EXIT ACTIVITY COSTS

6 Months Ended

Jul. 30, 2023

2022 Cost Savings Initiative

The Company announced in August 2022 that it would be taking steps to streamline its organization and simplify its ways of working. Included in this was a planned reduction in people costs in its global offices by approximately 10% by the end of 2023 to drive efficiencies and enable continued strategic investments to fuel growth, including in digital, supply chain and consumer engagement. The Company expects these reductions will generate annual cost savings of over $100 million, net of continued strategic people investments. In connection with this initiative, the Company recorded $20.2 million of pre-tax costs during 2022 and $39.0 million of pre-tax costs during the thirteen and twenty-six weeks ended July 30, 2023 and expects to incur additional costs of approximately $21 million in the third quarter of 2023.


(In millions)	Total Costs Expected to be Incurred		Costs Incurred During the Thirteen and Twenty-Six Weeks Ended 7/30/23		Cumulative Costs Incurred (1)
Severance, termination benefits and other employee costs	$	80.0	$	39.0	$	59.2

(1) There were no costs incurred during the thirteen and twenty-six week periods ended July 31, 2022.

Of the charges incurred during the thirteen and twenty-six weeks ended July 30, 2023, $6.4 million related to SG&A expenses of the Tommy Hilfiger North America segment, $12.3 million related to SG&A expenses of the Tommy Hilfiger International segment, $5.9 million related to SG&A expenses of the Calvin Klein North America segment, $8.5 million related to SG&A expenses of the Calvin Klein International segment, $4.6 million related to SG&A expenses of the Heritage Brands Wholesale segment and $1.3 million related to corporate SG&A expenses not allocated to any reportable segment. There were $20.2 million of charges incurred during 2022, of which $4.7 million related to SG&A expenses of the Tommy Hilfiger North America segment, $2.5 million related to SG&A expenses of the Tommy Hilfiger International segment, $4.6 million related to SG&A expenses of the Calvin Klein North America segment, $3.5 million related to SG&A expenses of the Calvin Klein International segment, $2.6 million related to SG&A expenses of the Heritage Brands Wholesale segment and $2.3 million related to corporate SG&A expenses not allocated to any reportable segment. Please see Note 16, “Segment Data,” for further discussion of the Company’s reportable segments.

The liabilities at July 30, 2023 related to these costs were principally recorded in accrued expenses in the Company’s Consolidated Balance Sheet and were as follows:


(In millions)	Liability at 1/29/23		Costs Incurred During the Twenty-Six Weeks Ended 7/30/23		Costs Paid During the Twenty-Six Weeks Ended 7/30/23		Liability at 7/30/23
Severance, termination benefits and other employee costs	$	13.2	$	39.0	$	8.7	$	43.5

Russia Business Exit Costs

As a result of the war in Ukraine, the Company made the decision in the second quarter of 2022 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. In connection with this exit, the Company recorded pre-tax costs during 2022 as shown in the following table. All expected costs related to the exit from the Russia business were incurred during 2022.


(In millions)	Costs Incurred During the Thirteen and Twenty-Six Weeks Ended 7/31/22		Cumulative Net Costs Incurred
Severance, termination benefits and other employee costs	$	2.1	$	2.1
Long-lived asset impairments	43.6		43.6
Contract termination and other costs, net of gain on lease terminations (1)	4.8		(2.7)
Total	$	50.5	$	43.0

(1) Contract termination and other costs, net of gain on lease terminations includes $4.8 million of contract termination and other costs recorded during the second quarter of 2022 and a $7.5 million gain related to the early termination of certain store lease agreements in Russia recorded during the fourth quarter of 2022.

Of the costs incurred during the thirteen and twenty-six weeks ended July 31, 2022, $36.7 million relate to SG&A expenses of the Tommy Hilfiger International segment and $13.8 million relate to SG&A expenses of the Calvin Klein International segment. Of the cumulative net costs incurred during 2022, $31.6 million relate to SG&A expenses of the Tommy Hilfiger International segment and $11.4 million relate to SG&A expenses of the Calvin Klein International segment. Please see Note 16, “Segment Data,” for further discussion of the Company’s reportable segments.

The liabilities at July 30, 2023 related to these costs were principally recorded in accrued expenses in the Company’s Consolidated Balance Sheet and were as follows:


(In millions)	Liability at 1/29/23		Costs Incurred During the Twenty-Six Weeks Ended 7/30/23		Costs Paid During the Twenty-Six Weeks Ended 7/30/23		Liability at 7/30/23
Severance, termination benefits and other employee costs	$	0.4	$	—	$	0.1	$	0.3
Contract termination and other costs	0.5		—		0.4		0.1
Total	$	0.9	$	—	$	0.5	$	0.4