Good morning, everyone, and welcome to today's PVH Second Quarter 2025 Earnings Conference Call. Please note this call may be recorded, and that I will be standing by should you 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.

Thank you, operator. Good morning, everyone, and welcome to the PVH Corp. Second Quarter 2025 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 PVH and consists of copyrighted material. It may not be recorded, rebroadcast or otherwise transmitted without PVH's written permission. 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 August 26, 2025, 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 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 actions undertaken to focus principally on its Calvin Klein and Tommy Hilfiger businesses and its current multiyear initiative to simplify its operating model and achieve cost savings. 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 second quarter 2025 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 Stefan Larsson.

Thank you, Sheryl, and good morning, everyone, and thank you for joining our call today. I want to start by thanking our teams around the world for delivering a better-than-expected second quarter. We beat our guidance on both the top and bottom line as we grew revenue 4% on a reported basis, achieved our 1% revenue growth guidance on a constant currency basis and drove better-than-expected gross margin performance and EBIT margins. Total direct-to-consumer revenue was flat in constant currency, a sequential improvement compared to the first quarter, including a sequential improvement each month throughout the quarter. We grew wholesale revenue by low single digits in constant currency benefiting from the intake and relaunch of the Calvin Klein women's businesses in North America. Looking ahead, we are reaffirming our earnings guidance for the full year and raising our reported revenue guidance despite tariff rates effectively doubling and a continued uneven global macro. And for the rest of the year, we have also increased our strategic investments in marketing to generate even higher visibility and customer impact. Since we last spoke, our focus has been to further strengthen our PVH+ execution. And for both brands, this means continuing to strengthen our brand-building consumer flywheel across products, marketing and marketplace execution. We drive performance by leaning into the strong consumer love for our iconic brands, focusing on our biggest product categories then bringing innovation and newness into our most iconic product franchises, amplifying them through powerful cut-through marketing and supporting it by next-level execution across all our channels, and we have already made significant progress. Regionally, in Europe, we delivered another quarter of positive D2C growth and finalized our spring '26 forward-looking wholesale order books up low single digits, marking our second consecutive season of growth. In North America, we drove stronger D2C performance and again drove double-digit EBIT margins. And in APAC, we exceeded our plan, and we started to stabilize the business in key markets. We are also successfully working through the transitory operational issues we experienced as we set up the Calvin Klein global product capability in New York. Already now for fall '25, we are delivering the sequential improvements we set out to achieve. And for the spring '26 product season, we have already locked in the important go-in margin improvements we targeted, as well as got them back to on time for our deliveries. David and the Calvin team have done a great job making this happen. Let me now share concrete examples of the actions we took that drove our performance in the second quarter. And let me start with Calvin Klein. The biggest and most iconic product categories in Calvin Klein are underwear and denim. And this quarter, we further drove powerful momentum in both these categories. When we last spoke, we had just launched our spring campaign with superstar Bad Bunny to amplify the newness and innovation in our new men's icon cotton stretch hero product franchise. It's been incredibly successful. And across all regions, this franchise is driving significant commercial impact. The combination of a powerful product category tied to strong product innovation, connected to a cut-through campaign with globally relevant talent is a repeatable model that we know works. The Bad Bunny campaign has increased brand awareness driving stronger traffic and conversion. It's also creating a strong halo effect across men's underwear. Sales of our cotton stretch styles were up 14% globally in the quarter, following the 25% growth we delivered last quarter. Building on this success for this fall, we are bringing that same next-level product innovation and newness to our largest and most successful women's underwear program with the launch of our Icon Cotton Modal franchise. It will also be supported by a global campaign featuring one of the most exciting global superstars in music. And we will again drive commercial impact by activating a full-funnel approach across all regions. Next, in denim, we have continued to build on Calvin's strong spring momentum. We focused on newness through 90 styles and fashion fits to capture consumer demand for looser fit silhouettes and delivered 19% growth in fashion denim this quarter. We're also innovating with new tools to drive conversion, and we recently introduced a new Lookbook style denim fit guide to make it even easier for consumers to shop their favorite denim look with styling inspiration that captures iconic Calvin lifestyle. And last week, leveraging our proven combination of hero product amplified by mega talent, we launched the denim-focused collection featuring K-pop megastar Mingyu. Already, we have seen more than doubling of our engagement rate on social media from this campaign with the key denim products featured rising to the #1 and #2 best-selling products in their categories and markets. This is just the beginning of what we believe will be the strongest Calvin Klein fall campaign so far. With a combination of strong product innovation, amplified with a lineup of global mega talent from the world of music and sports, we build relevance and desirability when we connect Calvin's brand DNA to the global cultural conversation. And this quarter, we have repeatedly done that. We connected the inspirational halo of our Calvin Klein collection to key cultural moments with talent, including Dua Lipa, Pedro Pascal and A$AP Rocky. And we took this to another level when Beyoncé wore custom Calvin Klein collection underwear in her Cowboy Carter show, a moment she shared with her over 300 million followers on Instagram. We are building strong connectivity between the collection and our main line to extend the halo that Veronica Leoni is creating. You will see this next at our upcoming runway show at New York Fashion Week on September 12. Finally, in the marketplace, we are making key investments in stores around the world to bring the full Calvin ambition to life for the consumer. Tomorrow, we'll open our newest flagship store in Tokyo in the center of Harajuku, a hub for youth culture, fashion and high traffic from both local and international shoppers. The new flagship marks the next chapter in our global retail expansion in major markets around the world. And later this year, we look forward to opening our next flagship in the heart of Soho, New York, one of the most iconic retail destinations globally. Turning to Tommy, throughout the quarter, we continued to take Tommy's iconic DNA, our classic American style with Tommy's unique twist and connecting it to culture and driving strong commercial impact. In the world of sport, Tommy was 20 years ahead of his time in building early partnerships with Formula One. Our latest partnership with Apple Studios took this to the next level. With Tommy the brand playing a key part in the global summer blockbuster film, F1 The Movie. It's already become the highest-grossing sports film in history, and it's also Brad Pitt's highest-grossing film to date. And for those who have seen it, you know that Tommy is impossible to miss. To support this major brand moment, we launched a full-funnel global campaign, with the movie premiere at the Landmark Radio City Music Hall in New York City. It was incredible to see the iconic Tommy Hilfiger brand on the big screen, embodying the fearless drive and effortless style that define both the sport and the brand. This continued in London, where Tommy was featured on the massive 3D screen in Piccadilly Circus ahead of the global premiere contributing to double-digit lifts in both brand perception and Net Promoter Scores in that market. Globally, we have seen an incredible consumer response to our limited edition APAC GP collection of key Formula One styles with strong sell-through around the world. We'll continue building on this momentum as Cadillac is the official apparel sponsor of the Cadillac Formula One racing team, where two of the biggest American icons are coming together to support the first U.S. team on the grid. And staying in the world of sport, as the official lifestyle partner of the U.S. SailGP team, Tommy recently launched a capsule collection, which blends high-performance sport and modern style. The partnership is at the heart of Tommy's unique DNA and opens up a new consumer and commercial opportunity for the brand around the world. Throughout the quarter, we executed across the full funnel. This included celebrating Tommy's summer lifestyle through the Hilfiger resort campaign, where our iconic hero product and strong category offense was amplified with top-tier talent including Madeline Klein and Patrick Schwarzenegger. This led to strong sell-through across channels for spring and summer 2025 seasons in featured key product categories. Within our summer shop styles, we drove womenswear up 10% globally and menswear up 3%. We continue to focus on the full Tommy lifestyle by expanding both our core men's and women's business. In men's, we recently expanded into dress casual, an important category in the consumer wardrobe. We previewed the collection in Milan to more than 350 wholesale partners at Pitti Uomo, one of the biggest men's fashion events in the world, and we are encouraged by the strong initial sell-in for spring '26. Category expansion is an important strength of the Tommy brand and we are excited for this new category to launch early next year with key wholesale partners globally as well as in premium stores and on tommy.com. In women's, building on the recent collaboration with Sofia Richie Grainge, this quarter, we launched the Tommy Girl Capsule, which drove strong sell-through across regions and attracted a younger consumer. Tommy Girl has been an important fixture in pop culture since the '90s, and we are tapping into that deep consumer love for the Tommy DNA. In North America, over half of our capsule purchasers were new consumers to the site and one-third became repeat purchases within 30 days. Looking to the fall season, yesterday, we launched a global lifestyle campaign featuring a cast led by supermodel Claudia Schiffer and Nicholas Hoult, the star of the summer hit film, Superman. To maximize amplification, we have increased our marketing investments, which include a global activation of the full funnel with multiple high-impact brand moments and sustained product storytelling. Now let me turn to our regional performance, where we also continue to make strong progress. Starting with Europe, we drove another quarter of total D2C growth, and we delivered our fourth consecutive quarter of store revenue growth. D2C growth was offset by a decline in wholesale from shipment timing that we mentioned last quarter, which benefited the first quarter. While overall revenue was down low single digits in constant currency for the quarter, importantly, we ended the first half with revenue up slightly versus last year. I'm also pleased to share that we drove growth in our wholesale order books for spring '26, up low single digits compared to the prior year, building on our growth in fall '25. This performance reflects our ability to further strengthen our product offering season by season, combined with our strong sales teams and wholesale partnerships in the region. Importantly, across the region, our stepped-up execution and product improvements drove growth in our largest category businesses in the quarter. In Tommy, we grew menswear up 3% versus last year, and in Calvin, we grew underwear up 6% versus last year. Turning to the Americas, we grew revenue by low double digits, including above-plan D2C performance across both brands. Our disciplined execution again drove double-digit EBIT margins. We delivered strong growth in our digital channels, supported by a double-digit increase in traffic, fueled by our product strength and cut-through campaigns, and driven by our investments that continue to further elevate the online shopping experience. This quarter, both brands had positive consumer growth across new, retained, and reactivated consumers across our digital platforms. The consumer is choosing iconic products with newness, and is showing up in our performance with strong trend improvement across both brands and across our D2C channels as we deliver products that are iconic to our brands with innovation and relevant newness. We also saw higher sell-through of newness with our key wholesale partners. While there is still uncertainty in the back half of the year tied to tariffs, we are focused on continuing to deliver iconic fashion with newness to our consumers. Moving on to Asia Pacific. For the second quarter, we drove better-than-expected top line performance with revenues declining low single digits in constant currency, representing a significant sequential improvement. This was driven by performance in our own channels, high-quality consumer engagement across the full funnel and strong execution of key holidays. We again won in the big consumer moments such as 618, where we delivered high single-digit GMV growth, outperforming our expectations adding to our double-digit GMV growth last year. During 618, both Calvin and Tommy ranked among the top five international brands on Tmall. While the macro remains choppy through strong execution, we have started to stabilize performance. This summer, I visited our teams in Japan and Korea, and it was incredible to see the brand love we have in these markets, whether it's Calvin's presence at a local Gen Z store or the strength of Tommy's flagship store in Tokyo. Each quarter, we continue to build out the strength of our brands leveraging the combination of our category offense and iconic hero products amplified with locally relevant talent. We still have significant untapped opportunity to grow our brands in APAC. And also here, we are increasing our investments in marketing to activate the full funnel and drive new store expansion, reflecting our long-term commitment to the region, which remains an important growth driver for our global business. Now turning to global licensing. Our licensing revenue, excluding the licenses that we are transitioning, continues to grow. As we have shared before, our large and diversified global licensing business is a key competitive advantage. Our licensing partners help bring our vision to life across multiple complementary categories and are critically important to how we drive sustainable, profitable growth through the PVH+ Plan. In collaboration with our licensing partner, Coty, we are deep into preparations for our biggest fragrance launch since CK One. While we are preparing for the big launch next year, we have already had early success in recent new product launches, especially with younger Gen Z consumers. In closing, the second quarter marked another step forward on our multiyear journey to unlock the full potential of Calvin Klein and Tommy Hilfiger, a step-by-step building them into the most desirable lifestyle brands in the world. In a choppy macro environment, we delivered by intensifying and expanding the impact of our PVH+ execution, and we are making significant progress. We continue to demonstrate that where we lean in to execute, we deliver. And I'm proud of how the team stepped up their execution again this quarter to drive the business forward. The areas we said we were going to lean into last quarter we delivered on. While the global macro landscape continues to evolve and remain uncertain, we are focused on what's within our own hands, which is building our brands and business for the long term. We continue to take concrete action to build on the momentum we created in the first half to drive our performance in the back half, continuously learning and improving to become stronger over time. And with that, I'll turn the call over to Zac.

Thanks, Stefan, and good morning. My comments are based on non-GAAP results and are reconciled in our press release. As Stefan discussed, this quarter, we took another step forward on our multiyear journey to build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world, delivering or exceeding expectations across all key financial metrics for the second quarter. In Q2, we delivered another quarter of revenue growth. We drove a sequential improvement in year-over-year gross margin percent and continued our strong SG&A discipline. And while our EPS for the quarter was lower than last year, it was better than expected. As we look forward, we are reaffirming our full-year guidance for constant currency revenue operating margin and EPS in spite of new tariff rates, which have effectively doubled since our last call. I will now discuss our second quarter results in more detail and then move on to our outlook. Revenue for the second quarter was up 4% on a reported basis and up 1% on a constant currency basis. Starting from a regional perspective, our EMEA business was up 3% on a reported basis and down 3% in constant currency for the quarter. In constant currency, we delivered growth in the direct-to-consumer business, which was up slightly, and notably, sales in our retail stores were up mid-single digits, the fourth consecutive quarter of year-over-year growth. Our wholesale business was lower by mid-single digits, reflecting the timing shift to Q1 of this year that I discussed last quarter. And looking at the first half overall for EMEA, which normalizes for the wholesale timing effect, our total EMEA business was up slightly in constant currency driven by growth in the direct-to-consumer business and wholesale revenue in line with the prior year. In our Americas business, revenue was up 11%, driven by double-digit growth in wholesale, which includes the impact of Calvin Klein women's sportswear and jeans wholesale transition in-house. As I discussed last quarter, the wholesale shipments this year were planned to reflect a more balanced first half, second half weighting versus last year when shipments were more heavily weighted to the back half. Direct-to-consumer revenue in the Americas was flat, a sequential improvement versus Q1. We delivered double-digit growth in our digital commerce business, which marks the fourth consecutive quarter of year-over-year growth, fueled by the investments we've made to elevate the online consumer experience. And while stores were down low single digits for the quarter, we delivered a sequential improvement compared to Q1 and exited the quarter with modest sales growth in July. Revenue in our Asia Pacific business was down 3% on a constant currency basis, a significant sequential improvement compared to the first quarter. Growth in our owned and operated digital commerce business was more than offset by declines in the wholesale business and in our stores, reflecting the choppy consumer environment in the region, particularly in China. And while direct-to-consumer revenue in China was down compared to last year, we saw a sequential improvement in our bricks-and-mortar stores compared to the first quarter and drove growth in our digital commerce business. Revenue for our Asia Pacific business was down 1% on a reported basis. In our licensing business, revenue was down 3% versus last year, more than explained by the previously mentioned transition of Calvin Klein women's sportswear and jeans in-house. Turning to our global brands, Tommy Hilfiger revenues were up 4% as reported and flat in constant currency. Calvin Klein revenues were up 5% as reported and up 3% in constant currency. From an overall PVH channel perspective, our direct-to-consumer revenue was up 4% as reported and flat in constant currency, a sequential improvement over the prior quarter. Sales in our retail stores were up 4% as reported and flat on a constant currency basis, driven by mid-single-digit growth in EMEA, offset by low single-digit declines in each of the Americas and APAC. Sales in our owned and operated e-commerce business were up 3% as reported and flat in constant currency as strong growth in the Americas and APAC was offset by a decline in EMEA. Total wholesale revenue was up 6% as reported and 2% in constant currency, which reflects the previously mentioned transition of Calvin Klein women's sportswear and jeans in-house. In the second quarter, our gross margin was 57.7%, a decrease of 240 basis points compared to last year but better than planned, largely due to a delayed impact of tariffs. As we have discussed previously, approximately 50 basis points of the decrease was the impact of our North America license transitions. And in Q2, gross margin reflected the initial early impact of tariffs of approximately 20 basis points. The remaining 170 basis point decrease was largely a continuation of the three main factors we felt in Q1, including higher promotions, the mix of shipments in wholesale, which has a negative impact on gross margin but not our overall profitability, and the impact of Calvin Klein product shipment delays. SG&A spending was down in constant currency and SG&A as a percent of revenue improved 140 basis points versus last year to 49.5%, reflecting our strong cost discipline and our Growth Driver 5 Actions. EBIT for the quarter was $178 million, and operating margin was 8.2%. Earnings per share was $2.52, reflecting a negative impact of $0.06 related to tariffs and a positive impact of $0.16 related to exchange. Interest expense was $22 million, and our tax rate for the quarter was approximately 22%. As a reminder, our earnings per share of $3.01 in the second quarter last year included a benefit of approximately $0.55 related to the favorable settlement of a multi-year international tax audit, which drove our tax rate to 0% for last year's quarter. Absent this benefit, Q2 2026 EPS would have been $2.46. The inventory at quarter end was up 13% compared to Q2 last year, including a 1% increase due to tariffs and reflects a planned improvement compared to up 19% in Q1. The rest of the increase in the current quarter was primarily due to a purposeful investment in best-selling core product categories and an increase to support our projected sales in the third quarter. Availability also improved across all regions and channels as we make strategic investments in the most essential styles. Our inventory is fresh and current and we remain on track to land the year with inventory aligned to our sales plan, excluding tariffs. And now moving on to our outlook. We are encouraged by our Q2 results, but we also recognize there continues to be significant uncertainty around global trade policies and the impact on the broader macroeconomic environment and consumer spending behavior. Our outlook is based on our best assessment of current conditions and currently announced tariff levels. Starting with the third quarter, we are projecting revenue to be flat to a slight increase on a reported basis and down slightly on a constant currency basis compared to the prior year. Our revenue outlook for the third quarter reflects the impact of wholesale shipment timing in the Americas I spoke of earlier, with this year reflecting a more balanced first-half, second-half weighting versus last year when shipments were more heavily weighted to the back half. Overall, for the Americas, we are planning revenue up low single digits with growth in wholesale and DTC sales approximately flat. In EMEA, we expect continued growth in DTC and wholesale approximately flat. And in Asia Pacific, we expect revenue to decline by low single digits, in line with the second quarter. We are expecting third quarter gross margin to decline approximately 175 basis points versus the prior year, a sequential improvement compared to the first half trend as we begin to stabilize the Calvin Klein operational challenges we have discussed previously. Our gross margin guidance includes an unmitigated tariff impact of approximately 80 basis points, partially offset by the impact of planned mitigation actions. The impact of tariffs, we felt much more heavily in the fourth quarter given when new rates take effect and the timing of sell-through. We expect SG&A as a percentage of revenue to be up approximately 75 basis points compared to last year. As Stefan mentioned, we are investing more into marketing in the third quarter to capitalize on key consumer moments and support our brand-building cut-through campaigns amplified by mega talent. At the same time, our Growth Driver 5 Actions will continue to deliver efficiencies. Overall, we are projecting third-quarter operating margin to be approximately 8%, down approximately 250 basis points compared to last year. Earnings per share is expected to be in a range of $2.35 to $2.50. Our tax rate for the third quarter is estimated at approximately 25%, higher than our tax rate projection for the full year due to timing items, and interest expense is projected to be approximately $22 million. And now moving on to the full year. We remain on track to deliver the overall business outlook we shared last quarter despite the recently announced incremental tariffs on goods coming into the U.S. We are reaffirming our full-year constant currency revenue guidance of flat to increase slightly. Our operating margin outlook of approximately 8.5% and our EPS outlook in the range of $10.75 to $11. Our guidance reflects an incremental tariff impact compared to our prior outlook and increased marketing investments, which are being offset by the impact of favorable exchange. We expect the tariffs currently in place with an overall net negative impact on our earnings in 2025, including an approximately $70 million unmitigated impact to EBIT or approximately $1.15 per share compared to previous guidance of $65 million and $1.05 per share. We expect to mitigate some of these costs through strategic actions in the second half of the year and fully mitigate the impact over time. But for this year, some we will need to absorb. The net impact of the tariffs and these mitigation actions are embedded within our guidance. We are confident that we are well positioned to navigate the fluid tariff situation. We have a strong globally diversified revenue base with 70% of our revenues coming from outside the U.S., and we work closely with an established network of global sourcing partners across more than 30 countries where we continue to leverage our deep, long-standing relationships to further optimize our sourcing and production costs. We are evaluating and actioning a variety of steps looking at every point along our value chain to mitigate the impact over time. On the top line, while we are reaffirming our constant currency revenue guidance, we are now projecting reported revenue to increase slightly to low single digits, reflecting the favorable impact of exchange compared to our previous guidance of flat to a slight increase. Regionally, our revenue outlook remains unchanged. Europe was planned to return to growth. In the Americas, we are planning revenue up mid-single digits, including the positive impact of the Calvin Klein women's sportswear and jeans wholesale transition in-house. And in Asia Pacific, revenue is planned down mid-single digits in constant currency. We continue to expect gross margin to decrease approximately 250 basis points versus last year, with the incremental headwind from increased tariff rates offset by the improvements we realized in the second quarter. On SG&A, we continue to expect expenses to be lower in constant currency in 2025 compared to 2024, and our SG&A expenses as a percentage of revenue to decrease approximately 100 basis points, reflecting significant cost savings connected to our Growth Driver 5 Actions. These actions will simplify our operating model to drive more efficient ways of working, focus on our global technology stack, our global distribution network, our operating model in Europe and our support functions. And through the end of the second quarter, we have already made meaningful progress in each of these areas. We continue to expect these actions to deliver 200 to 300 basis points of operating margin expansion over time, with nearly 200 basis points of that benefit expected to be realized in the fourth quarter by the actions we have completed to date. Interest expense is now projected to be approximately $80 million, and our tax rate for 2025 continues to be estimated at approximately 22%. Before we open up for questions, I just want to conclude by saying that while we are navigating a dynamic and uncertain macroeconomic environment, within that backdrop, we continue to focus on taking proactive measures on what is within our control and making progress in all dimensions of the business through our execution of the PVH+ Plan, building momentum into 2026 to deliver sustainable and increasingly profitable growth for the long term. And with that, we would like to open it up to questions.

We'll take our first question from Jay Sole with UBS.

Great. Stefan, just interesting to hear you talk about marketing investments. What are you seeing that drove that? And Zac, one for you, how do you think about marketing investments in the shape of the P&L?

Thanks, Jay. As I mentioned in my prepared remarks, the improvement in our execution during Q2, along with our enhanced focus on key product categories, enabled us to drive innovation within our major franchises and support that with our distinct marketing strategy. This is why you'll notice an increase in our investments in the second half of the year as we aim to build on the momentum we achieved in Q2. For Calvin Klein, we will focus on the strength of two key categories, underwear and denim, while enhancing our men's offerings with the positive impact of Bad Bunny and his product innovations from spring, which we will continue into the fall. We have an impressive lineup of global talents for both men's and women's lines. In the same way we've introduced innovation into men's underwear, we will adopt this approach for women's as well. For Tommy, we have two main strategies: enhancing our seasonal campaigns comprehensively, exemplified by our recently launched fall campaign, and collaborating with Formula One, which has been successful, along with our partnership with Cadillac. Additionally, we are looking at events like SailGP, paralleling Formula One but on water. Essentially, it's about maximizing the product strength with impactful marketing across all channels, providing us with the confidence to invest more than we initially planned.

Jay, thanks for the question. On the second half, in terms of SG&A, we'll continue to make significant progress on our value Driver Actions, we previously talked about. We've committed to delivering 200 to 300 basis points of improvement over time with 200 basis points of that exiting this year. That's all on track. And including in Q2, we saw significant SG&A leverage with over 100 basis points coming from these actions. As we then look into Q3, those savings continue. But as Stefan mentioned, we are also investing in marketing to build that momentum for the second half and for holiday. So we will see deleverage in SG&A in Q3 but that's more than explained by that increased marketing spending. And then by the time we get to Q4, we're back leveraging the SG&A as we finish up delivering that 200 basis points on the value Driver 5 Actions that we had committed earlier this year by the end of the year.

Our next question comes from Michael Binetti with Evercore.

I'm interested in discussing tariffs. Your guidance for the third quarter suggests about 280 basis points of pressure on gross margin. In the fourth quarter, Zac, you mentioned that the timing of tariffs would start to impact us. You also indicated the extent of the unmitigated tariff pressure. How should we consider this as we move into 2026? Is the tariff impact on gross margin expected to continue increasing? Additionally, what strategies do you have in mind for mitigation efforts and how will that balance out as we approach 2026? I understand you intend to offset these impacts over time. I would also like a brief update on the outlets. Earlier in the year, you noted a significant drop in outlet traffic. Typically, a weaker dollar can boost tourism, but current political situations may disrupt typical patterns. Can you share your perspective on the outlets as we look toward the latter half of the year?

Thank you, Michael. Let me start with the outlet traffic. We saw a sequential improvement in traffic from Q1 to Q2, including at our outlets, which is encouraging. Regarding tariffs, at a high level, they are affecting everyone in our industry, but 70% of our revenue comes from international business, supported by a diverse supply chain. Additionally, we benefit from having Calvin Klein and Tommy Hilfiger, two of the most recognized premium brands in the market. Through our PVH+ Plan, which we have been diligently implementing for several years, we are enhancing the relevance of our iconic brands, strengthening our product, engaging more with consumers, and executing effectively in the marketplace. This approach is designed to drive profitable growth and pricing power. Strategically, it's crucial to leverage our brand strength to deliver increased value to consumers in light of the tariffs. Tactically, like all our competitors, we are exploring ways to mitigate the impact of tariffs while maintaining our competitive positioning. We are evaluating every aspect of the value chain, and although it's still early, we are well-positioned to navigate this competitively. Zac, would you like to take it from here?

Absolutely. Thanks, Michael, for the question. With a diverse and resilient supply chain, we've successfully navigated through many disruptive times before. And so we're confident in our ability to manage through this very dynamic environment also. We've previously communicated that we'd mitigate approximately 50% of the cost of the prior cost in 2025 with more over time. With the newly announced rates coming in for 4Q for us around 2x higher than we previously had talked about, we do see that mitigation cost percentage being a little bit lower for 2025. But most importantly, we expect to continue to expand on our mitigation efforts through the strategic actions throughout 2026. Stefan mentioned, we feel really good about the premium positioning of our brands, and we'll continue to look at all levers across the entire value chain to mitigate the impact. This includes continuing to prioritize supply chain and internal efficiencies first. And any pricing actions we take will be targeted based on where we have pricing power. That's really important and always being sort of balance that price value for the consumer.

Our next question comes from Brooke Roach with Goldman Sachs.

Stefan, can you give us an operational update on your transformation within Calvin Klein? As you look ahead into 2026, what are the opportunities for improved execution in North America and globally?

Thank you, Brooke. I'm happy to share this quarter as we follow up on the operational challenges we faced in the first season of establishing the Calvin Klein global product capabilities in New York. I'm pleased to report that we have achieved what we set out to do this quarter. For fall '25, we have made the improvements from spring that we aimed for. Looking ahead to spring '26, we have already secured the margin improvements we targeted and are on schedule for deliveries. We are fully back on track, thanks to David and the Calvin team, who have done an excellent job navigating through these challenges. Establishing these capabilities will pay off for many years, as we now have a robust global product engine for both Calvin and Tommy, serving each of our global brands in their respective regions. We feel very good about our progress.

Our next question comes from Matthew Boss with JPMorgan.

So Stefan, maybe in the Americas, could you break down the drivers of the sequential improvement at direct-to-consumer relative to trends that you've embedded for the back half? And then in Europe, could you just elaborate on the composition of your fall '25 order book and initial indications for spring '26?

Thank you, Matt. It's encouraging to see the improved direct-to-consumer trends in North America, which showed significant improvement from Q1. There are three main drivers behind this. First, we leveraged the increased strength in our products across both Tommy and Calvin. Second, we enhanced that product strength with improved marketing. In North America, as well as in other regions, we focused on expanding mid-funnel marketing, which involves product storytelling and increasing consumer consideration. We took the aspirational elements created by our product innovation and collaborations, like Bad Bunny, and made them more shoppable, leading to greater consumer engagement. The third driver was our ability to attract new consumers at a growth rate we haven't observed before, as well as an increase in retained consumers and a higher number of reactivated consumers. This success stems from the combination of product strength, effective marketing, full-funnel expansion, and a strong focus on the consumer. It’s a repeatable strategy that we will continue to build upon. Moving on to Europe, it's exciting to see that we have started to grow the order books again following our quality of sales initiatives. This growth is due to the strength in our product offerings in both Calvin and Tommy, particularly with Calvin's underwear and denim, and Tommy's lifestyle products such as polos, cable knits, and outerwear. We were able to maintain this strength for the spring order books, which is underpinned by our focus on key growth categories and increased product innovation that our partners have recognized. Great work by Fredrik and the team in Europe.

Our next question comes from Dana Telsey with Telsey Group.

As you think about your business, 70% international versus domestic, what are you seeing in the different promotional trends overseas versus here in the U.S.? And then Stefan, you noted the new store in Tokyo, what we've heard about other enhancements being made to the store portfolio, what should we be looking forward to with Soho and perhaps other stores beyond outlets?

Thanks, Dana. And let's start with your question around the consumer across the world. So as everyone else in North America, we have uncertainty in the back half of the tariff. We don't yet know how the consumer will respond. What we do know is every improvement we put into the desirability of the iconic strength of our brands will resonate with the consumer. And in Europe, we see the backdrop and the consumer remains stable. We have seen that for a number of quarters. And in APAC, we continue to see a choppy backdrop, but exciting to see in Q2 that us leaning into the relevance, the strength of the brands, product, marketing, very strong execution in the channels in APAC, we have stabilized our performance there and sequentially significantly improved it. The second question was relating to stores. So very exciting today and tomorrow, we open our Harajuku flagship store in Tokyo. So it's one of the most important brand-building locations for APAC and for us globally. We have the biggest store, the most exciting brand expression on Calvin Klein.

Ladies and gentlemen, we are experiencing technical difficulties. Please, remain online.

Can you hear us?

And I can hear you loud and clear. Please present with your presentation.

Good question. Dana, are you still there?

I'm still here. Yes. So it's about the stores you were getting to.

Yes, where did they cut off, is there any way?

You cut off about Harajuku that the team is over there now.

All right. Even though I'm excited about Harajuku and our flagship stores, I want to make sure I don't take you through it twice. But yes, Harajuku opens tomorrow. It's our biggest and best flagship expression for Calvin so far. It's a really important location, not only for Japan but for APAC and for us globally to build the brand relevance. Soho, to your point, opens at the end of the year. And same there, really important shopping destination, also for our global consumers coming into New York to experience the brand, very exciting. And then in parallel to the flagships, what we really lean into is the renovations of our fleet. So we are getting everything set up to over the next three years, renovate and upgrade the majority of our fleet globally. So more on that later. We have time for one more question.

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Can you guys hear us? It sounds like it may have cut off again.

And Tom, your line is open.

I want to ask about the North American wholesale environment. I think a lot of brands I've talked about a lot of caution from the second half from wholesale partners? Have you seen any incremental caution from your wholesale partners in North America? And is there any impact on the in-sourcing of the G3 licenses based on the wholesale environment?

Thank you. So let's start with the first half for the second quarter in wholesale North America. We had a benefit of the intake and relaunch of the Calvin Klein women's sportswear and jeans businesses, as you mentioned. Then what you also see from the second quarter is that we grow with our most important full-price partners. And then thirdly, there is a normalization of wholesale shipment across first half, second half. So Zac, do you want to say a few words?

Yes, of course. So last year, we had a lighter weighting of shipments in the first half in wholesale than normal and a little bit heavier in the second half. As we moved into 2025, we've normalized that to a historical trend. So first half and second half are relatively normal. So what we see is in the first half of the year, a little bit of a stronger amount of growth and we'll see that normalize in the second half a little bit lower, especially in the third quarter.

All right. So with that, I apologize for any technical difficulties. I hope you heard most of the call. We are on a multiyear journey to build Calvin and Tommy into their full potential. Quarter by quarter, step by step, you'll see us add strength, desirability and engaging our consumer and leaning into that brand love and expanding our PVH execution. So Q2 was an example of that. We continue heads-down executing on the plan and look forward to updating you next quarter. Thank you.

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time.