Zachary Coughlin: Yes. And I think just to sort of talk a bit more — to put some numbers around that, Dana, around the European order books. Just as a reminder, for spring ’23, we had order books in at high single digits. And we’re happy to say that, that is actualized fully as product — supply chains normalize and products that are showing up earlier than expected. Now keeping in mind that’s about in line with where pre-pandemic was but earlier than us or the accounts were planning, the accounts have been very eager to take that product. So we’re able to ship and partially in — for the rest, early here in the first quarter. And we’re seeing from those floor sets as they’re setting is strong consumer response. I think we feel great about the spring order book.
As Stefan mentioned, the fall order books have come in and the numbers are low single digits from a growth perspective, which is not aligned with what we’re seeing from consumer response today. So we believe they’re taking a cautious outlook and we’re aligning our overall expectations for the year to that. But I do think it’s important to highlight what Stefan had mentioned that. And we saw specifically through the COVID period and all that volatility, our European operating model the team has built, the never-out-of-stock fulfillment model, best-in-class, we’re able to chase quickly into demand that showed itself then. And I think as consumer trends stay where they are, we believe we’ll be well positioned to do that as well heading into the year.
Dana Telsey: Got it. And then just lastly, just on marketing. How do you see marketing progress through the year? And what percentage of sales do you see marketing be coming?
Stefan Larsson: Yes. Thanks, Dana. So on the marketing side, as I mentioned in my prepared remarks, Calvin — Jonathan and the Calvin team has done a fantastic job to start with Calvin and Calvins or nothing is the campaign umbrella. So it’s very much connecting back to the iconic beloved DNA and making it super relevant for today, whether it’s Michael B. Jordan, Kendall Jenner and most recently, Jungkook from BTS, the BTS star, who is now becoming a Calvin global ambassador. And it was remarkable. Yesterday, we teased it on Instagram. Zac and I were following the reaction hour by hour. In a few hours, we got 1.5 million likes. We got 157,000 comments, likes from our customers, our consumers saying things like, “Our dream has come true.” “I’m dying.” “My life is complete.” “I’m ready to die.” “I’m crying right now.” So it’s — that — you can only do that if you have an iconic beloved brand like Calvin and Tommy and then connect that with incredible products and incredible talent.
And then something I’ll — late last night, a team member sent through Tommy and Shawn Mendes are doing the Classics Reborn campaign, also focusing on the DNA, the classic American cool, the style icons and making them relevant for today. And fantastic response to that. And what I received last night was a video clip from one of the — it’s called The Artz, one of the premier shopping centers in Mexico City. Shawn Mendes was there and did an immersive appearance and thousands of people, screaming, going wild. So it’s this fantastic balance between the iconic, timeless DNA of the brand and then making it current. So these campaign umbrellas will just continue. And it’s for us, it’s about systematically, repeatedly executing better and better and better.
So that’s from a marketing perspective. And then we — then as I mentioned, we are investing more in marketing. So Zac, will you be able to share more of the details of what that means in numbers?
Zachary Coughlin: Yes, we’re making a commitment this year to increase marketing spend, both in dollars and I think employee as well in percentage of revenue. So the percentage of revenue will increase 30 to 40 basis points this year to almost 6%. And that’s just the first step on the journey, the key investment priority for us as we work on delivering the PVH+ Plan. So a big step forward to almost 6% this year.
Operator: Our next question will come from Chris Nardone with Bank of America.
Christopher Nardone: Can you discuss the underlying assumptions around your North America wholesale business? It’d be very helpful if you could discuss how sellout trends are faring for both brands, given your healthier inventory position. And then whether you think you’re in a position to chase if retailers begin to turn more positive as we move through the year?
Stefan Larsson: Yes. Thanks, Chris. So in North America, as we mentioned, the outperformance in North America was driven by, first of all, our D2C business. But there is an underlying driver of improvement in North America that I really want to mention, which is — and it connects to wholesale, which is how we strengthen our performance in the full price wholesale channel with Macy’s. So we are seeing improved sell-through trends for both Calvin and Tommy. And we see tremendous potential here in working with Macy’s and expressing our full-price presence in North America stronger. For both Calvin and Tommy, we are seeing so much potential there. And the exciting part in Q4 and start of this year is that we’re seeing it translate to high growth and improved sell-throughs. With that said, there is a cautious outlook in North America as well from all our wholesale partners coming back to the macroeconomic volatility.
Zachary Coughlin: Yes. I think we expect, as we’d said, DTC to be our in North America. And then closely behind that, as Stefan mentioned, sort of our full price execution with our key partners like Macy’s. Beyond that, we do expect the broader wholesale environment to remain, sort of, I would say, the accounts are cautious. And with our focus increasingly on those global bestsellers and that core set of product, I think when we see the improved sellout, we’re able to work closely with those partners. And they’re eager to follow back in with inventory as we’re building something closer towards a never-out-of-stock model with them as we go through. So I think we’re optimistic that should those trends continue and what we’ve seen earlier in the year that we’ll be able to continue to fulfill that demand regardless of where the consumer demand goes.
Christopher Nardone: Okay. Great. And then just if I could squeeze one more in, just on China. Can you just talk about how that reopening is going? And then what level of recovery are you assuming in the back half to get to your total sales guide?
Stefan Larsson: Yes, absolutely. So China, as I mentioned before as well, China as a market is a very important growth market for us and seeing the reopening and seeing the consumers come back has been really strong positive trends. So that’s why we are planning Asia for 2023 as the highest growth region. So what we see is very encouraging.
Operator: Our last question will come from Ike Boruchow with Wells Fargo.
Irwin Boruchow: Let me add my congrats. Maybe just looking out the next couple of years, Zac, it’s only — it’s been about a year since the Analyst Day and the PVH+ Plan targets were given. Your 15% margin goal for ’25 was laid out. You’re looking for 10% this year. How are you feeling a year later in your progress towards that 15%? And then I guess to that point, beyond ’25 when these licensing dynamics start to play in, I assume that’s dilutive to the margin. Is there some way we should think about margins past ’25 as the business model changes a bit more from owned — away from license?
Stefan Larsson: Thanks, Ike. It’s Stefan here. So if I start from just an overall business perspective and value-creating perspective, first year in now into the PVH+ Plan. There is significant growth opportunities, both from a revenue and a margin expansion perspective in each of — through each of these 5 growth drivers: the product, the increased marketing, consumer engagement, the marketplace execution, the demand-driven supply chain that we are moving towards, the cost efficiencies and then investing behind these growth drivers. So 1 year in, when I look at this, I see that we are just in the beginning of unlocking this value. And it’s independently of macro because so much we have in our own hands. And what excites me the most is to see how we, as a team, has come together during this year and really locked into the direction we set out. And now it’s just about consistently delivering improvements. Zac?
