PVH Corp.
06/05/2026 | Press release | Distributed by Public on 06/05/2026 09:12
Quarterly Report for Quarter Ending May 3, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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We operate our business through the following reportable segments: (i) Europe, the Middle East and Africa ("EMEA"), (ii) Americas, (iii) Asia-Pacific ("APAC"), and (iv) Licensing. Our reportable segments include the brand businesses we operate under our TOMMY HILFIGER and Calvin Klein trademarks, which we own, and Van Heusen, Nike and other trademarks, which we license for certain product categories. References to brand names are to registered and common law trademarks owned by us or licensed to us by third parties and identified by italicizing the brand name. Please see Note 16, "Segment Data," in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for further discussion of our reportable segments.
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OVERVIEW
The following discussion and analysis is intended to help you understand us, our operations and our financial performance. It should be read in conjunction with our consolidated financial statements and the accompanying notes, which are included elsewhere in this report.
We are one of the largest global apparel companies in the world, with a history going back over 140 years. We have been listed on the New York Stock Exchange for over 100 years.
Our revenue was $9.0 billion in 2025, of which over 70% was generated outside of the United States. Our global iconic lifestyle brands, TOMMY HILFIGER and Calvin Klein, together generated over 95% of our revenue.
In addition to the TOMMY HILFIGER and Calvin Klein brands, which are owned, we also license the Van Heusen, Nike and other brands for certain product categories.
PVH+ Plan
The PVH+ Plan is our multiyear, strategic plan to build Calvin Klein and TOMMY HILFIGER into the most desirable lifestyle brands in the world and make PVH the leading brand building group in our sector. Please refer to Item 1 of our Annual Report on Form 10-K for the fiscal year ended February 1, 2026 under the heading "Our Business Strategy" for a description of the plan.
RESULTS OF OPERATIONS
Macroeconomic Environment
Inflation and other macroeconomic pressures, such as tariffs and the Middle East conflict (discussed further below), elevated interest rates and the risk of recession, continue to create a complex and challenging retail environment globally. Macroeconomic factors are having, and may continue to have, a negative impact on consumer demand for apparel and related products globally.
The conflict in the Middle East, which began in March 2026, has resulted in disruption and instability in global supply chains, increased fuel and oil costs, foreign currency volatility, particularly in the euro, and continued volatility and uncertainty in global markets. These and other factors have had, and may continue to have, broader macroeconomic implications that could have a significant impact on our business, including a decline in consumer spending and inventory availability. We are already seeing a broader impact from the conflict on consumer purchasing behavior in Turkey and the greater European region, including the effect of increased fuel prices, which is causing a decline in consumer traffic to stores and a more promotional environment. We have also started to experience an impact to wholesale demand in the direct Middle East region (excluding Turkey). Approximately 1% and 7% of our revenue and income before interest and taxes (excluding goodwill and other intangible asset impairment charges), respectively, were generated in the direct Middle East region (excluding Turkey) in 2025. The length, scope and intensity of the conflict remain uncertain. As a result, there continues to be significant uncertainty regarding the extent to which the conflict and its broader macroeconomic implications will impact our business, financial condition and results of operations for the remainder of 2026. Our 2026 outlook currently assumes estimated negative prolonged effects from the conflict in the Middle East and its broader macroeconomic pressures.
Beginning in the first quarter of 2025, the United States government announced additional tariffs on goods imported into the United States primarily under the International Emergency Economic Powers Act ("IEEPA"), with incremental tariffs on
products imported from most countries and economic unions, and the potential for further increases and revisions or terminations to existing trade agreements. In response, some countries and economic unions announced retaliatory tariffs on United States exports and other trade restrictions. In February 2026, the U.S. Supreme Court ruled that the IEEPA tariffs imposed were unconstitutional. In response to that decision, an executive order was issued imposing tariffs pursuant to Section 122 of the Trade Act of 1974 for 150 days, effective on February 24, 2026.
In March 2026, the U.S. Court of International Trade directed U.S. Customs and Border Protection ("CBP") to refund IEEPA tariffs that were previously collected, including applicable interest. CBP launched a tariff refund program in April 2026 to facilitate the refunds, and we submitted claims for IEEPA tariffs that have been previously paid. We elected to apply a gain contingency model in accordance with ASC 450-30, "Gain Contingencies" to account for potential recoveries of previously paid tariffs under which a gain will not be recognized until realized or realizable. As of May 3, 2026, we did not record a receivable related to potential tariff refunds as the amount and timing of any recoveries was uncertain. As of the date of this report, we have received $27 million in cash payments, plus interest, subsequent to the end of the quarter.
Further trade policy actions are unclear, including whether additional tariffs or other actions may be imposed, modified, or suspended. The Office of the U.S. Trade Representative has conducted and is conducting investigations under Section 301 of the Trade Act of 1974 that are expected to result in new tariffs being implemented in the second or third quarter of 2026. These factors have led to significant volatility and uncertainty in global markets. We continue to analyze the impact of incremental tariffs on our business and are taking steps to mitigate our tariff exposure to the extent possible. Mitigation strategies have included, and may continue to more significantly include, further sourcing optimization, negotiations with our vendors, internal efficiencies to drive cost savings, optimizing our discount strategies and pricing actions.
Our outlook assumes that the current U.S. tariff rates on goods coming into the U.S. will continue through July 2026 and then rates will increase to an average that approximates the levels that were in place prior to the U.S. Supreme Court ruling. We currently expect an estimated net negative impact on our full year 2026 gross profit related to the negative impact of tariffs on goods coming into the United States including a gross impact of approximately $195 million and a partially offsetting impact from planned mitigation actions. However, the duration, magnitude and scope of any additional tariffs are difficult to predict, along with the extent (if any) to which we will be able to offset the impact through our mitigation efforts. Our full year outlook also reflects an expected benefit to cost of goods sold of approximately $100 million related to tariff refunds, which are currently expected to be recorded in the second quarter of 2026. The amount and timing of recovery remains uncertain and dependent on regulatory and administrative processes outside of our control.
Outlook Uncertainty
There is significant uncertainty with respect to the conflict in the Middle East, global trade policies (including tariffs) and the related impacts of each on the broader global macroeconomic environment, as well as the impact of inflation and other macroeconomic factors, and foreign currency volatility. Our revenue, earnings and cash flows from operations in 2026 may be subject to material change as a result of these and other macroeconomic factors.
Operations Overview
We generate net sales from (i) the wholesale distribution to traditional retailers (both for stores and digital operations), pure play digital commerce retailers, franchisees, licensees and distributors of branded sportswear (casual apparel), jeanswear, performance apparel, intimate apparel, underwear, swimwear, dress shirts, handbags, accessories, footwear and other related products under owned and licensed trademarks, and (ii) the sale of certain of these products through (a) approximately 1,350 Company-operated free-standing store locations worldwide under our TOMMY HILFIGER and Calvin Klein trademarks, (b) approximately 1,450 Company-operated shop-in-shop/concession locations worldwide under our TOMMY HILFIGER and Calvin Klein trademarks, and (c) digital commerce sites worldwide, under our TOMMY HILFIGER and Calvin Klein trademarks. Additionally, we generate revenue from fees for licensing the use of our TOMMY HILFIGER and Calvin Klein trademarks.
The following actions, transactions and events have impacted or will impact our results of operations and the comparability among the periods, including our full year 2026 expectations as compared to the full year 2025, as discussed below:
•We completed the sale of our owned warehouse and distribution center located in Jonesville, NC on May 11, 2026, for net proceeds of $38 million. We will record a pre-tax gain of $25 million in the second quarter of 2026 in connection with the closing of the transaction, which represents the excess of the net proceeds over the carrying value of the assets on the date of the sale. Please see Note 4, "Assets Held for Sale," in the Notes to Consolidated Financial Statements
included in Part I, Item I of this report for further discussion.
•We embarked on a multi-year initiative beginning in 2024 to simplify our operating model by centralizing certain processes and improving systems and automation to drive more efficient and cost-effective ways of working across the organization (the "Growth Driver 5 Actions"). The initiative has resulted in annualized cost savings of over $200 million, while continuing to make targeted investments to drive our strategic initiatives. While the actions to support this initiative were largely completed by the end of 2025, there have been certain actions taken and additional actions that we plan to take under this initiative, on a limited basis, during 2026. Such actions include the sale of our owned warehouse and distribution center located in Jonesville, NC, as discussed above. We recorded pre-tax costs of $7 million during the first quarter of 2026 in connection with this initiative consisting principally of severance. We recorded pre-tax costs of $93 million during 2025 in connection with this initiative consisting principally of severance. We expect additional actions in 2026, however the net impact of these remaining actions cannot be quantified at this time. Please see Note 14, "Exit Activity Costs," in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for further discussion.
•We recorded pre-tax noncash goodwill and other intangible impairment charges of $480 million in the first quarter of 2025 in conjunction with interim goodwill and other intangible assets impairment tests. The impairments were primarily due to a significant increase in discount rates. Please see Note 5, "Goodwill and Other Intangible Assets," in the Notes to Consolidated Financial Statements included in Part I, Item I of this report for further discussion.
We extended in 2022 most of our licensing agreements with G-III Apparel Group, Ltd. for Calvin Klein and TOMMY HILFIGER in the United States and Canada, largely pertaining to the women's apparel product categories sold at wholesale in North America. These agreements now have staggered expirations through 2026, the first of which occurred at the end of calendar 2023. We have been directly operating a significant portion of the businesses for the previously licensed product categories, and we intend to continue to directly operate a significant portion of these businesses as the license agreements expire, with the remainder re-licensed to other third parties. The expiration of these licenses and the transition of previously licensed women's product categories in house resulted in a 1% net increase to our revenue and an approximately 50 basis point decline in our gross margin in 2025. In 2026, the transition of previously licensed product categories is expected to result in a less than 1% net increase to our revenue and an approximately 50 basis point decline in our gross margin.
Our Tommy Hilfiger and Calvin Klein businesses each have substantial international components that expose us to significant foreign exchange risk. Our results of operations in local foreign currencies are translated into United States dollars using an average exchange rate over the representative period. Accordingly, our results of operations are unfavorably impacted during times of a strengthening United States dollar against the foreign currencies in which we generate significant revenue and earnings and favorably impacted during times of a weakening United States dollar against those currencies. Over 70% of our 2025 revenue was subject to foreign currency translation. We currently expect our 2026 revenue and net income to increase by approximately $125 million and $20 million, respectively, as compared to 2025 due to the impact of foreign currency translation.
There also is a transactional impact of foreign exchange because we have foreign subsidiaries that purchase inventory in a currency other than their functional currency. We use foreign currency forward contracts to hedge against a portion of the exposure related to this transactional impact. We enter into these contracts up to 15 months in advance for a portion of the projected inventory purchases and may enter into incremental contracts leading up to the time the inventory purchases occur. The impact of foreign currency fluctuations on the cost of inventory purchases covered by these contracts is then realized in our results of operations as the underlying inventory hedged by the contracts is sold. The transactional impact of foreign currency on our 2026 gross margin as compared to 2025 is expected to be favorable by approximately 50 basis points.
We also have exposure to changes in foreign currency exchange rates related to our €1.125 billion aggregate principal amount of senior notes that are held in the United States. The strengthening of the United States dollar against the euro would require us to use a lower amount of our cash flows from operations to pay interest and make long-term debt repayments, whereas the weakening of the United States dollar against the euro would require us to use a greater amount of our cash flows from operations to pay interest and make long-term debt repayments. We designated the par value of these senior notes issued by PVH Corp., a U.S.-based entity, as net investment hedges of our investments in certain of our foreign subsidiaries that use the euro as their functional currency. In addition, we entered into multiple fixed-to-fixed cross-currency swap contracts in 2023, with a maturity date of July 2025, which, in aggregate, economically converted our $500 million principal amount of 4 5/8% senior notes due July 2025 from a United States dollar-denominated obligation to a euro-denominated obligation of €457 million. In July 2025, we completed a transaction to effectively blend and extend those cross-currency swaps with new fixed-to-fixed cross-currency swap contracts maturing in July 2027 and July 2028. We also designated these cross-currency swap contracts as net investment hedges of our investments in certain of our foreign subsidiaries that use the euro as their functional currency. As a result, the remeasurement of these foreign currency borrowings and cross-currency swaps at the end of each
period is recorded in equity. Please see Note 9, "Derivative Financial Instruments," in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for further discussion.
Investigation by China's Ministry of Commerce
In September 2024, China's Ministry of Commerce ("MOFCOM") announced that it had initiated an investigation into our business under the Provisions of the List of Unreliable Entities ("UEL Provisions"). In October 2024, we submitted a written response to MOFCOM and, in December 2024, we submitted a supplemental response. In January 2025, MOFCOM issued a preliminary finding that PVH Corp. had violated normal market trading principles and in February 2025, it announced its determination and placed PVH Corp. on the List of Unreliable Entities ("UEL"). We do not know if or when MOFCOM will implement any measures as a result of the listing or what they will be if any are imposed. Approximately 6% and 20% of our revenue and income before interest and taxes (excluding goodwill and other intangible asset impairment charges), respectively, were generated in China in 2025. Furthermore, if, as a result of any such measures, it is necessary for us to cease certain or all operations in China, it may result in charges related to excess inventory and difficulty collecting trade receivables, among other things. We may also incur material non-cash impairment charges if we are unable to recover the carrying value of our indefinite-lived intangible assets and long-lived assets. Please see our risk factor "China's Ministry of Commerce ("MOFCOM") conducted an investigation into our business which resulted in PVH Corp. being placed on the List of Unreliable Entities ("UEL") and could result in fines or restrictions on our ability to do business in China, which could have a material adverse effect on our revenue and results of operations" in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended February 1, 2026 for additional information.
SEASONALITY
Our business generally follows a seasonal pattern. Our wholesale businesses tend to generate higher levels of sales in the first and third quarters, while our direct-to-consumer businesses tend to generate higher levels of sales in the fourth quarter. Licensing revenue tends to be earned somewhat evenly throughout the year, although the third quarter tends to have the highest level of revenue due to higher sales by licensees in advance of the holiday selling season. We expect this seasonal pattern will generally continue. Working capital requirements vary throughout the year to support these seasonal patterns and business trends.
Due to the above seasonal factors, our results of operations for the thirteen weeks ended May 3, 2026 are not necessarily indicative of those for a full fiscal year.
Thirteen Weeks Ended May 3, 2026 Compared With Thirteen Weeks Ended May 4, 2025
The following table summarizes our consolidated statements of operations for the first quarter of 2026 compared to the prior year period:
| Thirteen Weeks Ended | |||||||||||||||||||||||
| May 3, | May 4, | % / bps | |||||||||||||||||||||
| (Dollars in Millions) | 2026 | 2025 | $ change | change | |||||||||||||||||||
| Revenue | $ | 2,025 | $ | 1,984 | $ | 42 | 2 | % | |||||||||||||||
| Gross profit | 1,186 | 1,162 | 25 | 2 | % | ||||||||||||||||||
| % of revenue | 58.6 | % | 58.6 | % | - | ||||||||||||||||||
| Selling, general and administrative expenses | 1,074 | 1,024 | 51 | 5 | % | ||||||||||||||||||
| % of revenue | 53.1 | % | 51.6 | % | 150 bps | ||||||||||||||||||
| Goodwill and other intangible asset impairments | - | 480 | (480) | NM | |||||||||||||||||||
| Non-service related pension and postretirement cost | (1) | (1) | - | (20) | % | ||||||||||||||||||
| Equity in net income of unconsolidated affiliates | 13 | 10 | 3 | 27 | % | ||||||||||||||||||
| Income (loss) before interest and taxes | 124 | (332) | 457 | NM | |||||||||||||||||||
| % of revenue | 6.1 | % | (16.7) | % | NM | ||||||||||||||||||
| Interest expense, net | 16 | 17 | (2) | (9) | % | ||||||||||||||||||
| Income (loss) before taxes | 109 | (350) | 458 | NM | |||||||||||||||||||
| Income tax expense (benefit) | 21 | (305) | (325) | NM | |||||||||||||||||||
| Effective tax rate | 18.9 | % | 87.2 | % | NM | ||||||||||||||||||
| Net income (loss) | $ | 88 | $ | (45) | $ | 133 | NM | ||||||||||||||||
NM - not meaningful
Total Revenue
Total revenue in the first quarter of 2026 was $2.025 billion compared to $1.984 billion in the first quarter of the prior year. The overall increase in revenue of $42 million, or 2%, included a positive impact of $87 million, or 4%, related to foreign currency translation.
Revenue by Segment:
•EMEA - Revenue increased $18 million, or 2%, compared to the prior year period, including a positive impact of $67 million, or 7%, related to foreign currency translation. Excluding the impact of foreign currency translation, the decrease in revenue was driven by declines in both the direct-to-consumer and wholesale businesses, including softer consumer demand due to the prolonged effects from the conflict in the Middle East and its broader macroeconomic pressures.
•Americas - Revenue decreased $6 million, or 1%, compared to the prior year period, including a positive impact of $5 million, or 1%, related to foreign currency translation, as growth in the direct-to-consumer business was more than offset by a decrease in the wholesale business. The decrease in wholesale revenue included (i) a decrease in the first quarter related to the overall impact of a shift in the timing of wholesale shipments from the first half of the year to the second half as compared to the prior year period, partially offset by (ii) an increase driven by the transition of previously licensed women's product categories in house.
•APAC - Revenue increased $35 million, or 10%, compared to the prior year period, including a positive impact of $15 million, or 4%, related to foreign currency translation. Excluding the impact of foreign currency translation, the increase in revenue included an approximately 4% favorable impact from the timing of Lunar New Year, which occurred in the first quarter of 2026 but did not occur in the first quarter of 2025. An increase in revenue in the direct-to-consumer business was partially offset by a decrease in wholesale business.
•Licensing - Revenue decreased $7 million, or 7%, compared to the prior year period, primarily due to the license transitions in North America.
Revenue by Brand:
•Tommy Hilfiger - Revenue increased 3% compared to the prior year period including a 5% positive foreign currency impact.
•Calvin Klein - Revenue increased 1% compared to the prior year period, including a 4% positive foreign currency impact.
Revenue by Channel:
•Direct-to-consumer - Revenue increased 6% compared to the prior year period including a 4% positive foreign currency impact.
◦Owned and operated retail stores - Revenue increased 5% compared to the prior year period, including a 4% positive foreign currency impact. Excluding the impact of foreign currency translation, revenue growth in Americas and APAC was partially offset by a decline in EMEA.
◦Owned and operated digital commerce - Revenue increased 11% compared to the prior year period, including a 4% positive foreign currency impact, with revenue increasing across all regions.
•Wholesale - Revenue was flat compared to the prior year period, including a 5% positive foreign currency impact. Excluding the impact of foreign currency translation, revenue decreased in all regions.
We currently expect revenue for the full year 2026 to be approximately flat compared to 2025. Excluding the impact of foreign currency translation, we currently expect revenue for the full year 2026 to decrease slightly.
Gross Profit
Gross profit is calculated as total revenue less cost of goods sold and gross margin is calculated as gross profit divided by total revenue. Included as cost of goods sold are costs associated with the production and procurement of product, such as inbound freight costs, purchasing and receiving costs, inspection costs and tariffs and other import costs. Also included as cost of goods sold are the amounts recognized on foreign currency forward contracts as the underlying inventory hedged by such forward exchange contracts is sold. Warehousing and distribution expenses are included in selling, general and administrative ("SG&A") expenses. Revenue from licensing the use of our trademarks is included in gross profit because there is no cost of goods sold associated with such revenue. As a result, our gross profit may not be comparable to that of other entities.
Gross profit in the first quarter of 2026 was $1.186 billion, or 58.6% of total revenue, compared to $1.162 billion, or 58.6% of total revenue, in the first quarter of the prior year. Gross profit as a percentage of revenue was flat compared to the prior year period and included (i) a negative impact of the tariffs on goods coming into the United States, (ii) an increase in promotional selling as compared to the prior year period, and (iii) a decline due to the transition of previously licensed product categories into our directly operated wholesale business, as revenue through our wholesale distribution channel carries lower gross margins. These declines were offset by the favorable impacts of (i) tariff mitigation actions, (ii) lower product costs, including the favorable transactional impact of foreign exchange on our international businesses, particularly our European business and (iii) a change in the revenue mix between our direct-to-consumer distribution channel and our wholesale distribution channel, as our direct-to-consumer distribution channel was a larger proportion of total revenue and carries higher gross margins.
We currently expect that gross margin for the full year 2026 will increase by approximately 100 basis points compared to 2025, with increases particularly impacting the second quarter despite (i) the assumed approximately 215 basis point gross negative impact in 2026 of the tariffs on goods coming into the United States, compared to the approximately 80 basis point gross negative impact in 2025, (ii) the approximately 50 basis point decline expected in connection with the above-mentioned transition of previously licensed product categories into our directly operated wholesale business, and (iii) an increase in promotional selling as compared to the prior year. These decreases are expected to be more than offset by (i) an approximately 100 basis point impact related to the IEEPA tariff refunds, which are expected to be recorded in the second quarter of 2026, (ii) the impact of planned mitigation actions to address the impacts of tariff costs, (iii) lower product costs, including the approximately 50 basis point favorable transactional impact of foreign exchange on our international businesses as discussed above, and (iv) the absence of higher freight costs and incremental discounts provided to customers to address the impact of Calvin Klein product delivery delays in 2025.
SG&A Expenses
SG&A expenses in the first quarter of 2026 were $1.074 billion, or 53.1% of total revenue, compared to $1.024 billion, or 51.6% of total revenue, in the first quarter of the prior year. The 150 basis point increase was primarily driven by (i) an increase in strategic investments to fuel growth, including increased marketing, (ii) a change in the revenue mix between our direct-to-consumer distribution channel and our wholesale distribution channel, as our direct-to-consumer distribution channel was a larger proportion of total revenue and carries higher SG&A expenses as a percentage of revenue and (iii) the impact from the deleveraging of expenses partially offset by (i) cost savings resulting from the Growth Driver 5 Actions and (ii) a net decrease in restructuring costs incurred in the first quarter of 2026 in connection with the Growth Driver 5 Actions compared to the prior year period.
We currently expect that SG&A expenses as a percentage of revenue for the full year 2026 will be relatively flat compared to 2025 with increases in SG&A expenses as a percentage of revenue more significantly impacting the first half of 2026, including higher marketing spend. SG&A expenses as a percentage of revenue for the full year are expected to include an approximately 100 basis point decrease resulting from a decrease in restructuring costs incurred in 2026 as compared to 2025 in connection with the Growth Driver 5 actions. This decrease is expected to be offset by the net impact of an increase in strategic investments to fuel growth, including increased marketing, and the impact from the deleveraging of expenses partially offset by the cost savings resulting from the Growth Driver 5 actions. Our expectation for 2026 includes the restructuring costs incurred in the first quarter of 2026 in connection with the Growth Driver 5 actions but does not include any further restructuring costs beyond the first quarter. We expect additional actions in 2026, however the impact of these remaining actions cannot be quantified at this time.
Goodwill and Other Intangible Asset Impairments
We recorded noncash impairment charges of $480 million during the first quarter of 2025 in conjunction with interim goodwill and other intangible assets impairment tests, including $426 million related to goodwill and $54 million related to our Australia reacquired perpetual license rights, which were primarily due to a significant increase in discount rates. Please see Note 5, "Goodwill and Other Intangible Assets," in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for further discussion of these impairments.
Non-Service Related Pension and Postretirement Cost
Non-service related pension and postretirement cost was $1 million in each of the first quarters of 2026 and 2025. Please see Note 6, "Retirement and Benefit Plans," in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for further discussion.
Non-service related pension and postretirement cost recorded throughout the year is calculated using actuarial valuations that incorporate assumptions and estimates about financial market, economic and demographic conditions. Differences between estimated and actual results give rise to gains and losses that are recorded immediately in earnings, generally in the fourth quarter of the year, which can create volatility in our results of operations. We currently expect that non-service related pension and postretirement income for the full year 2026 will be approximately $3 million. However, our expectation of 2026 non-service related pension and postretirement income does not include the impact of an actuarial gain or loss. As a result of the volatility in the financial markets, there is significant uncertainty with respect to the actuarial gain or loss we may record on our retirement plans in 2026. We may record a significant actuarial gain or loss in 2026 if there is a significant increase or decrease in discount rates, respectively, or if there is a difference between the actual and expected return on plan assets. As such, our actual 2026 non-service related pension and postretirement income may be significantly different than our projections.
Equity in Net Income of Unconsolidated Affiliates
The equity in net income of unconsolidated affiliates was $13 million in the first quarter of 2026 compared to $10 million in the first quarter of the prior year. These amounts relate to our share of income (loss) from (i) our joint venture for the TOMMY HILFIGER and Calvin Klein brands and certain licensed trademarks in Mexico, (ii) our joint venture for the TOMMY HILFIGER and Calvin Klein brands in India, (iii) our joint venture for the TOMMY HILFIGER brand in Brazil and (iv) our PVH Legwear LLC joint venture for the TOMMY HILFIGER and Calvin Klein brands and certain licensed trademarks in the United States and Canada. The equity in net income of unconsolidated affiliates for the first quarter of 2026 increased as
compared to the prior year period primarily due to an increase in income attributable to our joint venture in Mexico and our PVH Legwear LLC joint venture. Our investments in the joint ventures are being accounted for under the equity method of accounting.
We currently expect that our equity in net income of unconsolidated affiliates for full year 2026 will be relatively flat as compared to $45 million in 2025.
Income (Loss) Before Interest and Taxes
Income (loss) before interest and taxes in the first quarter of 2026 was $124 million, or 6.1%, of total revenue, compared to $(332) million, or (16.7)% of total revenue, in the first quarter of the prior year, and included changes in our segments' income (loss) before interest and taxes and other reconciling items as follows:
•EMEA - Income before interest and taxes in the first quarter of 2026 was $152 million, or 16.1% of total revenue, compared to $149 million, or 16.1% of total revenue in the first quarter of the prior year. A 30 basis point increase in gross margin was offset by a 30 basis point increase in SG&A expenses as a percentage of revenue. The increase in SG&A expenses as a percentage of revenue includes (i) an increase in marketing and (ii) a deleveraging of expenses resulting from the decrease in revenue excluding the impact of foreign currency translation partially offset by (iii) savings resulting from Growth Driver 5 Actions.
•Americas - Income before interest and taxes in the first quarter of 2026 was $51 million, or 8.4% of total revenue, compared to $61 million, or 10.0% of total revenue in the first quarter of the prior year. The 160 basis point decrease was primarily driven by a 190 basis point gross margin decline, inclusive of the negative impact of the increase in tariffs on goods coming into the United States partially offset by tariff mitigation actions. SG&A expenses as a percentage of revenue decreased 40 basis points due to savings resulting from the Growth Driver 5 Actions partially offset by an increase in marketing.
•APAC - Income before interest and taxes in the first quarter of 2026 was $89 million, or 23.1% of total revenue, compared to $79 million, or 22.5% of total revenue in the first quarter of the prior year. The 60 basis point increase was primarily driven by a 160 basis point increase in gross margin partially offset by a 100 basis point increase in SG&A expenses as a percentage of revenue, including an increase in marketing.
•Licensing - Income before interest and taxes in the first quarter of 2026 was $75 million, a 7% decrease compared to $81 million in the prior year period, primarily due to the license transitions in North America.
•Corporate and other costs were $236 million in the first quarter of 2026, an increase of $27 million compared to $209 million in the prior year period, primarily due to (i) an increase in marketing and other brand-building investments and (ii) an increase in centrally managed information technology and support costs resulting from the actions taken in conjunction with the Growth Driver 5 initiative to move to a single global technology stack and streamline and optimize our support functions globally. Overall, the Growth Driver 5 initiative drove significant savings in the first quarter with savings in the regional segments more than offsetting the increase in Corporate information technology and support costs.
•Restructuring and other items included $7 million of restructuring costs in the first quarter of 2026 in connection with the Growth Driver 5 Actions, consisting principally of severance. Restructuring and other items included $493 million of expenses in the first quarter of the prior year including (i) $480 million of noncash goodwill and other intangible asset impairment charges and (ii) $13 million of restructuring costs in connection with the Growth Driver 5 Actions, consisting principally of severance.
Interest Expense, Net
Interest expense, net decreased to $16 million in the first quarter of 2026 from $17 million in the first quarter of the prior year.
Interest expense, net for the full year 2026 is currently expected to be approximately $75 million as compared to $79 million in 2025.
Income Tax Expense (Benefit)
The effective income tax rate for the first quarter of 2026 was 18.9% compared to 87.2% in the first quarter of the prior year.
The effective income tax rate for the first quarter of 2026 reflected a $21 million income tax expense recorded on $109 million of pre-tax income. The effective income tax rate for the first quarter of 2025 reflected a $(305) million income tax benefit recorded on $(350) million of pre-tax losses.
The effective income tax rate for the first quarter of 2026 was lower than the prior year period primarily due to the impact of the $480 million pre-tax noncash goodwill and other intangible asset impairment charges in the prior year period, which were non-deductible for tax purposes and factored into our annualized effective income tax rate in 2025, and resulted in a 70.5% increase to our effective income tax rate for the first quarter 2025.
We currently expect that our effective income tax rate for the full year 2026 will be in a range of 22% to 23%.
We file income tax returns in more than 40 international jurisdictions each year. Our tax rate is influenced by several factors, including the mix of international and domestic pre-tax earnings, specific discrete transactions and events, new regulations, audits by tax authorities, and new information received. These elements may lead to adjustments in both our estimate for uncertain tax positions and the overall effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Summary and Trends
Cash and cash equivalents at May 3, 2026 was $593 million, a decrease of $109 million from $701 million at February 1, 2026. We ended the first quarter of 2026 with approximately $1.4 billion of borrowing capacity available under our various debt facilities. The seasonality of our business results in significant fluctuations in our cash balance during our fiscal year due, in part, to the timing of inventory purchases and peak sales periods.
Cash flow for the full year 2026 will be impacted by various factors, including, as discussed further below in this "Liquidity and Capital Resources" section, (i) expected common stock repurchases under the stock repurchase program of at least $300 million, (ii) projected capital expenditures of approximately $250 million, (iii) net proceeds of $38 million received in the second quarter of 2026 in connection with the sale of the Jonesville, NC warehouse and distribution center, (iv) mandatory long-term debt repayments on our term loan under our 2022 senior unsecured credit facilities of approximately $13 million, subject to exchange rate fluctuations, and (v) offsetting impacts from cash inflows of approximately $100 million for refunds related to IEEPA tariffs previously paid and an expected reduction in cash due to the prolonged effects from the conflict in the Middle East.
As of May 3, 2026, $267 million of cash and cash equivalents was held by international subsidiaries. Our intent is to reinvest indefinitely substantially all of our historical earnings in foreign subsidiaries outside of the United States in jurisdictions which we would expect to incur material tax costs upon the distribution of such amounts. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation.
Operations
Cash used by operating activities was $46 million in the first quarter of 2026 compared to $71 million in the first quarter of 2025. The decrease in cash used by operating activities as compared to the prior year period was primarily driven by changes in our working capital, including changes in inventories net of the related change in payables and a decrease in trade receivables in the current year period as compared to an increase in trade receivables in the prior year period, primarily driven by a shift in the timing of our wholesale revenue.
Supply Chain Finance Program
We have a voluntary supply chain finance program (the "SCF program") administered through a third party platform that provides our inventory suppliers with the opportunity to sell their receivables due from us to participating financial institutions in advance of the invoice due date, at the sole discretion of both the suppliers and the financial institutions. We are not a party to the agreements between the suppliers and the financial institutions and have no economic interest in a supplier's decision to sell a receivable. Our payment obligations, including the amounts due and payment terms, which generally do not exceed 90 days, are not impacted by suppliers' participation in the SCF program. Please see Note 18, "Other Comments," in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for further discussion of our SCF program.
Investments in Unconsolidated Affiliates
We received dividends of $25 million and $26 million from our investments in unconsolidated affiliates during the first quarters of 2026 and 2025, respectively. These dividends are included in our net cash used by operating activities in our Consolidated Statements of Cash Flows for the respective period.
Sale of Warehouse and Distribution Center
We completed the sale of our owned warehouse and distribution center located in Jonesville, NC during the second quarter of 2026, for net proceeds of $38 million. Please see Note 4, "Assets Held for Sale," in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for further discussion.
Capital Expenditures
Our capital expenditures in the first quarter of 2026 were $40 million compared to $27 million in the first quarter of 2025. We currently expect that capital expenditures for the full year 2026 will be approximately $250 million as compared to $142 million in 2025 and will primarily consist of (i) investments in new stores and store renovations and (ii) investments, upgrades and enhancements in our information technology platforms, systems and infrastructure worldwide.
Dividends
Cash dividends paid on our common stock totaled $2 million in each of the first quarters of 2026 and 2025.
Additionally, we declared a $0.0375 per share dividend on our common stock in the first quarter of 2026 to be paid in the second quarter of 2026. We currently project that cash dividends paid on our common stock in 2026 will be approximately $7 million.
Acquisition of Treasury Shares
The Board of Directors has authorized over time beginning in 2015 an aggregate $5 billion stock repurchase program through July 30, 2028. Repurchases under the program may be made from time to time over the period through open market purchases, accelerated share repurchase programs, privately negotiated transactions or other methods, as we deem appropriate. Purchases are made based on a variety of factors, such as price, corporate requirements and overall market conditions, applicable legal requirements and limitations, trading restrictions under our insider trading policy and other relevant factors. The program may be modified by the Board of Directors, including to increase or decrease the repurchase limitation or extend, suspend or terminate the program at any time, without prior notice. Our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act of 2022.
On April 1, 2025, we entered into accelerated share repurchase ("ASR") agreements with financial institutions to repurchase an aggregate of $500 million of our shares of common stock under our existing $5 billion stock repurchase authorization. We paid $500 million to the financial institutions and received initial deliveries of an aggregate of approximately 4.6 million shares of our common stock at a price of $76.43 per share, the closing share price of our common stock on April 1, 2025. The value of the initial shares delivered represented approximately 70% of the aggregate purchase price. The ASR agreements were funded with cash on hand and $115 million of short-term borrowings. During the third quarter of 2025, the ASR agreements were settled, and we received an aggregate of approximately 2.3 million of additional shares of our common stock. The total number of shares purchased under the ASR agreements was approximately 6.9 million shares at a price paid per share of $72.44, which was based on the daily volume-weighted average price of our common stock over the term of the ASR agreements, less a discount, and subject to customary adjustments pursuant to the terms and conditions of the ASR agreements. The ASR agreements were accounted for as a share purchase transaction and forward stock purchase agreement indexed to our common stock.
During the first quarter of 2025, we additionally purchased 0.8 million shares (all prior to the execution of the ASR agreements) of our common stock under the program in open market transactions for $61 million. Excise taxes of $4 million were excluded from the share repurchases for the first quarter of 2025, including in respect of the initial deliveries of the shares repurchased under the ASR agreements. We did not purchase any of our common stock under the program during the first quarter of 2026. As of May 3, 2026, the repurchased shares were held as treasury stock and $1.212 billion of the authorization remained available for future share repurchases, excluding excise taxes, as the excise taxes do not reduce the authorized amount remaining.
Treasury stock activity also includes shares that were withheld in conjunction with the settlement of restricted stock units and performance share units to satisfy tax withholding requirements.
Financing Arrangements
Our capital structure was as follows:
| (In millions) | 5/3/26 | 2/1/26 | 5/4/25 | ||||||||||||||
| Short-term borrowings | $ | - | $ | - | $ | 115 | |||||||||||
| Current portion of long-term debt | 13 | 13 | 512 | ||||||||||||||
| Finance lease obligations | 2 | 3 | 5 | ||||||||||||||
| Long-term debt | 2,269 | 2,291 | 1,720 | ||||||||||||||
| Stockholders' equity | 4,895 | 4,792 | 4,618 | ||||||||||||||
In addition, we had $593 million, $701 million and $191 million of cash and cash equivalents as of May 3, 2026, February 1, 2026 and May 4, 2025, respectively.
Short-Term Borrowings
We have the ability to draw revolving borrowings under the senior unsecured credit facilities discussed below in the section entitled "2022 Senior Unsecured Credit Facilities." We had no revolving borrowings outstanding under these facilities as of May 3, 2026.
Additionally, we have the ability to borrow under short-term lines of credit, overdraft facilities and short-term revolving credit facilities denominated in various foreign currencies. These facilities provided for borrowing capacity of up to $236 million based on exchange rates in effect on May 3, 2026 and are utilized primarily to fund working capital needs. We had no borrowings outstanding under these facilities as of May 3, 2026.
Commercial Paper
We have the ability to issue unsecured commercial paper notes with maturities that vary but do not exceed 397 days from the date of issuance primarily to fund working capital needs. We had no borrowings outstanding under the commercial paper note program as of May 3, 2026.
Finance Lease Obligations
Our cash payments for finance lease liabilities totaled $1 million in each of the first quarters of 2026 and 2025.
2022 Senior Unsecured Credit Facilities
On December 9, 2022, we entered into senior unsecured credit facilities (the "2022 facilities"). The 2022 facilities consist of (a) a €441 million euro-denominated Term Loan A facility, (b) a $1.150 billion United States dollar-denominated multicurrency revolving credit facility, which is available in (i) United States dollars, (ii) Australian dollars (limited to A$50 million), (iii) Canadian dollars (limited to C$70 million), or (iv) euros, yen, pounds sterling, Swiss francs or other agreed foreign currencies (limited to €250 million), and (c) a $50 million United States dollar-denominated revolving credit facility available in United States dollars or Hong Kong dollars. The 2022 facilities are due on December 9, 2027.
We made payments of $3 million on our term loan under the 2022 facilities in each of the first quarters of 2026 and 2025. We currently expect to make total long-term debt repayments of approximately $13 million, subject to exchange rate fluctuations, for the full year 2026.
4 5/8% Senior Notes Due 2025
We had outstanding $500 million principal amount of 4 5/8% senior notes due July 10, 2025. We repaid these notes upon maturity utilizing the net proceeds from the issuance of the $500 million principal amount of 5 1/2% senior notes due June 13, 2030 together with other available funds, as discussed below.
3 1/8% Euro Senior Notes Due 2027
We have outstanding €600.0 million principal amount of 3 1/8% senior notes due December 15, 2027. We may redeem some or all of these notes at any time prior to September 15, 2027 by paying a "make whole" premium plus any accrued and unpaid interest. In addition, in advance of maturity, we may redeem the remaining outstanding notes beginning on September 15, 2027 at their principal amount plus any accrued and unpaid interest.
4 1/8% Euro Senior Notes Due 2029
We have outstanding €525 million principal amount of 4 1/8% senior notes due July 16, 2029. We may redeem some or all of these notes at any time prior to April 16, 2029 by paying a "make whole" premium, plus any accrued and unpaid interest. In addition, in advance of maturity, we may redeem the remaining outstanding notes beginning on April 16, 2029, or all of these notes at any time in the event of certain developments affecting taxation, at their principal amount plus any accrued and unpaid interest.
5 1/2% Senior Notes Due 2030
We issued on June 13, 2025, $500 million principal amount of 5 1/2% senior notes due June 13, 2030. We paid $6 million of fees in connection with the issuance of the notes, which are being amortized over the term of the notes.
We utilized the net proceeds of the offering, together with other available funds, to repay the $500 million principal amount of 4 5/8% senior notes due July 10, 2025, as discussed above.
We may redeem some or all of these notes at any time prior to May 13, 2030 by paying a "make whole" premium, plus any accrued and unpaid interest. In addition, in advance of maturity, we may redeem the remaining outstanding notes beginning on May 13, 2030 at their principal amount plus any accrued and unpaid interest.
Our financing arrangements contain financial and non-financial covenants and customary events of default. As of May 3, 2026, we were in compliance with all applicable financial and non-financial covenants under our financing arrangements.
As of May 3, 2026, our issuer credit was rated BBB by Standard & Poor's with a stable outlook and our corporate credit was rated Baa3 by Moody's with a stable outlook, and our commercial paper was rated A-2 by Standard & Poor's and P-3 by Moody's. In assessing our credit strength, we believe that both Standard & Poor's and Moody's considered, among other things, our capital structure and financial policies, our consolidated balance sheet, our historical acquisition activity and other financial information, including our revenue growth and operating margin, as well as industry and other qualitative factors.
Please see Note 7, "Debt," in the Notes to Consolidated Financial Statements included in Part I, Item 1 of this report for a schedule of mandatory long-term debt repayments for the remainder of 2026 through 2031.
Please see Note 8, "Debt," in the Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended February 1, 2026 for further discussion of our debt.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Our significant accounting policies are outlined in Note 1, "Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended February 1, 2026. During the thirteen weeks ended May 3, 2026, there were no significant changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the fiscal year ended February 1, 2026.
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