some of our license agreements, the buyback calls that we have in those license agreements, I think the triggering point to that is really 2016 that you really would see an impact from that, so we’re working on that diligently. The opportunities from a geographic point of view continue to be Asia and, to some degree, Latin America. Those are both growth regions for both brands, both Calvin and Tommy, and they give us the greatest opportunity to take advantage of our operating platforms in those regions to really see some outsized growth as we move forward. So that would be our priority. We’re also looking at some product categories that would make some sense to either bring in-house directly or to take joint venture ownership position in those businesses, depending on the category and region what vehicle would make the most sense. But there’s been no change in that being our number one strategic priority, along with investing in the organic growth of the two global powerhouse brands.

Great, that’s very helpful. If I could just add a follow-up on Europe to one of your former responses. Can you just elaborate a little bit more on what you’re seeing in southern Europe in particular? I guess I’m curious in Italy, just given how Calvin indexes there, are you seeing pressure continue from doors being closed from some other ma-and-pa independent retailers there? Would love an update there, thanks.

Sure. I’d say southern Europe, so it’s two big markets - Italy and Spain. The Italian market continues to be soft. It’s not as soft as it was, it’s not as negative as it was the last 24 months, so we’re seeing a deceleration of the negative trends and I think a bottoming out of that region and that country’s retail situation as we go forward. So we’re starting to feel a little better about Italy. We’re still not looking to make major investments there at this point, but I think as the year progresses and we turn into 2016, we are optimistic that we could actually see some small increases as we go forward there and really stop the bleeding in that country. In Spain, which is our other big southern market, there’s clearly been a change in the direction of the consumer spending habits there, and we’re seeing it with our biggest retail partner, El Corte Inglés. Our business in Spain is more of a wholesale or concession-driven model. We have some stores, but really not that significant. It’s really driven through El Corte Inglés, and that business has improved significantly over the last six months. We’re actually seeing the business and our order book grow in Spain, and I would expect that that would continue to happen. We’re seeing it in the mid-single digit kind of range, so I think the bleeding there has stopped and that’s been a big market particularly for Calvin and Tommy. So I think hopefully as we get into 2016, we should start to see improvement there as well.

Great, thank you guys, and congrats on the great first quarter.

Thanks.

We’ll go next to Eric Tracy with Janney Capital.

Hey guys, good morning. Just a quick follow-up as to the timing of the pricing increase. It sounds like spring ’16, but maybe talk through when some of the transactional impact, the currency hits on the hedges potentially roll off. Is it a lag, or should it be relatively aligned with some of those moves to offset?

Well look, I think you’re going to see fourth quarter as the euro drops--just to remind everyone, the euro in particular fell out of bed probably September 2014, so as we were buying contracts at that point and hedging as we go forward, that’s kind of when I think you’ll start to see some of the impacts. We’ve talked about that this year, fiscal 2015, that 70% or thereabouts of the foreign currency hit was translation, and transaction was about 30% but that 30% really sat predominantly in the second half of 2015. So there is going to be some pressure third, fourth quarter. We are trying to increase some prices there and to adjust some costing there, but I think that’s where you’ll start to see some of the pressure associated with it and not be able to really significantly offset some of the cost increases since they happen so quickly at that point. So early fall deliveries, we’re not touching our retail prices at this point. As we get into resort deliveries that hit November-December, I think there we are trying to really change some of our pricing as we move forward, and then to be even more aggressive as we get into 1/25 deliveries.

Okay. Switching gears a bit, you discussed the pulling in of the licenses. Is there anything--you know, beyond just the timing of the contracts, is there anything from a management capacity perspective that would limit or prohibit the ability to pull those in? I guess just as it relates to all the investments and those being made on the CK business, do you feel like there’s any sort of constraints that would limit the ability to do that?

I think there is--look, there is just acquisitions, bringing them in-house, whether they’re $2 billion acquisitions or $200 million acquisitions, there’s a level of integration that goes on that size matters, but it’s not geometric. So there is a capacity issue, and that’s one of the reasons I don’t see us being able to execute all of these in a 12 or 18-month period. There are going to have to be stretched out over a three to four-year period beyond when the contracts come up. So clearly, we’re looking at the opportunities that we feel we can execute best and would deliver the most strategically from a financial point of view, so we’re doing that together with our management teams. I think it’s important for us to be diligent and prudent about how we bring these in. That will be the key to success. I think rushing, especially where we have strong strategic partners in these regions--it’s not like these are areas that are being mismanaged or the brand is not being treated appropriately or we’re not seeing appropriate growth. This is really an opportunity to just capture more of that growth internally, so we’re not under the pressure of we have a bad licensee or a bad strategic partner and we have to take them out. I think the urgency that that might have created is not there. We clearly had that situation in India and Australia and South America with the Warnaco acquisition, and we moved very quickly to deal with that by replacing licensees or taking more direct control of those businesses. I think that answers the question.

Absolutely, perfect. Thanks guys. Best of luck.

We’ll go next to Michael Binetti with UBS.

Morning guys. Congrats on a great quarter. Manny, I wanted to just ask you back of the napkin math here on the guidance. It looks like you’re expecting Calvin Klein brand revenue growth to accelerate to high single digits in the back half of the year versus a low single digit growth rate in the first half blended to get your 6% constant currency guidance for the year. Could you maybe talk through some of the components of what accelerates in the back half from the trends that you just mentioned, which actually are already very good, so I’m just curious what you see accelerating in the second half.

Okay, hold on. I want to make sure your math is right, as opposed to--so I’m just taking a look at some schedules. Hold on a second as I do that. Yes, I think what we are seeing really is second half of the year, not necessarily second quarter but second half of the year, we’re seeing a significant improvement in business. We’re seeing the Calvin Klein underwear business really significantly start to grow, particularly on the women’s side of the business. The Modern Cotton business really starts to take off second half. Our bra business in general, the opportunity getting our supply chain in order to meet the demand as we start to roll those new programs out with our key retail partners, I think we feel very strongly about that and that’s what’s driving a big piece of the growth. Continuation of the jeans progression as we move forward is really starting to pay off. We have some significant store openings throughout Asia that’s driving the business, and as we get into the second half of the year, we’re not up against a number of the launches that we had last year from a wholesale point of view. We had a significant fixture sell-in, and that’s first half of 2014, had a lot of fixture sell-in so we saw the improvement in the Calvin Klein businesses because of that, and we’re up against it but still putting up increases. As we get into the second half of the year, that fixture fill-in is behind us both in North America and in Europe, and I think we really think there’s a big opportunity for our direct EDI replenishment business, never out of stock businesses, particularly underwear but also basic denim categories that we should be able to capture on the Calvin Klein side of the business. So that’s really what’s driving it. We think the big opportunity is really third and fourth quarter.

Okay, thanks. As a follow-up, having proven your ability to do math quickly, I’ll follow up with that. If you add back the $25 million shift, that implies the second quarter revenue growth is maybe 1.5%, and you’re telling us that most of the same store sales for the businesses around the world are running better than that for maybe everybody, except for Calvin Klein North America. So it seems to imply the guidance is set for second quarter below the trends you’re seeing today. Maybe you could just elaborate on why you wanted to bake in some conservatism there.

Well, it’s two things. We always try to be as transparent as possible, and I think you’re right - I think the May trends overall are better than the implied retail sales guidance that we were using for the quarter. But it’s one month, and to be honest it’s just too early to really get too far ahead of ourselves. But if the trends were to continue, obviously if the kind of retail comps that we’re seeing right now continue, there’s clearly upside in the second quarter and obviously for the year as well. But I’d like to see a little bit more of that as we go forward, so we’ll see how that all plays itself out. But clearly there is an opportunity as we go forward. But my back of the envelope math also is that that piece for the Calvin Klein side of the business is worth about 2.5%, so just to put it in perspective, the timing of the shipments.

Thanks again. Great quarter.

Thank you.

We’ll go next to John Kernan with Cowen.

Hey, good morning guys. Congrats on some of the greenshoots you seem to be seeing in Calvin Klein Europe. Just coming back here to the States, I think, Manny, you said that North America you’re seeing 25% retail sales increases at some of the new jeans shops that you built, and that there’s 150 planned for 2015. Over the next few years, how many more of those shops do you think you can open?

I think for the next two years, somewhere in the neighborhood of about 100 shops a year. I think what’s more important is that we need to get bigger square foot presentations, particularly in the top 150 doors in the United States. If you were to walk the floors in some of the best department stores in the United States, and when you walk into a Macy’s or if you walk into a Belk’s or a Dillard’s and look at the Calvin Klein presentation, I think it’s as strong as any brand in the market. But when I compare our presentation in men’s sportswear, tailored clothing, dress shirts, with our jeans presentation, I would say it’s 25% of the presentation that we get in sportswear on jeans, and that’s not logical if we execute. We should be very--with a brand like Calvin with its heritage in jeans on the men’s side, our jean shop should be as big as our men’s sportswear shops around the country, and they’re currently running about 25% of that size. So performance will dictate getting more square footage, taking it--you know, they’re not building bigger stores. It’s going to be taking away step by step from some of our competitors, but over the last five years we’ve given it up. It’s the same thing on the women’s side of the floor. If you look at the amount of space that G3 has captured in the major department stores in the United States with Calvin Klein and the kind of growth that they’ve experienced with the Calvin Klein brand, which has been high double-digit teens kind of growth, and if you look at our presentation in jeans, it’s not 25% of what it is in some of the other categories, it’s more like 10 or 15%. So although we’ve got in position and now we’re in the game and we have presentation to compete, we clearly have an opportunity to grow the square footage in North America and that is going to be the key to driving the success of the Calvin Klein business in jeans in this part of the world.

All right, that’s helpful. You’ve seen a lot of ebbs and flows to the global consumer. Given the significant move we’ve seen in FX rates, we start lapping that in holiday of this year. Do you think some of that tourist consumer comes back, or do you think the exchange rates relative to the dollar at these levels permanently impairs some of those tourist doors?

[Indiscernible] I’m not sure if it comes back. What I think happens is it reaches equilibrium [indiscernible], and I want to just be--even at this level that I talked about, the Tommy business under some more pressure than even the Calvin business, and with comps in these tourist destination locations at Tommy down 8%, let’s say, those stores are still some of the most--are the most profitable businesses of the entire chain. So I just want to be careful when we use words like impair. This is still a huge significantly profitable business. There may be some rightsizing as currencies are under pressure, but I think that levels out and as you get that behind you, unless there’s another drop in currencies again, but I think at this level I think that consumer finds their footing and I think the strength of the Tommy Hilfiger and the Calvin Klein business globally really allows us to capture that international tourist that travels to the United States consistently. I think we should be in a better profit position because we should be better in 2016, late 2015 in managing the flow of the inventory into those stores, getting it right, less need to be maybe as promotional as we were in the first quarter of this year, so I think that presents an opportunity as well.

Okay, and if I could just sneak one more in for Mike - will you only plan to buy shares back with free cash flow after debt paydown? The leverage ratio, if we looked at it on the balance sheet, is coming down pretty significantly and you’ve maintained leverage on the balance sheet for a long time now, so is the share buyback only going to get done with cash flow that’s left after debt paydown, or would you essentially keep the leverage ratio elevated to buy back some stock?

So right now, what we’re talking about is generating 450 of cash flow, and we’re talking about paying 350 down in debt, and then with that balance that’s left, we have opportunities to look at license take-backs and look at buying shares.

Okay.

And I think as we look out, I think the point being is after we pay down this $350 million of debt in 2015, I think the leverage ratio is at a point where we are more comfortable than we are today at the current level, and I think we’d potentially be more aggressive as we move into 2016 and ’17, really balancing out the strategic acquisitions and the ability to buy back stock and looking at those as we move forward.

Okay, thanks guys.

We’ll go next to Dave Weiner with Deutsche Bank.

Great, good morning everyone. So just two questions, if I may. Number one, I was hoping, Manny, you could talk about what you’re seeing in the U.S. department stores. There’s been a lot of talk about maybe a bump-up in inventories there over the last couple months, probably in part due to the port situation, but just kind of your view and if you have seen higher inventories, if you think those are coming down or normalizing. And then also, if you could talk a little bit about your accessories business. It’s something that you guys don’t talk about that often, so I’m curious where you are in terms of a percentage of your business and how you think that can help your revenue and margin profile going forward. Thanks.

I think inventory levels, it’s really a story retailer by retailer. I think some of the places where we have seen softer business that may have been more impacted by the international tourists, I think those retailers are aggressively moving to get inventories down. We don’t really have any bulge in inventory sitting anywhere. We’ve been very diligent about moving goods. We haven’t--our flow of goods hasn’t really been impacted by the port situation. We got ahead of that and really we’re moving goods to the northeast and are really now just getting back to our normal balance of how goods are coming into the country. So we don’t specifically see it. I think there are--look, I think it continues to be promotional at retail. I think it’s going to be a promotional Father’s Day as we get into June and July, so nothing is really changing, but I don’t see anything that would directly impact our business or the trends we are seeing at retail. So I think it’s a little higher in some places than people would like, but I think they’re taking steps to deal with it, so I feel pretty good about that overall. Accessories, we always tend to just pull that together with our apparel businesses when we talk about comps and we talk about trends, only because we don’t want to confuse people and start talking about big increases on what I would say three years ago were relatively small numbers, but has become big businesses for us over the last three years both at wholesale here in North America, our business is growing double digit with department stores with both Calvin and our Tommy Hilfiger business with department stores, and in our own retail stores. We’ve really grown the square footage associated with accessories, and that business has been healthy for us overall. I think that accessories in general, what I would say is the category is not as robust, and I’m not speaking now about our business, I’m speaking just in general terms. I don’t think we are as significantly exposed as some of our competitors to that category. We have a big, healthy business there that’s doing well, and I think there’s runway and growth for us particularly as we’re price positioned in the market. But I think the kind of growth that’s been experienced the last four or five years, I think that growth, be it watches and jewelry or be it handbags directly, I think it’s starting to level out in general. It’s still a healthy business as long as you don’t get into inventory problems, and margins, particularly in a business like for PVH Calvin and Tommy, where clearly accessory margins are much higher than are apparel margins. We’re an apparel company that has an complementary accessory business as opposed to an accessory business that’s trying to develop some type of a lifestyle brand or apparel business. I think that’s a much harder formula to navigate, given the high operating margins in accessory versus probably half those kind of margins when you talk about apparel.

That’s really helpful. If I may, can I just sneak in one other quick one? You had also commented that you expect an improvement in the dress shirt business in the second half of the year. Could you just talk a little bit about, is that based on some new product or something else? What’s the expectation there?

There is some exciting new product that’s going on there, but we’re not counting on that for huge increases. This whole flex collar technology that’s coming out, we haven’t really spoken about it that significantly. It’s really a second half launch, and I’ll probably talk about it on the second quarter call. It has had very good sell-in, and we have to see now--we’re testing it with the consumer to the reaction, but we think it has a real chance to have some legs for the business at slightly higher margins and price points. What we are counting on for the turnaround in the business is just getting the inventories completely rightsized and getting the business rightsized. If you recall, we had a very tough third quarter in dress shirts and a disaster in the fourth quarter, so to be honest, what we’re counting on is that we’re going to run the business as we normally do and comparatively you’ll see an improvement particularly in the fourth quarter.

Very helpful. Thank you.

Given the time frame, this is going to be our last question, Operator.

We’ll take our final question from Eric Beder with Wunderlich.

Congratulations on a good quarter. Thanks for squeezing me in. Could you talk a little bit about the licensing business? I see that was up on a year-over-year basis, even with the currency, and could you talk about where you are in the evolution in the off-price channel? I know you have been reducing your dependence upon that. Thank you.

Eric, you just broke up. The last piece of that about the dependence, just say that again?

On the off-price channel, I know you’ve been cutting back on the off-price channel, and where are you in that evolution, where do you want to be in the off-price channel?

Okay, let’s talk about the licensing business. It was healthy, both for Calvin and for Tommy. The Tommy business just continued good performance with a number of key businesses, particularly internationally is where we really saw it. Our Asia business continued to do well and our South America business is doing well. On the Calvin side, the real growth driver has been G3 - that continues. Also the men’s tailored side of the business for both Calvin and Tommy continues to do very well for us, that’s Peerless and Marcraft, G3 on the women’s side. They’ll speak probably tomorrow, I think, on their call, so they’ll give a bit more color on that, but we’re seeing really healthy growth there. They are a great licensing partner and just do a fantastic job for us. On the off price channel, we talked about it, the Warnaco business was overly dependent on the business in Europe and North America. In Europe, we are exactly where we want to be and the only business being done in the off-price channel is selling off clearance at the end of the season, which is normal, as opposed to selling in business in-season and treating it as if it was a department store account. That’s behind it. On the underwear business, we’re exactly where we want to be from a channel and distribution diversification, very well balanced. Eighty percent of our business is being done in the regular price channel of distribution, exactly like we would want it to be, premium positioning both in North America and Europe, that’s very healthy. The jeans business has continued to be a story. In North America, we’re at the right sales level at this point as we particularly turn to the second half of this year, so the comparisons will be fine. What we really need to do is to grow the department store business to a healthier level, so I think there the financial hits that we’ve had to take by limiting profitable off-price sales, that is behind us particularly as we get out of this first quarter. That’s completely behind us and shouldn’t be a real topic of discussion as we go forward. So I feel good about where we are, and I think as we grow that jeans regular price business, it will be in balance with the rest of the Calvin Klein businesses over the next two years.

Great, thank you.

Okay, thanks Eric. I’d like to thank everybody for joining us. We look forward to speaking with you at our second quarter earnings call, which will be in late August of this year. Everyone enjoy their summer, and have a great day. Bye bye.

Again, this does conclude today’s presentation. We thank you for your participation.