Stefan Larsson
Chief Executive Officer at PVH
Thank you, Sheryl, and good morning, everyone, and thank you for joining our call today. I want to start by saying that despite the macro challenges we're all facing, we have many strong proof points on the progress we are making in executing the PVH+ Plan. Starting with the underlying strength of our business, in the second quarter on an underlying basis, we delivered solid revenue growth of 6% compared to last year, excluding the impact of currency, Russia, and the Heritage Brands divestiture. The underlying growth speaks to the effectiveness of our strategy and resilience of our two brands, which are two of the strongest most iconic brands in our sector globally.
We also had solid profitability with non-GAAP EPS for the quarter above guidance. This quarter started strong with the trends we experienced in the first quarter continuing through May. The macroeconomic environment then softened in June as high gas prices and other inflationary pressures began to affect consumer discretionary spending. It was most pronounced for us in the middle income and value consumer in North America, but we also experienced some pullback in certain European markets. Consumer demand has stabilized in July, although at the reduced levels we experienced in June. And we're now planning prudently for demand to remain at these lower levels for at least the remainder of the year, and we have revised our outlook accordingly.
Importantly, we are still projecting underlying high single-digit revenue growth for the full-year, driven by continued strength in our direct-to-consumer business led by the international regions. As a management team, we continue to intensify the execution of our PVH+ Plan, where we are in the early days of a multi-year journey to unlock Calvin Klein's and Tommy Hilfiger's full potential. We developed the PVH+ Plan to compete to win in the new normal because there is no such thing as normal operating conditions anymore. Our plan is about operating in a way that helps us compete and win long-term regardless of macro challenges.
I want to start by thanking our teams around the world for their hard work and dedication. It's through our extraordinary talent that we bring the PVH+ Plan to life step by step for the consumer and in our financial performance. As we navigate the current business conditions, we have not one but two of the most iconic global brands that resonate deeply with consumers around the world. We have the PVH+ Plan to deliver brand, D2C, and digitally-led sustainable growth over time. We are taking concrete steps to further strengthen our financial performance, particularly in North America. And we remain committed to achieving the 2025 targets we presented at our Investor Day four months ago.
More than ever across both our brands, the five key growth drivers of our PVH+ Plan provide a clear roadmap to execute profitable long-term growth and value creation. Our first growth driver is about winning with product, and it's about intensifying our focus on the most important product categories for our consumers, where we have the right to play to win and where every season we will have stronger and more focused hero product offering with the best essential products in the market. During the quarter, we saw strong performance in key hero product categories in men's polos at Tommy Hilfiger and our iconic underwear and denim categories at Calvin Klein.
We're also continuing to see positive momentum in refined and smart casual categories like woven shirts, dresses and pants. As consumers are elevating their apparel, more people are returning to the workplace and attending events. And with both brands being true lifestyle brands, we are well positioned to deliver on consumer needs ranging from casual to refined. Our second growth driver is about winning with consumer engagement. The main way we drive increased customer engagement is by connecting our brands through our hero products with people who shape culture in a masspirational way and to big consumer moments throughout the year.
You can see the impact of this right now in Calvin Klein through our collaboration with Jennie Kim of the South Korean Group, Blackpink. She has 69 million followers on Instagram. She's a big supporter of the brand, loves our iconic products and drive big engagement among consumers in Asia and increasingly globally. Tommy is doing the same type of work with Shawn Mendes with strong results. And for both brands, this is just a beginning of building a very strong influence capability that will leverage and multiply each brand's iconic global strength. We're also creating our own big brand moments, and I'm excited that Tommy Hilfiger is returning to the New York Fashion Week for the first time in three years with an experiential runway event that will unveil the latest See Now, Buy Now Fall 2022 collection while immersing audiences both physically and digitally in a refreshed brand world.
Our third growth driver is to win in the digitally-led marketplace, where we continue to align our channel mix to where the consumer wants to shop our brands. We delivered solid underlying growth in our digital channel led by our own and operated business. In addition, our third-party partnerships continue to provide important platforms for our brands globally. This was important to mention is that this year's performance will reflect consumers coming back to brick-and-mortar shopping in most regions after a multi-year absence including lockdowns during the height of the COVID. However, we still expect that the digital channel has the strongest long-term trajectory of growth over the coming years across both owned and operated and third-party e-commerce channels, and digital continues to represent approximately 25% of our revenue.
Our fourth growth driver is about developing a demand and data-driven operating model to enhance the speed and agility of our supply chain. Even though we are early days in this initiative, we already have some significant international proof points. A major portion of our European best sellers are on core replenishment with short lead times to match demand. In Asia for the first time this season, we were able to keep 15% open-to-buy. These are just a few important first steps that we will scale and enhance globally over the coming years. In North America, we are continuing to work through inventory issues driven by both external factors and internal execution challenges. We've previously shared with you that residual pandemic related supply chain issues were the primary driver of inventory shortages in our North American D2C business, particularly in our stores.
We are still working through those issues, and they're still pressuring retail inventory levels. While we are still experiencing inventory shortages in our North America retail channel, we ended the quarter with excess inventory in certain categories within our wholesale business as consumer spending softened. We have a clear strategy to strategically manage inventory through the remainder of the year and Zac will give you more details around that. Our business in North America has also been over-reliant on the international consumer and has not sufficiently prioritized the domestic consumer.
These issues have also made crystal clear the need to simplify our execution, especially in North America within our supply chain globally. As such, we are evolving our leadership team to the needs of the execution of the PVH+ Plan and the changing environment. And we have made two significant leadership announcements. As we recently announced, David Savman will be joining us as Global Chief Supply Chain Officer. David joins PVH from H&M, where he served as Head of Global Supply Chain and brings a wealth of knowledge and experience in managing best-in-class global supply chains. We are excited that David is joining the team later this year, and we look forward to have him hit the ground running in helping us make our supply chain a competitive advantage.
We have just announced that Trish Donnelly, CEO of PVH Americas and Calvin Klein Global will be leaving the Company to pursue other opportunities. She will remain in an advisory role through November 30 to assist with the transition. We're deeply grateful to Trish for her commitment, hard work and dedication leading Americas and Calvin Klein. We believe it's critical to strengthen our ability to execute our PVH+ Plan for the Americas and continue growing the Calvin Klein brand globally. We therefore plan to separate Trish's responsibilities and hire two leaders with different skill sets who will be able to devote their full attention to each of these key roles. In the Americas, we need a very strong leader who can help us unlock the full potential of both Calvin and Tommy in the North American market and especially when it comes to winning more with the domestic consumer.
At the same time, we are continuing to expand the Calvin Klein brand around the world. This requires a brand visionary whose singular focus is realizing the brand's significant global growth opportunity. We have launched a global search process to identify the right leaders for these roles. In the interim, I will lead PVH Americas and the global Calvin Klein business, working very closely with leadership and teams from both organizations. Lastly, our fifth growth driver is about driving efficiencies and investing in growth. As we are proactively managing what's within our control, managing the cost base is critical. At Investor Day, we spoke about how we will work differently and more efficiently manage our expenses. This effort includes reducing our people costs in our global offices by approximately 10% on a net basis by the end of 2023 in order to streamline our corporate organization, drive efficiencies and fuel strategic investments in line with the PVH+ Plan.
I want to emphasize that our focus on managing expenses is to simplify how we work, stop doing work that doesn't align with the PVH+ Plan and better leverage our global scale. As we generate those savings, we're committed to reinvest a portion of them in PVH+ growth drivers, such as product, consumer engagement, digital and supply chain capabilities.
Now turning to our regional performance and how we are connecting our PVH+ Plan across each region. I want to start with Europe. We continue to experience positive brand momentum. Even as the European consumer is showing some signs of softening, our business across both our brands in Europe remains strong and growing. Our European business is now 25% larger than pre-COVID levels in local currency with significantly higher profitability. During the second quarter, we continue to achieve healthy year-over-year growth on an underlying basis, adjusting for the impact of our exit from the Russian market and FX, which have been headwinds to our business. For the quarter, we generated mid single-digit growth versus last year adjusting for these impacts.
We're seeing continued momentum in consumers returning to stores with traffic up meaningfully compared to last year. There is some bifurcation in the strength of our business between Northern and Southern Europe. Our Southern European markets continue to show solid business performance while Germany, our largest market in Europe has been most impacted by macro factors. However, we continue to see underlying growth for the region, as I mentioned earlier. Brand relevance for both Tommy and Calvin remains very high among European consumers.
Tommy Hilfiger ranks number two across global lifestyle brands spontaneously mentioned in Europe for both men and women. And Calvin Klein continues to be the runaway leader in underwear, a category that brings huge visibility and constantly engages new consumers into the brand. In addition, we are seeing a positive impact on AURs and gross margins from premium positioning through product elevation. This will remain a key priority for both brands. And demand in future order books across brands remains solid, with the spring 2023 season planned up high single-digits on top of double-digits growth this past year.
Moving on to Asia. We continue to be encouraged by the underlying momentum in our brands across the region, and we are pleased with the progress we made in Asia against the PVH+ Plan. Excluding China, the region demonstrated a 25% year-over-year growth in the second quarter, and this included a 12% headwind for foreign currency. The resurgence of COVID has continued to pressure sales in Greater China, but we are gaining momentum in other markets across the regions, such as Australia, New Zealand and Southeast Asia.
Also in Japan and South Korea, we grew at healthy rates compared to last year. Across the region, we build on the strong underlying performance we have achieved and remain focused on driving the PVH+ Plan execution with a very strong focus on regionally relevant hero products, talent and focus on the biggest consumer moments. Our hero product strategy continues to yield strong results, with sales up over 300% on like-for-like categories with sales outpacing inventory. During 618 [Phonetic], the largest selling period of the quarter in China, sales increased nearly 40% year-over-year, with strength in both Calvin and Tommy.
Hero product activations, including underwear, tees, polos were key features of our sale events and include a strong marketing support, further elevation of interactive content and supplemental live streaming from stores. In addition, e-commerce for Asia grew strong double-digits, with notable strength in China and Korea, driven by key volume driving platforms, such as Tmall, JD, and in addition to rapidly expanding Douyin. E-commerce also remains significantly underpenetrated relative to the sizable growth opportunity we have, which is a big reason for optimism and a key factor in our strategy.
We also increased our investment in our supply chain, including Asia for Asia product and sourcing, getting us closer to the market and closer to the consumer. By leaning into the initiatives and core tenants of the PVH+ Plan in Asia, we continue to have a long runway ahead to grow both our brands in the region. Lastly for North America, as I mentioned earlier, we're seeing the effects of the weaker macroeconomic environment in North America, which is pressuring consumer discretionary spending. And we felt the softening consumer environment most prominently in our wholesale channel, where performance was below our expectations, and our partners have taken a more cautious approach to orders. And while there are some signs of improvements in foreign tourism, the absence of most international tourists from Asia remains a headwind.
We remain in the early phase of our multi-year journey to unlock the significant opportunity we have in this market. However, our focus on winning more with the domestic consumer is already starting to deliver some positive proof points. In our D2C channels, we have driven improvements and positive comps for domestic consumers that continue to improve sequentially. We grew our own and operated stores across both Calvin and Tommy by 8% in the quarter, and traffic trends for our factory stores outpaced the market in July. Improved inventory levels of hero products and enhanced store experience and stronger execution will translate into an even stronger performance over time. As we focus on improving our product offering, we're seeing encouraging results in stores where we have a full assortment of the most important product essentials for our consumers, our hero products.
In Tommy Hilfiger stores, we have been strategically repositioning inventory to high volume test stores, ensuring our best stores have appropriate inventory of the right hero products. And as we pursue this strategy, sales in these stores have shown a 20 percentage point positive improvement compared to the rest of chain and control doors. This shows how our brands and product strategies resonate with consumers when we play in the right product categories with the right hero products in the right stores in the right inventory levels in front of the consumers, then we'll drive profitable sustainable growth. This also provides a roadmap for driving future growth as we resolve supply chain challenges.
Headed into fall and holiday, we're working to scale the most impactful initiatives we have tested. It's important that over time we start to accelerate these green shoots we are growing and build them into how we win with the domestic consumer in North America across both brands and all businesses. Next, I'll share a few key global brand highlights on how we are bringing both brands to life for the consumer beginning with Calvin Klein. Global brand aided awareness remains incredibly high with ongoing strength in consolidation [Phonetic] and high visibility in key markets. From a product perspective for fall, we are building out our hero product franchises in key categories, starting with underwear, where we are expanding our Hero Modern Cotton program with new silhouettes, seasonal colors and sustainable fibers.
We are doing the same with denim and a number of other key categories where we make sure we have the best essentials in the market. As we move into fall, we have structured a multi-month program to strategically strengthen our brand positioning. Just last week, fall '22 images of Jennie Kim were revealed on Instagram, e-commerce and high visibility placements, including Houston Street in New York City. Time to Blackpink's release of their new single, the activation created excitement for the fall campaign and further tapped into the brand's connection to culture. Additional images starring Jennie as well as actor Dominic Fike, actor and activist, Susan Sarandon, models, Lila Moss and Precious Lee and more we launched today, all executed in an iconic unmistakably Calvin way.
In addition, the brand announced Son Heung-Min as brand ambassador for Calvin Klein Underwear in South Korea. Heung-Min will be featured in an exclusive campaign in South Korea for this fall season, wearing one of Calvin Klein's underwear's newest styles, Embossed Icon. The announcement generated significant excitement on own social with Son's post driving higher reach, engagement and comment volume. This is an early example of how we are building out Calvin's talent collaborations across regions and countries.
Moving on to Tommy Hilfiger. We continue to drive enhanced brand equity with consumers, demonstrated by continued strength in brand visibility and relevance across markets. We are driving brand heat and momentum through connections with pop culture. Collaborations with Shawn Mendes, the NBA and the anticipation for our upcoming return to New York Fashion Week have all increased the visibility of Tommy Hilfiger. Our collaboration with Shawn Mendes generated a record-breaking 1.5 billion impressions and the highest global growth in new followers since 2019.
Our Summer 2022 Classics Reborn Campaign featuring Shawn wearing a collection fully made from more sustainable materials drove a meaningful uplift in sales of our full price 1985 Essential business across all regions. We applaud Shawn's courage to speak openly about mental health and his efforts towards healing and recovery. Speaking up is an inspiring act that sets a positive example for his 100 plus million followers. Following his recovery, we look forward to the next exciting phase of our collaboration.
Turning to Tommy Jeans, the brand launched a global capsule collection with the NBA, continuing our focus on creating unique capsules. The collection drove hype and quickly sold out, supported by strong media placement in key outlets, coupled with a successful influencer push with more than 22 million impressions. Looking ahead, in September through the brand's return to New York Fashion Week, we kick off an exciting global brand activation campaign featuring Kate Moss, legendary drummer and producer, Travis Barker, and Grammy-winning artist and Golden Globe and Emmy-nominated actor, Anthony Ramos.
In closing, we are early into the execution of our PVH+ Plan to achieve the 2025 targets we shared at our Investor Day. While we are prudently navigating the current macro challenges, we remain laser-focused on executing our plan to set PVH up to win in the new normal and drive long-term sustainable growth. We already have proof points of our strong execution in Europe and Asia. And with the actions we are taking to strengthen North America and our global supply chain, how we drive efficiencies and invest in growth initiatives, with the current level of macro impact, we will still be well positioned to deliver underlying growth for the remainder of this year and deliver on our long-term commitments. With the power of our two iconic brands and quarter-by-quarter connecting them closer to where the consumer is going, driven by the execution of the five value-creating initiatives of the PVH+ Plan, we are confident in our ability to generate long-term sustainable growth and value for shareholders.
With that, I'll turn the call over to Zac to discuss the financials in more detail.