PVH CORP. /DE/ [PVH] Filings

10-Q 1 pvh-20230730.htm 10-Q pvh-20230730

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended		July 30, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number 001-07572


PVH CORP.
(Exact name of registrant as specified in its charter)

Delaware

13-1166910

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

285 Madison Avenue,

New York,

New York

10017

(Address of principal executive offices)

(Zip Code)

(212) 381-3500

__________________________________________________________________________________________________________________________________________________________________________

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1.00 par value	PVH	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of common stock of the registrant as of August 29, 2023 was 60,424,938.

PVH CORP.

INDEX

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements in this Quarterly Report on Form 10-Q, including, without limitation, statements relating to our future revenue, earnings and cash flows, plans, strategies, objectives, expectations and intentions are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated, including, without limitation, (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our ability to realize anticipated benefits and savings from divestitures, restructurings and similar plans, such as the headcount cost reduction initiative announced in August 2022, and the August 2021 sale of assets of, and exit from, our Heritage Brands business to focus on our Calvin Klein and Tommy Hilfiger businesses; (iii) the ability to realize the intended benefits from the acquisition of licensees or the reversion of licensed rights (such as the announced plan to bring in-house most of the product categories currently licensed to G-III Apparel Group, Ltd. upon the expirations over time of the underlying license agreements) and avoid any disruptions in the businesses during the transition from operation by the licensee to the direct operation by the Company; (iv) we have significant levels of outstanding debt and borrowing capacity and we use a significant portion of our cash flows to service our indebtedness, as a result of which we might not have sufficient funds to operate our businesses in the manner we intend or have operated in the past; (v) the levels of sales of our apparel, footwear and related products, both to our wholesale customers and in our retail stores and our directly operated digital commerce sites, the levels of sales of our licensees at wholesale and retail, and the extent of discounts and promotional pricing in which we and our licensees and other business partners are required to engage, all of which can be affected by weather conditions, changes in the economy (including inflationary pressures like those currently being seen globally), fuel prices, reductions in travel, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, consumer sentiment and other factors; (vi) our ability to manage our growth and inventory; (vii) quota restrictions, the imposition of safeguard controls and the imposition of new or increased duties or tariffs on goods from the countries where we or our licensees produce goods under our trademarks, any of which, among other things, could limit the ability to produce products in cost-effective countries, or in countries that have the labor and technical expertise needed, or require us to absorb costs or try to pass costs onto consumers, which could materially impact our revenue and profitability; (viii) the availability and cost of raw materials; (ix) our ability to adjust timely to changes in trade regulations and the migration and development of manufacturers (which can affect where our products can best be produced); (x) the regulation or prohibition of the transaction of business with specific individuals or entities and their affiliates or goods manufactured in (or containing raw materials or components from) certain regions, such as the listing of a person or entity as a Specially Designated National or Blocked Person by the U.S. Department of the Treasury’s Office of Foreign Assets Control and the issuance of Withhold Release Orders by the U.S. Customs and Border Protection; (xi) changes in available factory and shipping capacity, wage and shipping cost escalation, and store closures in any of the countries where our licensees’ or wholesale customers’ or other business partners’ stores are located or products are sold or produced or are planned to be sold or produced, as a result of civil conflict, war or terrorist acts, the threat of any of the foregoing, or political or labor instability, such as the current war in Ukraine that led to our exit from our retail business in Russia and the cessation of our wholesale operations in Russia and Belarus, and the temporary cessation of business by many of our business partners in Ukraine; (xii) disease epidemics and health-related concerns, such as the recent COVID-19 pandemic, which could result in (and, in the case of the COVID-19 pandemic, did result in some of the following) supply-chain disruptions due to closed factories, reduced workforces and production capacity, shipping delays, container and trucker shortages, port congestion and other logistics problems, closed stores, and reduced consumer traffic and purchasing, or governments implement mandatory business closures, travel restrictions or the like, and market or other changes that could result in shortages of inventory available to be delivered to our stores and customers, order cancellations and lost sales, as well as in noncash impairments of our goodwill and other intangible assets, operating lease right-of-use assets, and property, plant and equipment; (xiii) actions taken towards sustainability and social and environmental responsibility as part of our sustainability and social and environmental strategy, may not be achieved or may be perceived to be falsely claimed, which could diminish consumer trust in our brands, as well as our brands’ value; (xiv) the failure of our licensees to market successfully licensed products or to preserve the value of our brands, or their misuse of our brands; (xv) significant fluctuations of the U.S. dollar against foreign currencies in which we transact significant levels of business; (xvi) our retirement plan expenses recorded throughout the year are calculated using actuarial valuations that incorporate assumptions and estimates about financial market, economic and demographic conditions, and differences between estimated and actual results give rise to gains and losses, which can be significant, that are recorded immediately in earnings, generally in the fourth quarter of the year; (xvii) the impact of new and revised tax legislation and regulations; and (xviii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

We do not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimate regarding revenue, earnings or cash flows, whether as a result of the receipt of new information, future events or otherwise.

PART I -- FINANCIAL INFORMATION


Item 1 - Financial Statements

Consolidated Statements of Operations for the Thirteen and Twenty-Six Weeks Ended July 30, 2023 and July 31, 2022			1

Consolidated Statements of Comprehensive Income for the Thirteen and Twenty-Six Weeks Ended July 30, 2023 and July 31, 2022			2

Consolidated Balance Sheets as of July 30, 2023, January 29, 2023 and July 31, 2022			3

Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended July 30, 2023 and July 31, 2022			4

Consolidated Statements of Changes in Stockholders’ Equity for the Twenty-Six Weeks Ended July 30, 2023 and July 31, 2022			5

Notes to Consolidated Financial Statements			7

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations			31

Item 3 - Quantitative and Qualitative Disclosures About Market Risk			43

Item 4 - Controls and Procedures			45

PART II -- OTHER INFORMATION


Item 1 - Legal Proceedings			46

Item 1A - Risk Factors			46

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds			46

Item 5 - Other Information			47

Item 6 - Exhibits			48

Signatures			50

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

PVH Corp.

Consolidated Statements of Operations

Unaudited

(In millions, except per share data)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30,		July 31,		July 30,		July 31,
	2023		2022		2023		2022
Net sales	$	2,105.2	$	2,031.1	$	4,156.3	$	4,037.7
Royalty revenue	80.1		78.3		164.8		168.3
Advertising and other revenue	21.7		22.6		43.8		48.7
Total revenue	2,207.0		2,132.0		4,364.9		4,254.7
Cost of goods sold (exclusive of depreciation and amortization)	934.7		912.5		1,842.3		1,796.5
Gross profit	1,272.3		1,219.5		2,522.6		2,458.2
Selling, general and administrative expenses	1,138.5		1,070.4		2,202.5		2,109.8

Non-service related pension and postretirement income	0.3		3.2		0.9		6.8

Equity in net income of unconsolidated affiliates	9.2		24.7		21.1		32.1
Income before interest and taxes	143.3		177.0		342.1		387.3
Interest expense	25.9		21.8		51.2		44.8
Interest income	2.3		1.5		5.6		2.7
Income before taxes	119.7		156.7		296.5		345.2
Income tax expense	25.5		41.4		66.3		96.8
Net income	$	94.2	$	115.3	$	230.2	$	248.4
Basic net income per common share	$	1.52	$	1.73	$	3.69	$	3.69
Diluted net income per common share	$	1.50	$	1.72	$	3.65	$	3.66

See accompanying notes.

PVH Corp.

Consolidated Statements of Comprehensive Income

Unaudited

(In millions)


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30,		July 31,		July 30,		July 31,
	2023		2022		2023		2022

Net income	$	94.2	$	115.3	$	230.2	$	248.4
Other comprehensive income (loss):
Foreign currency translation adjustments	21.1		(92.0)		4.4		(223.8)
Net unrealized and realized gain (loss) related to effective cash flow hedges, net of tax (benefit) expense of $(0.1), $1.8, $(0.5), and $10.8	0.3		5.5		(1.7)		31.3
Net (loss) gain on net investment hedges, net of tax (benefit) expense of $(1.0), $9.6, $(4.2), and $26.2	(2.9)		28.6		(12.7)		78.8
Total other comprehensive income (loss)	18.5		(57.9)		(10.0)		(113.7)
Comprehensive income	$	112.7	$	57.4	$	220.2	$	134.7

See accompanying notes.

PVH Corp.

Consolidated Balance Sheets

(In millions, except share and per share data)


	July 30,		January 29,		July 31,
	2023		2023		2022
	UNAUDITED		AUDITED		UNAUDITED
ASSETS
Current Assets:
Cash and cash equivalents	$	372.8	$	550.7	$	699.3
Trade receivables, net of allowances for credit losses of $42.0, $42.6 and $49.1	889.2		923.7		804.6
Other receivables	20.8		21.5		32.9
Inventories, net	1,795.5		1,802.6		1,689.9
Prepaid expenses	256.0		209.2		207.4
Other	79.8		72.7		150.3

Total Current Assets	3,414.1		3,580.4		3,584.4
Property, Plant and Equipment, net	876.0		904.0		842.0
Operating Lease Right-of-Use Assets	1,291.2		1,295.7		1,230.3
Goodwill	2,354.7		2,359.0		2,694.5
Tradenames	2,713.1		2,701.1		2,647.7

Other Intangibles, net	518.7		548.8		555.3
Other Assets, including deferred taxes of $24.1, $33.8 and $42.0	374.6		379.3		368.1
Total Assets	$	11,542.4	$	11,768.3	$	11,922.3

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	1,242.9	$	1,327.4	$	1,359.0
Accrued expenses	773.6		874.0		844.9
Deferred revenue	74.4		54.3		54.0
Current portion of operating lease liabilities	328.6		353.7		348.2
Short-term borrowings	15.2		46.2		12.2
Current portion of long-term debt	688.9		111.9		38.2

Total Current Liabilities	3,123.6		2,767.5		2,656.5
Long-Term Portion of Operating Lease Liabilities	1,136.9		1,140.0		1,114.2
Long-Term Debt	1,619.6		2,177.0		2,155.5
Other Liabilities, including deferred taxes of $321.3, $357.5 and $378.2	624.7		671.1		789.7

Stockholders’ Equity:
Preferred stock, par value $100 per share; 150,000 total shares authorized	—		—		—
Common stock, par value $1 per share; 240,000,000 shares authorized; 88,161,386; 87,641,611 and 87,509,778 shares issued	88.2		87.6		87.5
Additional paid-in capital - common stock	3,271.4		3,244.5		3,220.9
Retained earnings	4,978.5		4,753.1		4,806.0
Accumulated other comprehensive loss	(723.1)		(713.1)		(726.4)
Less: 27,481,695; 24,932,374 and 21,906,203 shares of common stock held in treasury, at cost	(2,577.4)		(2,359.4)		(2,181.6)
Total Stockholders’ Equity	5,037.6		5,012.7		5,206.4
Total Liabilities and Stockholders’ Equity	$	11,542.4	$	11,768.3	$	11,922.3

See accompanying notes.

PVH Corp.

Consolidated Statements of Cash Flows

Unaudited

(In millions)


	Twenty-Six Weeks Ended
	July 30,		July 31,
	2023		2022
OPERATING ACTIVITIES
Net income	$	230.2	$	248.4
Adjustments to reconcile to net cash provided (used) by operating activities:
Depreciation and amortization	147.8		152.2
Equity in net income of unconsolidated affiliates	(21.1)		(32.1)
Deferred taxes	(22.1)		(13.5)
Stock-based compensation expense	27.4		22.8

Impairment of other long-lived assets	—		43.6


Changes in operating assets and liabilities:
Trade receivables, net	36.2		(99.2)
Other receivables	0.9		(13.3)
Inventories, net	1.2		(415.9)
Accounts payable, accrued expenses and deferred revenue	(153.0)		8.8
Prepaid expenses	(45.9)		(46.0)

Other, net	(5.4)		(18.9)
Net cash provided (used) by operating activities	196.2		(163.1)
INVESTING ACTIVITIES

Purchases of property, plant and equipment	(115.9)		(108.7)





Proceeds from sale of Karl Lagerfeld investment	—		19.1
Purchases of investments held in rabbi trust	(2.4)		(5.7)
Proceeds from investments held in rabbi trust	0.9		0.6
Net cash used by investing activities	(117.4)		(94.7)
FINANCING ACTIVITIES
Net (payments on) proceeds from short-term borrowings	(28.8)		3.0




Repayment of 2022 facilities	(6.0)		—
Repayment of 2019 facilities	—		(13.4)
Net proceeds from settlement of awards under stock plans	0.1		0.1
Cash dividends	(4.8)		(5.2)
Acquisition of treasury shares	(214.2)		(237.7)
Payments of finance lease liabilities	(2.5)		(2.2)

Net cash used by financing activities	(256.2)		(255.4)
Effect of exchange rate changes on cash and cash equivalents	(0.5)		(30.0)
Decrease in cash and cash equivalents	(177.9)		(543.2)
Cash and cash equivalents at beginning of period	550.7		1,242.5
Cash and cash equivalents at end of period	$	372.8	$	699.3

See accompanying notes.

PVH Corp.

Consolidated Statements of Changes in Stockholders’ Equity

Unaudited

(In millions, except share and per share data)


	Twenty-Six Weeks Ended July 31, 2022

			Common Stock			Additional Paid-In Capital- Common Stock				Accumulated Other Comprehensive Loss				Total Stockholders’ Equity
	Preferred Stock		Shares	$1 par Value				Retained Earnings				Treasury Stock
January 30, 2022	$	—	87,107,155	$	87.1	$	3,198.4	$	4,562.8	$	(612.7)	$	(1,946.8)	$	5,288.8
Net income								133.1						133.1
Foreign currency translation adjustments										(131.8)				(131.8)
Net unrealized and realized gain related to effective cash flow hedges, net of tax expense of $9.0										25.8				25.8
Net gain on net investment hedges, net of tax expense of $16.6										50.2				50.2
Comprehensive income														77.3


Settlement of awards under stock plans			157,495	0.2		(0.1)								0.1

Stock-based compensation expense						10.1								10.1
Dividends declared ($0.0375 per common share)								(2.6)						(2.6)
Acquisition of 1,264,730 treasury shares												(105.2)		(105.2)


May 1, 2022	$	—	87,264,650	$	87.3	$	3,208.4	$	4,693.3	$	(668.5)	$	(2,052.0)	$	5,268.5
Net income								115.3						115.3
Foreign currency translation adjustments										(92.0)				(92.0)
Net unrealized and realized gain related to effective cash flow hedges, net of tax expense of $1.8										5.5				5.5
Net gain on net investment hedges, net of tax expense of $9.6										28.6				28.6
Comprehensive income														57.4


Settlement of awards under stock plans			245,128	0.2		(0.2)								—

Stock-based compensation expense						12.7								12.7
Dividends declared ($0.0375 per common share)								(2.6)						(2.6)
Acquisition of 2,068,991 treasury shares												(129.6)		(129.6)



July 31, 2022	$	—	87,509,778	$	87.5	$	3,220.9	$	4,806.0	$	(726.4)	$	(2,181.6)	$	5,206.4

PVH Corp.

Consolidated Statements of Changes in Stockholders’ Equity (continued)

Unaudited

(In millions, except share and per share data)


	Twenty-Six Weeks Ended July 30, 2023

			Common Stock			Additional Paid-In Capital- Common Stock				Accumulated Other Comprehensive Loss				Total Stockholders’ Equity
	Preferred Stock		Shares	$1 par Value				Retained Earnings				Treasury Stock
January 29, 2023	$	—	87,641,611	$	87.6	$	3,244.5	$	4,753.1	$	(713.1)	$	(2,359.4)	$	5,012.7
Net income								136.0						136.0
Foreign currency translation adjustments										(16.7)				(16.7)
Net unrealized and realized loss related to effective cash flow hedges, net of tax benefit of $0.4										(2.0)				(2.0)
Net loss on net investment hedges, net of tax benefit of $3.2										(9.8)				(9.8)
Comprehensive income														107.5


Settlement of awards under stock plans			132,809	0.2		(0.1)								0.1

Stock-based compensation expense						13.1								13.1
Dividends declared ($0.0375 per common share)								(2.4)						(2.4)
Acquisition of 53,950 treasury shares												(4.6)		(4.6)


April 30, 2023	$	—	87,774,420	$	87.8	$	3,257.5	$	4,886.7	$	(741.6)	$	(2,364.0)	$	5,126.4
Net income								94.2						94.2
Foreign currency translation adjustments										21.1				21.1
Net unrealized and realized gain related to effective cash flow hedges, net of tax benefit of $0.1										0.3				0.3
Net loss on net investment hedges, net of tax benefit of $1.0										(2.9)				(2.9)
Comprehensive income														112.7


Settlement of awards under stock plans			386,966	0.4		(0.4)								—

Stock-based compensation expense						14.3								14.3
Dividends declared ($0.0375 per common share)								(2.4)						(2.4)
Acquisition of 2,495,371 treasury shares, including excise taxes of $1.7												(213.4)		(213.4)


July 30, 2023	$	—	88,161,386	$	88.2	$	3,271.4	$	4,978.5	$	(723.1)	$	(2,577.4)	$	5,037.6

See accompanying notes.

PVH CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

PVH Corp. and its consolidated subsidiaries (collectively, the “Company”) constitute a global apparel company with a brand portfolio that includes TOMMY HILFIGER, Calvin Klein, Warner’s, Olga and True&Co., which are owned, Van Heusen and Nike, which the Company licenses for certain product categories, and other owned and licensed brands. The Company designs and markets branded sportswear (casual apparel), jeanswear, performance apparel, intimate apparel, underwear, swimwear, dress shirts, handbags, accessories, footwear and other related products and licenses its owned brands globally over a broad array of product categories and for use in numerous discrete jurisdictions.

The consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated in consolidation. Investments in entities that the Company does not control but has the ability to exercise significant influence over are accounted for using the equity method of accounting. The Company’s Consolidated Statements of Operations include its proportionate share of the net income or loss of these entities. Please see Note 4, “Investments in Unconsolidated Affiliates,” for further discussion.

Since the first day of the second quarter of 2022, the Company has been accounting for its operations in Turkey as highly inflationary, as the cumulative inflation rate surpassed 100% for the three-year period that ended during the first quarter of 2022. Accordingly, the Company has changed the functional currency of its subsidiary in Turkey from the Turkish lira to the euro, which is the functional currency of its parent. The required remeasurement of monetary assets and liabilities denominated in Turkish lira into euro did not have a material impact on the Company’s results of operations during the thirteen and twenty-six weeks ended July 30, 2023 and July 31, 2022. As of July 30, 2023 and July 31, 2022, net monetary assets denominated in Turkish lira represented less than 1% of the Company’s total net assets.

The Company’s fiscal years are based on the 52-53 week periods ending on the Sunday closest to February 1 and are designated by the calendar year in which the fiscal year commences. References to a year are to the Company’s fiscal year, unless the context requires otherwise.

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not contain all disclosures required by U.S. GAAP for complete financial statements. Reference is made to the Company’s audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended January 29, 2023.

The preparation of the interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from these estimates.

The results of operations for the thirteen and twenty-six weeks ended July 30, 2023 and July 31, 2022 are not necessarily indicative of those for a full fiscal year due, in part, to seasonal factors. Furthermore, the data contained in these consolidated financial statements are unaudited and are subject to year-end adjustments. However, in the opinion of management, all known adjustments have been made to present fairly the consolidated operating results for the unaudited periods.

There is significant uncertainty in the current macroeconomic environment due to inflationary pressures globally, the war in Ukraine and foreign currency volatility and their impacts on the Company’s business. If economic conditions were to worsen, the Company’s results of operations, financial condition and cash flows from operations may be materially and adversely impacted.

War in Ukraine

As a result of the war in Ukraine, the Company announced in March 2022 that it was temporarily closing stores and pausing commercial activities in Russia and Belarus. In the second quarter of 2022, the Company made the decision to exit from its Russia business, including the closure of its retail stores in Russia and the cessation of its wholesale operations in Russia and Belarus. Additionally, while the Company has no direct operations in Ukraine, virtually all of its wholesale customers and franchisees in Ukraine have been impacted, which has resulted in a reduction in shipments to these customers and canceled

orders. The war also led to broader macroeconomic implications in 2022, including the weakening of the euro against the United States dollar, increases in fuel prices and volatility in the financial markets, as well as a decline in consumer spending.

There is uncertainty regarding the extent to which the war and its broader macroeconomic implications, including the potential impacts on the broader European market, will further impact the Company’s business, financial condition and results of operations for the remainder of 2023.

COVID-19 Pandemic

The COVID-19 pandemic had a significant impact on the Company’s business, results of operations, financial condition and cash flows from operations during 2022. The pandemic did not have a significant impact on the Company in the first half of 2023.

Strict lockdowns in China during 2022 resulted in extensive temporary store closures and significant reductions in consumer traffic and purchasing, as well as impacted certain warehouses, which resulted in the temporary pause of deliveries to the Company’s wholesale customers and from its digital commerce business in the first half of 2022. COVID-related restrictions in China were lifted at the end of the fourth quarter of 2022.

In addition, the Company’s North America stores have been challenged by the significant decrease in international tourists coming to the United States since the onset of the pandemic. Stores located in international tourist destinations had represented a significant portion of the North America retail business prior to the pandemic.

In addition, pandemic-related supply chain and logistics disruptions have impacted the Company’s supply chain partners, including third party manufacturers, logistics providers and other vendors, as well as the supply chains of its licensees. These supply chains have experienced disruptions as a result of closed factories or factories operating with a reduced workforce, or other logistics constraints, including vessel, container and other transportation shortages, labor shortages and port congestion due to the impact of the pandemic. These impacts significantly improved in the second half of 2022.

2. REVENUE

The Company generates revenue primarily from sales of finished products under its owned trademarks through its wholesale and retail operations. The Company also generates royalty and advertising revenue from licensing rights to its trademarks to third parties. Revenue is recognized upon the transfer of control of products or services to the Company’s customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those products or services.

Performance Obligations Under License Agreements

As of July 30, 2023, the contractual minimum fees on the portion of all license agreements not yet satisfied totaled $904.7 million, of which the Company expects to recognize $142.8 million as revenue during the remainder of 2023, $259.7 million in 2024 and $502.2 million thereafter. The Company elected not to disclose the remaining performance obligations for contracts that have an original expected term of one year or less and expected sales-based percentage fees for the portion of all license agreements not yet satisfied.

Deferred Revenue

Changes in deferred revenue, which primarily relate to customer loyalty programs, gift cards and license agreements for the twenty-six weeks ended July 30, 2023 and July 31, 2022 were as follows:


	Twenty-Six Weeks Ended
(In millions)	7/30/23		7/31/22
Deferred revenue balance at beginning of period	$	54.3	$	44.9

Net additions to deferred revenue during the period	62.4		45.4
Reductions in deferred revenue for revenue recognized during the period (1)	(42.3)		(36.3)

Deferred revenue balance at end of period	$	74.4	$	54.0

(1) Represents the amount of revenue recognized during the period that was included in the deferred revenue balance at the beginning of the period and does not contemplate revenue recognized from amounts deferred during the period. The amounts include $2.8 million and $4.0 million of revenue recognized during the thirteen weeks ended July 30, 2023 and July 31, 2022, respectively.

The Company also had long-term deferred revenue liabilities included in other liabilities in its Consolidated Balance Sheets of $10.8 million, $12.1 million and $13.3 million as of July 30, 2023, January 29, 2023 and July 31, 2022, respectively.

Please see Note 16, “Segment Data,” for information on the disaggregation of revenue by segment and distribution channel.

3. INVENTORIES

Inventories are comprised principally of finished goods and are stated at the lower of cost or net realizable value, except for certain retail inventories in North America that are stated at the lower of cost or market using the retail inventory method. Cost for all wholesale inventories in North America and certain wholesale and retail inventories in Asia is determined using the first-in, first-out method. Cost for all other inventories is determined using the weighted average cost method. The Company reviews current business trends and forecasts, inventory aging and discontinued merchandise categories to determine adjustments that it estimates will be needed to liquidate existing clearance inventories and record inventories at either the lower of cost or net realizable value or the lower of cost or market using the retail inventory method, as applicable.

4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company had investments in unconsolidated affiliates of $195.8 million, $190.2 million and $164.9 million as of July 30, 2023, January 29, 2023 and July 31, 2022, respectively. These investments are accounted for under the equity method of accounting and included in other assets in the Company’s Consolidated Balance Sheets. The Company received dividends of $30.1 million and $16.2 million from these investments during the twenty-six weeks ended July 30, 2023 and July 31, 2022, respectively.

The Company completed the sale of its economic interest in Karl Lagerfeld Holding B.V. (“Karl Lagerfeld”) to a subsidiary of G-III Apparel Group, Ltd. (the “Karl Lagerfeld transaction”) on May 31, 2022 for approximately $20.5 million in cash, subject to customary adjustments, of which $19.1 million was received during the second quarter of 2022 and $1.4 million is being held in escrow and subject to exchange rate fluctuation. The carrying value of the Company’s investment in Karl Lagerfeld was $1.0 million immediately prior to the completion of the sale.

In connection with the closing of the Karl Lagerfeld transaction, the Company recorded a pre-tax gain of $16.1 million during the second quarter of 2022, which reflected (i) the excess of the proceeds over the carrying value of the Karl Lagerfeld investment, less (ii) $3.4 million of foreign currency translation adjustment losses previously recorded in accumulated other comprehensive loss. The gain was included in equity in net income of unconsolidated affiliates in the Company’s Consolidated Statement of Operations and recorded in corporate expenses not allocated to any reportable segments, consistent with how the Company has historically recorded its proportionate share of the net income or loss of its investment in Karl Lagerfeld.

Please see Note 5, “Investments in Unconsolidated Affiliates,” in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended January 29, 2023 for further discussion of the Karl Lagerfeld investment.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the twenty-six weeks ended July 30, 2023, by segment (please see Note 16, “Segment Data,” for further discussion of the Company’s reportable segments), were as follows:


(In millions)	Calvin Klein North America		Calvin Klein International		Tommy Hilfiger North America		Tommy Hilfiger International		Heritage Brands Wholesale		Total
Balance as of January 29, 2023
Goodwill, gross	$	781.8	$	885.0	$	203.0	$	1,587.6	$	105.0	$	3,562.4
Accumulated impairment losses	(449.9)		(471.3)		(177.2)		—		(105.0)		(1,203.4)
Goodwill, net	331.9		413.7		25.8		1,587.6		—		2,359.0

Currency translation	—		(3.2)		—		(1.1)		—		(4.3)
Balance as of July 30, 2023
Goodwill, gross	781.8		881.8		203.0		1,586.5		105.0		3,558.1
Accumulated impairment losses	(449.9)		(471.3)		(177.2)		—		(105.0)		(1,203.4)
Goodwill, net	$	331.9	$	410.5	$	25.8	$	1,586.5	$	—	$	2,354.7

The Company assesses the recoverability of goodwill and other indefinite-lived intangible assets annually, at the beginning of the third quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying amount may be impaired. Impairment testing for goodwill is done at the reporting unit level. Impairment testing for other indefinite-lived intangible assets is done at the individual asset level. Intangible assets with finite lives are amortized over their estimated useful life and are tested for impairment, along with other long-lived assets, when events and circumstances indicate that the assets might be impaired. Indefinite-lived intangible assets and intangible assets with finite lives are tested for impairment prior to assessing the recoverability of goodwill. Please see Note 1, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended January 29, 2023 for discussion of the Company’s goodwill and other intangible assets impairment testing process.

There have been no significant events or changes in circumstances during the twenty-six weeks ended July 30, 2023 that would indicate the remaining carrying amount of the Company’s goodwill and other intangible assets may be impaired as of July 30, 2023.

6. RETIREMENT AND BENEFIT PLANS

The Company, as of July 30, 2023, has two noncontributory qualified defined benefit pension plans. These plans cover substantially all employees resident in the United States hired prior to January 1, 2022 who meet certain age and service requirements. The plans provide monthly benefits upon retirement generally based on career average compensation and years of credited service. The plans also provide participants with the option to receive their benefits in the form of lump sum payments. Vesting in plan benefits generally occurs after five years of service. The Company refers to these two plans as its “Pension Plans.”

The Company also has three noncontributory unfunded non-qualified supplemental defined benefit pension plans, including:

–A plan for certain former members of Tommy Hilfiger’s domestic senior management.

–A capital accumulation program for certain former senior executives. Under the individual participants’ agreements, the participants in the program will receive a predetermined amount during the ten years following the attainment of age 65.

–A plan for certain employees resident in the United States hired prior to January 1, 2022 who meet certain age and service requirements that provides benefits for compensation in excess of Internal Revenue Service earnings limits and requires payments to vested employees upon or after employment termination or retirement, according to their distribution election.

The Company refers to these three plans as its “SERP Plans.”

The components of net benefit cost recognized were as follows:


	Pension Plans				Pension Plans
	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(In millions)	7/30/23		7/31/22		7/30/23		7/31/22

Service cost	$	5.8	$	7.7	$	10.8	$	15.7
Interest cost	7.4		6.4		14.6		12.7
Expected return on plan assets	(8.4)		(10.4)		(16.9)		(20.9)






Total	$	4.8	$	3.7	$	8.5	$	7.5


	SERP Plans				SERP Plans
	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(In millions)	7/30/23		7/31/22		7/30/23		7/31/22

Service cost	$	0.4	$	0.7	$	0.8	$	1.3
Interest cost	0.7		0.8		1.4		1.4







Total	$	1.1	$	1.5	$	2.2	$	2.7

The Company also provides certain postretirement health care and life insurance benefits to certain retirees resident in the United States under two plans. Retirees contribute to the cost of the applicable plan, both of which are unfunded and frozen. The Company refers to these two plans as its “Postretirement Plans.” Net benefit cost related to the Postretirement Plans was immaterial for the thirteen and twenty-six weeks ended July 30, 2023 and July 31, 2022.

The components of net benefit cost are recorded in the Company’s Consolidated Statements of Operations as follows: (i) the service cost component is recorded in selling, general and administrative (“SG&A”) expenses and (ii) the other components are recorded in non-service related pension and postretirement income.

Currently, the Company does not expect to make material contributions to the Pension Plans in 2023. The Company’s actual contributions may differ from planned contributions due to many factors, including changes in tax and other laws, as well as significant differences between expected and actual pension asset performance or interest rates.

7. DEBT

Short-Term Borrowings

The Company has the ability to draw revolving borrowings under the senior unsecured credit facilities discussed below in the section entitled “2022 Senior Unsecured Credit Facilities.” The Company had no revolving borrowings outstanding under these facilities as of July 30, 2023. The Company also had no revolving borrowings outstanding under its 2019 facilities (as defined below) as of July 31, 2022.

Additionally, the Company has 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 borrowings of up to $220.9 million based on exchange rates in effect on July 30, 2023 and are utilized primarily to fund working capital needs. The Company had $15.2 million outstanding under these facilities as of July 30, 2023. The weighted average interest rate on funds borrowed as of July 30, 2023 was 0.19%.

Commercial Paper

The Company has 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. The Company had no borrowings outstanding under the commercial paper note program as of July 30, 2023.

Long-Term Debt

The carrying amounts of the Company’s long-term debt were as follows:


(In millions)	7/30/23		1/29/23		7/31/22

Senior unsecured Term Loan A facility due 2027 (1)(2)	$	477.3	$	476.6	$	—
Senior unsecured Term Loan A facility due 2024 (2)	—		—		457.8

7 3/4% debentures due 2023	100.0		99.9		99.9
3 5/8% senior unsecured euro notes due 2024 (2)	576.8		568.1		532.5
4 5/8% senior unsecured notes due 2025	497.6		497.0		496.4
3 1/8% senior unsecured euro notes due 2027 (2)	656.8		647.3		607.1
Total	2,308.5		2,288.9		2,193.7
Less: Current portion of long-term debt	688.9		111.9		38.2
Long-term debt	$	1,619.6	$	2,177.0	$	2,155.5

(1) The outstanding principal balance for the euro-denominated Term Loan A facility was €435.1 million as of July 30, 2023.

(2) The carrying amount of the euro-denominated Term Loan A facilities and the senior unsecured euro notes includes the impact of changes in the exchange rate of the United States dollar against the euro.

Please see Note 10, “Fair Value Measurements,” for the fair value of the Company’s long-term debt as of July 30, 2023, January 29, 2023 and July 31, 2022.

The Company’s mandatory long-term debt repayments for the remainder of 2023 through 2028 were as follows as of July 30, 2023:


(In millions)
Fiscal Year	Amount (1)
Remainder of 2023	$	106.1
2024	590.5
2025	512.1
2026	12.1
2027	1,097.8
2028	—

(1) A portion of the Company’s mandatory long-term debt repayments is denominated in euros and subject to changes in the exchange rate of the United States dollar against the euro.

Total debt repayments for the remainder of 2023 through 2028 exceed the total carrying amount of the Company’s debt as of July 30, 2023 because the carrying amount reflects the unamortized portions of debt issuance costs and the original issue discounts.

As of July 30, 2023, approximately 80% of the Company’s long-term debt had fixed interest rates, with the remainder at variable interest rates.

2022 Senior Unsecured Credit Facilities

On December 9, 2022, the Company entered into new senior unsecured credit facilities (the “2022 facilities”), the proceeds of which, along with cash on hand, were used to repay all of the outstanding borrowings under the 2019 facilities (as defined below), as well as the related debt issuance costs.

The 2022 facilities consist of (a) a €440.6 million euro-denominated Term Loan A facility (the “Euro TLA facility”), (b) a $1,150.0 million United States dollar-denominated multicurrency revolving credit facility (the “multicurrency revolving credit facility”), which is available in (i) United States dollars, (ii) Australian dollars (limited to A$50.0 million), (iii) Canadian dollars (limited to C$70.0 million), or (iv) euros, yen, pounds sterling, Swiss francs or other agreed foreign currencies (limited

to €250.0 million), and (c) a $50.0 million United States dollar-denominated revolving credit facility available in United States dollars or Hong Kong dollars (together with the multicurrency revolving credit facility, the “revolving credit facilities”). The 2022 facilities are due on December 9, 2027.

The Company had loans outstanding of $477.3 million, net of debt issuance costs and based on applicable exchange rates, under the Euro TLA facility as of July 30, 2023.

The Company made payments of $6.0 million on its term loan under the 2022 facilities during the twenty-six weeks ended July 30, 2023. The Company made payments of $13.4 million on its term loan under the 2019 facilities during the twenty-six weeks ended July 31, 2022.

The current applicable margin with respect to the Euro TLA facility as of July 30, 2023 was 1.250%. The current applicable margin with respect to the revolving credit facilities as of July 30, 2023 was 0.125% for loans bearing interest at the base rate, Canadian prime rate or daily simple euro short term rate and 1.125% for loans bearing interest at the euro interbank offered rate (“EURIBOR”) or any other rate specified in the 2022 facilities. The applicable margin for borrowings under the Euro TLA facility and each revolving credit facility is subject to adjustment (i) after the date of delivery of the compliance certificate and financial statements, with respect to each of the Company’s fiscal quarters, based upon the Company’s net leverage ratio or (ii) after the date of delivery of notice of a change in the Company’s public debt rating by Standard & Poor’s or Moody’s.

The 2022 facilities require the Company to comply with customary affirmative, negative and financial covenants, including a maximum net leverage ratio, calculated in a manner set forth in the terms of the 2022 facilities. Please see Note 8, “Debt,” in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended January 29, 2023 for further discussion of the 2022 facilities.

2019 Senior Unsecured Credit Facilities

On April 29, 2019, the Company entered into senior unsecured credit facilities (as amended, the “2019 facilities”). The Company replaced the 2019 facilities with the 2022 facilities on December 9, 2022 as discussed above in the section entitled “2022 Senior Unsecured Credit Facilities.” The 2019 facilities included a €500.0 million euro-denominated Term Loan A facility, of which €440.6 million was outstanding as of the date it was replaced, and senior unsecured revolving credit facilities.

7 3/4% Debentures Due 2023

The Company has outstanding $100.0 million of debentures due November 15, 2023 that accrue interest at the rate of 7 3/4%. The debentures are not redeemable at the Company’s option prior to maturity.

3 5/8% Euro Senior Notes Due 2024

The Company has outstanding €525.0 million principal amount of 3 5/8% senior notes due July 15, 2024. The Company may redeem some or all of these notes at any time prior to April 15, 2024 by paying a “make whole” premium plus any accrued and unpaid interest. In addition, the Company may redeem some or all of these notes on or after April 15, 2024 at their principal amount plus any accrued and unpaid interest.

4 5/8% Senior Notes Due 2025

The Company has outstanding $500.0 million principal amount of 4 5/8% senior notes due July 10, 2025. The Company may redeem some or all of these notes at any time prior to June 10, 2025 by paying a “make whole” premium plus any accrued and unpaid interest. In addition, the Company may redeem some or all of these notes on or after June 10, 2025 at their principal amount plus any accrued and unpaid interest.

3 1/8% Euro Senior Notes Due 2027

The Company has outstanding €600.0 million principal amount of 3 1/8% senior notes due December 15, 2027. The Company 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, the Company may redeem some or all of these notes on or after September 15, 2027 at their principal amount plus any accrued and unpaid interest.

The Company’s financing arrangements contain financial and non-financial covenants and customary events of default. As of July 30, 2023, the Company was in compliance with all applicable financial and non-financial covenants under its financing arrangements.

The Company also has standby letters of credit primarily to collateralize the Company’s insurance and lease obligations. The Company had $80.5 million of these standby letters of credit outstanding as of July 30, 2023.

Please see Note 8, “Debt,” in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended January 29, 2023 for further discussion of the Company’s debt.

8. INCOME TAXES

The effective income tax rates for the thirteen weeks ended July 30, 2023 and July 31, 2022 were 21.3% and 26.4%, respectively. The effective income tax rates for the twenty-six weeks ended July 30, 2023 and July 31, 2022 were 22.4% and 28.0%, respectively. The effective income tax rates for the thirteen and twenty-six weeks ended July 30, 2023 were lower than the respective prior year periods primarily due to a change in the mix of international and domestic earnings.

9. DERIVATIVE FINANCIAL INSTRUMENTS

Cash Flow Hedges

The Company has exposure to changes in foreign currency exchange rates related to anticipated cash flows associated with certain international inventory purchases. The Company uses foreign currency forward exchange contracts to hedge against a portion of this exposure.

The Company records the foreign currency forward exchange contracts at fair value in its Consolidated Balance Sheets and does not net the related assets and liabilities. The foreign currency forward exchange contracts associated with certain international inventory purchases are designated as effective hedging instruments (“cash flow hedges”). As such, the changes in the fair value of the cash flow hedges are recorded in equity as a component of accumulated other comprehensive loss (“AOCL”). No amounts were excluded from effectiveness testing.

Net Investment Hedges

The Company has exposure to changes in foreign currency exchange rates related to the value of its investments in foreign subsidiaries denominated in a currency other than the United States dollar. To hedge against a portion of this exposure, the Company designated the carrying amounts of its (i) €600.0 million principal amount of 3 1/8% senior notes due 2027 and (ii) €525.0 million principal amount of 3 5/8% senior notes due 2024 (collectively, “foreign currency borrowings”), that were issued by PVH Corp., a U.S.-based entity, as net investment hedges of its investments in certain of its foreign subsidiaries that use the euro as their functional currency. Please see Note 7, “Debt,” for further discussion of the Company’s foreign currency borrowings.

The Company records the foreign currency borrowings at carrying value in its Consolidated Balance Sheets. The carrying value of the foreign currency borrowings is remeasured at the end of each reporting period to reflect changes in the foreign currency exchange spot rate. Since the foreign currency borrowings are designated as net investment hedges, such remeasurement is recorded in equity as a component of AOCL. The fair value and the carrying value of the foreign currency borrowings designated as net investment hedges were $1,199.1 million and $1,233.6 million, respectively, as of July 30, 2023, $1,192.0 million and $1,215.4 million, respectively, as of January 29, 2023 and $1,147.8 million and $1,139.6 million, respectively, as of July 31, 2022. The Company evaluates the effectiveness of its net investment hedges at inception and at the beginning of each quarter thereafter. No amounts were excluded from effectiveness testing.

Undesignated Contracts

The Company records immediately in earnings changes in the fair value of hedges that are not designated as effective hedging instruments (“undesignated contracts”), which primarily include foreign currency forward exchange contracts related to third party and intercompany transactions, and intercompany loans that are not of a long-term investment nature. Any gains and losses that are immediately recognized in earnings on such contracts are largely offset by the remeasurement of the underlying balances.

The Company does not use derivative or non-derivative financial instruments for trading or speculative purposes. The cash flows from the Company’s hedges are presented in the same category in the Company’s Consolidated Statements of Cash Flows as the items being hedged.

The following table summarizes the fair value and presentation of the Company’s derivative financial instruments in its Consolidated Balance Sheets:


	Assets												Liabilities
	7/30/23				1/29/23				7/31/22				7/30/23				1/29/23				7/31/22
(In millions)	Other Current Assets		Other Assets		Other Current Assets		Other Assets		Other Current Assets		Other Assets		Accrued Expenses		Other Liabilities		Accrued Expenses		Other Liabilities		Accrued Expenses		Other Liabilities
Contracts designated as cash flow hedges:
Foreign currency forward exchange contracts (inventory purchases)	$	6.7	$	—	$	15.7	$	0.1	$	84.5	$	2.5	$	21.8	$	1.4	$	20.7	$	2.2	$	1.1	$	0.1


Undesignated contracts:
Foreign currency forward exchange contracts	0.2		—		—		—		6.7		—		4.3		—		12.5		—		1.5		—


Total	$	6.9	$	—	$	15.7	$	0.1	$	91.2	$	2.5	$	26.1	$	1.4	$	33.2	$	2.2	$	2.6	$	0.1

The notional amount outstanding of foreign currency forward exchange contracts was $1,333.7 million at July 30, 2023. Such contracts expire principally between August 2023 and January 2025.

The following tables summarize the effect of the Company’s hedges designated as cash flow and net investment hedging instruments:


	Gain (Loss) Recognized in Other Comprehensive Income (Loss)

(In millions)

Thirteen Weeks Ended	7/30/23		7/31/22
Foreign currency forward exchange contracts (inventory purchases)	$	5.6	$	12.5

Foreign currency borrowings (net investment hedges)	(3.9)		38.2
Total	$	1.7	$	50.7

Twenty-Six Weeks Ended	7/30/23		7/31/22
Foreign currency forward exchange contracts (inventory purchases)	$	8.0	$	45.8

Foreign currency borrowings (net investment hedges)	(16.9)		105.0
Total	$	(8.9)	$	150.8


	Amount of Gain Reclassified from AOCL into Income, Consolidated Statements of Operations Location, and Total Amount of Consolidated Statements of Operations Line Item
(In millions)	Amount Reclassified				Location	Total Statements of Operations Amount

Thirteen Weeks Ended	7/30/23		7/31/22			7/30/23		7/31/22
Foreign currency forward exchange contracts (inventory purchases)	$	5.4	$	5.2	Cost of goods sold	$	934.7	$	912.5




Twenty-Six Weeks Ended	7/30/23		7/31/22			7/30/23		7/31/22
Foreign currency forward exchange contracts (inventory purchases)	$	10.2	$	3.7	Cost of goods sold	$	1,842.3	$	1,796.5

A net loss in AOCL on foreign currency forward exchange contracts at July 30, 2023 of $4.8 million is estimated to be reclassified in the next 12 months in the Company’s Consolidated Statement of Operations to cost of goods sold as the underlying inventory hedged by such forward exchange contracts is sold. Amounts recognized in AOCL for foreign currency borrowings would be recognized in earnings only upon the sale or substantially complete liquidation of the hedged net investment.

The following table summarizes the effect of the Company’s undesignated contracts recognized in SG&A expenses in its Consolidated Statements of Operations:


(In millions)	(Loss) Gain Recognized in SG&A Expenses
Thirteen Weeks Ended	7/30/23		7/31/22

Foreign currency forward exchange contracts (1)	$	(1.8)	$	12.5


Twenty-Six Weeks Ended	7/30/23		7/31/22
Foreign currency forward exchange contracts (1)	$	(2.8)	$	26.6

(1) Any gains and losses that are immediately recognized in earnings on such contracts are largely offset by the remeasurement of the underlying balances.

The Company had no derivative financial instruments with credit risk-related contingent features underlying the related contracts as of July 30, 2023.

10. FAIR VALUE MEASUREMENTS

In accordance with U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy prioritizes the inputs used to measure fair value as follows:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 – Observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data.

Level 3 – Unobservable inputs reflecting the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability based on the best information available.

In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s financial assets and liabilities that are required to be remeasured at fair value on a recurring basis:


	7/30/23							1/29/23							7/31/22
(In millions)	Level 1		Level 2		Level 3	Total		Level 1		Level 2		Level 3	Total		Level 1		Level 2		Level 3	Total
Assets:
Foreign currency forward exchange contracts	N/A		$	6.9	N/A	$	6.9	N/A		$	15.8	N/A	$	15.8	N/A		$	93.7	N/A	$	93.7
Rabbi trust assets	9.4		N/A		N/A	9.4		7.2		N/A		N/A	7.2		5.1		N/A		N/A	5.1



Total Assets	$	9.4	$	6.9	N/A	$	16.3	$	7.2	$	15.8	N/A	$	23.0	$	5.1	$	93.7	N/A	$	98.8

Liabilities:
Foreign currency forward exchange contracts	N/A		$	27.5	N/A	$	27.5	N/A		$	35.4	N/A	$	35.4	N/A		$	2.7	N/A	$	2.7



Total Liabilities	N/A		$	27.5	N/A	$	27.5	N/A		$	35.4	N/A	$	35.4	N/A		$	2.7	N/A	$	2.7

The fair value of the foreign currency forward exchange contracts is measured as the total amount of currency to be purchased, multiplied by the difference between (i) the forward rate as of the period end and (ii) the settlement rate specified in each contract. The fair value of the rabbi trust assets, which consist of investments in mutual funds, is valued at the net asset value of the funds, as determined by the closing price in the active market in which the individual fund is traded.

The Company established a rabbi trust that, beginning January 1, 2022, holds investments related to the Company’s supplemental savings plan. The rabbi trust is considered a variable interest entity and it is consolidated in the Company’s financial statements because the Company is considered the primary beneficiary of the rabbi trust. The rabbi trust assets, which generally mirror the investment elections made by eligible plan participants, were $9.4 million, $7.2 million and $5.1 million as of July 30, 2023, January 29, 2023 and July 31, 2022, respectively, and recorded in the Company’s Consolidated Balance Sheets as follows: $1.5 million and $7.9 million were included in other current assets and other assets, respectively, as of July 30, 2023, $0.7 million and $6.5 million were included in other current assets and other assets, respectively, as of January 29, 2023, and $0.1 million and $5.0 million were included in other current assets and other assets, respectively, as of July 31, 2022. The corresponding deferred compensation liability was included in accrued expenses and other liabilities in the Company’s Consolidated Balance Sheets as of July 30, 2023, January 29, 2023 and July 31, 2022. Unrealized gains (losses) recognized on the rabbi trust investments were immaterial during the twenty-six weeks ended July 30, 2023 and July 31, 2022.

There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements.

The Company’s non-financial assets, which primarily consist of goodwill, other intangible assets, property, plant and equipment, and operating lease right-of-use assets, are not required to be measured at fair value on a recurring basis, and instead are reported at their carrying amount. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying amount may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial assets are assessed for impairment. If the fair value is determined to be lower than the carrying amount, an impairment charge is recorded to write down the asset to its fair value.

The following table shows the fair values of the Company’s non-financial assets that were required to be remeasured at fair value on a non-recurring basis during the twenty-six weeks ended July 31, 2022, and the total impairments recorded as a result of the remeasurement process (There were no impairments recorded during the twenty-six weeks ended July 30, 2023.):

(In millions)

Fair Value Measurement Using

Fair Value As Of Impairment Date

Total Impairments

7/31/22

Level 1

Level 2

Level 3

Operating lease right-of-use assets

N/A

—

26.4

Property, plant and equipment, net

N/A

—

17.2