PVH Corp. (NYSE:PVH) Q4 2022 Earnings Call Transcript March 28, 2023
Operator: Good morning, everyone, and welcome to today’s PVH’s Fourth Quarter and Full Year 2022 Earnings Conference Call. . It is now my pleasure to turn today’s program over to Sheryl Freeman, Senior Vice President of Investor Relations.
Sheryl Freeman: Thank you, operator. Good morning, everyone and welcome to the PVH Corp. Fourth Quarter and Full Year 2022 Earnings Conference Call. Leading the call today will be Stefan Larsson, Chief Executive Officer; and Zac Coughlin, Chief Financial Officer. This webcast and conference call is being recorded on behalf of PVH and consists of copyrighted material. It may not be recorded, rebroadcast or otherwise transmitted without PVH’s written permission. Your participation constitutes your consent to having anything you say appear on any transcript or replay of this call. The information to be discussed includes forward-looking statements that reflect PVH’s view as of March 28, 2023, of future events and financial performance.
These statements are subject to risks and uncertainties indicated in the company’s SEC filings and the safe harbor statements included in the press release that is the subject of this call. These include PVH’s right to change its strategies, objectives, expectations and intentions and the company’s ability to realize anticipated benefits and savings from divestitures, restructurings and similar plans such as the planned cost efficiency action announced in its second quarter earnings release and its 2021 sale of and exit from its Heritage Brands business to focus on the Calvin Klein and Tommy Hilfiger businesses. Significantly, the COVID-19 pandemic, global inflationary pressures and the war in Ukraine continue to have impacts on PVH’s business, cash flow and results of operations.
There is significant uncertainty about the duration and extent of these impacts. As a result, what is said on this call could change materially at any time. Therefore, the operation of the company’s business and its future results of operations could differ materially from historical practices and results or current descriptions, estimates and suggestions. PVH does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimates regarding revenue or earnings. Generally, the financial information and projections to be discussed will be on a non-GAAP basis as defined under SEC rules. Reconciliations to GAAP amounts are included in PVH’s fourth quarter 2022 earnings release, which can be found on www.pvh.com and in the company’s current report on Form 8-K furnished to the SEC in connection with the release.
At this time, I’m pleased to turn the conference over to Stefan Larsson.
Stefan Larsson: Thank you, Sheryl, and good morning, everyone, and thank you for joining our call today. We are pleased to report that we drove strong fourth quarter financial performance ahead of expectations for both the top and bottom line, led by strength in our direct-to-consumer businesses. Revenue exceeded our expectations on both a reported and constant currency basis. And underlying growth, excluding the impact of currency and the Russia-Ukraine exit, was plus 9% in the fourth quarter driven by better-than-expected results for both Tommy Hilfiger and Calvin Klein. We are coming into 2023 with strong momentum and expect to continue to grow our top line, led by outsized D2C growth while planning to deliver EBIT margin expansion and double-digit EPS growth.
The growth in 2022 was driven by strong consumer response to our product, marketing and marketplace execution across both brands and across all regions. We showed that we were able to compete to win in what proved to be a much more challenging macro environment than any of us expected going into the year. And I would like to highlight some of the proactive choices we made to make that happen. Last April, we shared our long-term vision and multiyear growth plan at our Investor Day. The PVH+ Plan is our brand-focused, direct-to-consumer and digitally led growth plan that will over time build Calvin Klein and Tommy Hilfiger into the most desirable lifestyle brands in the world and in parallel, making PVH one of the highest performing brand groups in our sector.
The clarity of our direction and plan have provided a very strong focus for everyone in the company. We know where we are going, we know how we will get there and we made great progress in the first year of execution. This stronger execution focus is gaining traction across the company and we will continue into this year. In 2022, both Calvin and Tommy delivered increased strength in product with hero products across key categories and in our consumer engagement with cut-through campaigns, collaborations and world-class talent partnerships. This strength in product and consumer engagement is a big reason we drove high-quality plus 9% underlying revenue growth with increased pricing power. For 2022 from a regional perspective, Europe continued to grow from a position of strength in a challenging environment and delivered a very strong plus 10% growth in euros when adjusting for the Russia exit.
In Asia, we are setting out to accelerate our growth. We were able to drive outstanding performance in the markets that were not in COVID lockdown, driving plus 11% constant currency growth for the total region and plus 23% constant currency growth outside of China. And in North America, we were able to start to win more with our domestic consumer, driving plus 9% growth for Tommy and Calvin together in a brand-accretive way, recognizing that this is the beginning of a multiyear unlock. From a supply chain perspective, we successfully navigated through the COVID-related challenges. Over the year, we increased our on-time deliveries from 60% to 95%, which have and will continue to deliver a positive impact on both availability and cost. And we are now about to unleash the next steps in building our supply chain to become a real strategic value driver.
We are creating a strong data-driven sourcing approach that will return not only efficiencies and cost reduction opportunities but also enable us to invest back into great products. In addition, we are optimizing our SKU breadth to create higher productivity by cutting the unproductive assortment tail. We also came into the year knowing that an important underlying driver of the PVH+ Plan is to become more cost competitive in a way that simplifies how we work, increase our speed in decision-making and empowers our team to execute and enables us to drive new growth by making strategic investments in areas such as marketing, supply chain and technology. I’m pleased to share that we made significant progress here during the year. Perhaps the most important improvements we have made this past year was to continue to strengthen our management team with the capabilities needed to translate our PVH+ Plan to impact.
From my experience, the strength of the leadership team is the single most important factor in successfully translating a value-creating plan into action and impact. I’m proud to share that we made significant progress in this critical area. Zac Coughlin joined as our CFO, David Savman as our Chief Supply Chain Officer, and Sara Bland as our Chief Strategy Officer. All 3 bring highly relevant experience and we are already seeing the positive impact from their leadership. And then as of this month, Eva Serrano joined as Calvin Klein Global President, having spent 20 years as one of the key leaders behind the growth of Zara and Inditex. And Donald Kohler joined as Calvin Klein America’s President, having spent a big part of his career on the team that turned around Burberry, both from global roles and as Head of North America for them.
With these appointments complementing our strong existing leadership team, we have the capabilities, experiences and the competitive mindset needed to deliver on our long-term PVH+ growth commitments. Finally, I spent a big part of my time in 2022 traveling to experience our markets and stores from the consumer’s perspective. And I continue to be impressed by our people and teams around the world. I want to thank all of our associates for their hard work during 2022 and give a special recognition to our store managers. Their incredible work ethic, expertise and their passion to every day go out there and win with the consumer is an inspiration to all of us. Now turning to our regional performance and how we are connecting our brands and executing the PVH+ Plan across each region.
Starting with Europe. Our Europe team continued to drive very strong performance, reflecting the power our brands have with consumers in the region. Despite macro headwinds, we really leaned into the business that finished the year strong. We delivered double-digit year-over-year growth for the fourth quarter and had another record quarter, exceeding EUR 1 billion in revenue. For the year, Europe also delivered double-digit underlying revenue growth adjusted for FX and our Russia exit, including growth in every quarter of 2022. Growth in the fourth quarter was led by our retail stores, which generated very strong performance during the holidays selling period. We also saw strong early wholesale shipments of spring 2023 collections, which have been very well received by our partners.
Growth was enabled by better product availability, increased operational efficiencies and faster product deliveries. Our Tommy product strategy continues to be driven by product elevation, winning assortments and product stories true to the Tommy DNA, all with a focus on reaching the aspiration of consumer. This was supported by our hero product strategy, which was a strong enabler of growth in 2022. And in 2023, we are further increasing our category offerings and with that, amplifying our iconic products. For Calvin, we continue to leverage our proven playbook from Tommy to further build out Calvin as a lifestyle brand across product categories. We see strong growth momentum in footwear, accessories, next to our established Calvin Klein underwear and jeans businesses.
We have seen favorable demand from consumers for our spring collection with unplanned early sell-through at wholesale. Looking ahead, adjusting for Russia and improved delivery performance compared to last year’s supply chain disruptions, our shipped order book for fall is expected to be up low single digits. While our wholesale partners are taking a conservative approach, given the potential for macroeconomic volatility, we are well positioned to capitalize should stronger demand continue through our best-in-class operating model and strong never-out-of-stock program. Moving on to Asia Pacific. Our Asia team continued to deliver solid growth in constant currency in the fourth quarter outside of Greater China. In Greater China, we generated stronger-than-expected 11.11 performance, which was offset by the widespread COVID impact.
For the year, the region generated strong double-digit constant currency growth. And both Calvin and Tommy continued to increase their brand awareness. Our focus on key growth categories and hero products and ongoing efforts to refine the products assortment through regionally relevant products with SKU rationalization are driving results. In the fourth quarter, our hero products outperformed with higher AURs and lower discounts. We continue to lean in and win key consumer moments such as Lunar New Year by driving engagement and performance above plan, fueled by successful product capsule launches and consumer activations. Both brands continue to move up the rankings on Tmall, underscoring the strength of our brands and product in the market and how well they are resonating with consumers.
For the holiday, we launched the Tommy Miffy Capsule Collection, which feature the iconic cartoon character Miffy. The omnichannel campaign and capsule launch was brought to life across retail, social media, influencer collaborations and e-commerce partnerships, fueling strong brand heat. Calvin also launched a dedicated capsule and consumers had the opportunity to dress virtual avatars in the collection called Ready Player Me. As we look toward 2023, we are working to further expand the region’s digital capabilities and to enable a single consumer view across channels as well as faster digital execution. We continue to make investments in newer channels such as Douyin live streaming and collaborations with the Tmall Innovation Center, which leverages big data and consumer insights to offer customized styles.
We’re also laying the foundation for new and enhanced capabilities in our supply chain through Asia for Asia sourcing, as well as improving our demand planning to focus increasingly on core replenishment and a read-and-react model to enable shorter lead times with higher in-season buying. Looking ahead, our brands have a clear premium brand and product positioning with the opportunity to grow further in all markets. We continue to lean into further increasing overall brand awareness, especially in China, where both Calvin and Tommy are underpenetrated. Lastly, shifting gears to our business in North America. Step by step, we are getting early traction in growing the business in a brand accretive way, underpinned by a clear category and product focus to deliver sustainable, profitable growth with an increased focus on the domestic consumer.
Our Tommy and Calvin businesses delivered mid-single-digit growth in the fourth quarter, led by our D2C stores. We delivered strong performance despite a very promotional holiday period, given elevated inventory levels across the market. For the year, our Tommy and Calvin businesses increased high single digits. Our D2C stores delivered high single-digit positive comps in the fourth quarter driven by improved product assortments and in-stock levels. Most importantly, we continue to drive improved domestic consumer comps. Our assortment and product improvements continue to yield results. For Tommy, our global bestseller initiative, which focuses on combining global winning design, scaled quickly to 70% of our D2C business. This initiative is generating higher AURs, stronger sell-throughs and higher gross margins compared to the balance of the assortment.
One great example that we shared with you last quarter pertain to our expanding Polo business. Building on the prior quarter success in this key category, in the fourth quarter, our 3 biggest Polo product franchises were up plus 21% versus 2019. We also saw significant progress with on-time deliveries in the region with over 90% of our spring season on time compared to a year ago where we were just 32% on time at the start of the year. This improvement is a direct result of our improved supply chain leadership. Looking ahead to 2023, we are focused on applying our learnings from 2022 and further scale our growth initiatives in North America. We are doubling down on the performance drivers in our D2C stores through rigorous assortment billing and , even better matched to demand with a focus on in-stock improvements in key categories.
For Tommy, we’re expanding the Tommy global bestseller initiative to the wholesale channel. And for Calvin, we’re building market share in CK underwear by improving replenishment execution and in-stock levels across all channels coupled with our impactful marketing execution. At the same time, we are making investments in store upgrades to ensure our stores deliver an elevated consumer experience. Next, I’ll share a few global brand highlights and how we are bringing both brands to life for the consumer, beginning with Calvin Klein. Jonathan Bottomley, our global Calvin Klein CMO, and our Calvin marketing team have done a fantastic job in going back to the iconic DNA of Calvin Klein and made it highly relevant to today. During the past few months, we have been able to see this work come to life under the campaign umbrella of Calvins or nothing.
In January, the campaign launched with global tennis star, Carlos Alcaraz, in our signature cotton underwear styles, wearing our classic straight jeans and it drove strong results. More recently, the spring chapter of the campaign was launched globally starring ambassadors and friends of the brand including Michael B. Jordan, Jennie Kim, Kendall Jenner, FKA Twigs and the Aaron Taylor-Johnson. Dressed in the latest underwear and jeans, the full cast introduced a wide range of new styles for the season. The campaign launched with Michael B. Jordan timed to the release of his highly anticipated film, Creed III. The campaign images quickly went viral across social media and generated very high engagement. The colab post between Calvin and Michael B.
Jordan is now one of our highest performing post to date with a total reach of 8 million on OwnSocial. We saw incredibly strong organic broadcast and digital coverage across entertainment, pop culture and fashion outlets, including on Jimmy Kimmel Live! for a total reach of 1.3 billion in the 24 hours after launch. And the campaign pickup didn’t stop there. The brand’s colab post with Kendall Jenner is now the highest reaching post of the year with 13.4 million in reach, again, a testament to the power of the right imagery and the right talent to cut through. Also launching this week, Jungkook, a member of the extremely popular South Korean boy band, BTS, will join the brand as global ambassador for Calvin Klein jeans and Calvin Klein underwear.
Moving on to Tommy Hilfiger. Tommy, with its unique classic American cool DNA, continued to drive strong brand visibility and relevance among our target consumers. The brand generated approximately 4 billion impressions from November to January. Tapping into a moment of strong consumer relevance, the brand’s Miffy collaboration, which I just spoke to, although developed for the Lunar New Year celebrations, was leveraged globally and it was one of our strongest performing capsules. Looking ahead, our Tommy spring campaign, Classics Reborn with Shawn Mendes recently launched globally. And as part of that, Tommy and Shawn just hosted a tour of immersive events in London, Berlin, Milan and Mexico City. Selected flagship stores held in-store activations.
Sustainability stands at the heart of this collaboration with the collection incorporating a broad range of recycled and other sustainable materials. The Tommy Jeans label is also fostering new consumer connections through the upcoming Tommy Aries collaboration, which features a bold and creative play on all things Tommy Jeans. The collection is inspired by archival Tommy pieces and will, in the coming days, be available for early access online in our own stores and in key streetwear retailers globally. For both brands, we are looking forward to an exciting 2023. It will be a year to take another big step forward in delivering on our PVH+ commitments towards our long-term vision of building Tommy and Calvin into the most desirable lifestyle brands in the world, all while becoming one of the highest performing brand groups in our sector.
I recognize the macroeconomic environment will likely continue to be tough. So we will be relentless in executing our 5 PVH+ growth drivers across both brands and all regions. In winning with products, we will advance our category offerings and create the best hero products in the market. In winning with consumer engagement, we will deliver seasonal cut-through campaigns charged by an increasingly strong network of aspirational talent. You will also see us improve the aspirational presence of all consumer touch points ranging from social media, e-commerce to in-store. We’re also investing more into marketing as a share of sales to make sure we continue to cut through with our initiatives. In winning in the digital marketplace, we will continue to drive D2C offense across both the e-commerce and stores with improved productivity, all while we strengthen our partnership and business with our key wholesale partners and increasing our full price penetration.
We are continuing to drive e-commerce strength, both owned and operated and with key partners. We are only in the beginning of developing our demand-driven supply chain. And this year, we will make progress in cost of goods, delivery accuracy and leveraging our scale across both brands, all while we take big steps to become cost competitive, going after efficiencies while investing behind our growth drivers. I look forward to building on the strong momentum we started in 2022 to win in 2023 and beyond. We are starting to get real traction around the vision, the plan, the execution and most importantly, the team and the mindset needed to get it done. Over time, there is enormous power in the compounded effect on being consistent in direction and value-creating focus through the PVH+ Plan.
I’ll now turn the call over to Zac to discuss the financials in more detail.
Zachary Coughlin: Thanks, Stefan and good morning. My comments are based on non-GAAP results and are reconciled in our press release. As Stefan discussed, we are extremely pleased with our results for the fourth quarter and the full year, which significantly exceeded both our top and bottom line guidance, driven by strength in our European business and continued cost discipline globally. 2022 was a year of unprecedented macroeconomic volatility. And in this tough environment, we fought hard to win by focusing on what is within our control. Our ability to drive underlying revenue growth of 9% for 2022 and earnings per share of $8.97, in line with our initial expectations at the start of the year, approximately $9 per share, is a testament to our disciplined execution of our strategic priorities and the power of our 2 global brands, Calvin Klein and Tommy Hilfiger.
We are encouraged by the positive momentum we drove in the fourth quarter and are confident that we can deliver solid top line growth in 2023 while driving increasingly improved profitability. I will now discuss our 2022 results in more detail and then we’ll move on to our outlook 2023. Our strong fourth quarter results delivered underlying revenue growth of 9% versus last year, exceeding our top line guidance by 4% on a constant currency basis. And we delivered earnings per share of $2.38, significantly exceeding our earnings guidance by $0.73. Our underlying revenue growth was driven by both our Tommy Hilfiger and Calvin Klein brands. We delivered strong revenue growth in Europe and continued growth in North America driven by the direct-to-consumer business.
We continue to experience negative impacts in China from the COVID pandemic but the rest of Asia Pacific continued to drive growth in constant currency. On a reported basis, fourth quarter revenue was up 2%, which reflected a 6% negative impact from exchange and a 1% negative impact from the war in Ukraine. We continue to focus on driving performance in our direct-to-consumer business, where we have the closest connection to our consumer. And DTC was up double digits on an underlying basis driven by strong high single-digit growth in North America and mid-teens growth in Europe in euros. On a reported basis, DTC revenue was up 4% compared to last year, which reflected a 6% negative impact from exchange and a 1% negative impact from the war in Ukraine.
From a regional perspective, fourth quarter revenue for our international business was up 11% versus last year on a constant currency basis, continuing to significantly exceed 2019 pre-pandemic levels. Within our international business, our European business had another record quarter following the first EUR 1 billion quarter in the company’s history in the third quarter. Our Asia Pacific business was down 8% on a reported basis, including a 9% negative impact of exchange. Fourth quarter results in Asia Pacific were severely impacted as COVID cases in China rose following the lifting of restrictions there but saw improvement at the end of the quarter and into the first quarter of 2023. In North America, revenue in the fourth quarter was up 5% overall for Tommy Hilfiger and Calvin Klein with our retail store business up high single digits versus last year as we drove sequential improvement versus the third quarter in sales to domestic consumers.
Our domestic comp sales are now up mid-single digits compared to 2019 levels. Our global brands also continued strong underlying growth, balanced across both brands, with Tommy Hilfiger revenues up 10% on a constant currency basis and Calvin Klein revenues up 8% on a constant currency basis. Reported revenues were up 3% for both Tommy Hilfiger and Calvin Klein. In the fourth quarter, we delivered gross margin of 55.9%, up approximately 190 basis points compared to pre-pandemic levels but down approximately 240 basis points compared to last year. Gross margin reflected favorable region and channel mix compared to last year as well as planned price increases. Those benefits were more than offset by higher product costs, elevated ocean freight rates and increased promotional selling compared to last year as inventory levels are elevated across the industry.
Later, I will discuss how some of these headwinds transition into tailwinds for 2023. SG&A expense as a percentage of revenue for the fourth quarter was 47.2%, down nearly 400 basis points from last year and better across all dimensions of the business. We continue to take a disciplined approach to managing expenses, driving cost efficiencies while making targeted investments in strategic areas to fuel growth, in line with the fifth growth driver of the PVH+ Plan. In total, EBIT for the quarter was $215 million, exceeding our expectations due to strong revenue performance and lower expenses. Operating margin was 8.6% as reported and 9% excluding the negative impact of approximately 40 basis points due to exchange. Earnings per share was $2.38 compared to $2.84 in last year’s fourth quarter and exceeded our guidance by $0.73, almost entirely driven by the improvement in EBIT.
Earnings per share for the quarter also included a $0.23 negative impact compared to the prior year related to exchange and a $0.13 negative impact due to the war in Ukraine. Excluding these 2 external factors, earnings per share was almost flat to prior year. Our tax rate was approximately 22%. As a reminder, in last year’s fourth quarter, we benefited from noncash tax rate relief tied to our purchase of the Calvin Klein brand back in 2003. This benefit ran out in 2021. As a result, our tax rate in the fourth quarter of last year was a benefit of approximately 33%. Inventory was up 34% at the end of the quarter compared to the prior year period due to a combination of factors. As we’ve discussed, inventory levels were abnormally low in 2021 due to supply chain and logistics disruptions, which intensified in the second half of 2021.
We have seen steady progress over the course of 2022 towards pre-pandemic production capacity and significantly improved delivery times. And in the fourth quarter this year, we experienced much earlier receipts of inventory as these supply chain and logistics disruptions had eased. This enabled us to capitalize on incremental top line opportunities in wholesale for the quarter but also contributed to the higher ending inventory levels. Absent the elevation due to timing of receipts, we have normalized back to inventory levels that support our planned growth. We also felt the full impact this quarter of higher product costs compared to last year. Looking into 2023, we expect cost to improve as we move through the year, particularly in the second half.
We ended the full year 2022 with revenue of $9 billion and underlying revenue growth of high single digits aligned to our long-term financial algorithm and driven by growth in all regions and in both our Tommy Hilfiger and Calvin Klein brands. Our full year reported revenue was down 1% versus prior year and reflected a negative impact of 7% from exchange and 3% from the exit of Heritage Brands and the war in Ukraine. Operating margin was 9.5% and our tax rate for the year was 23.3%. Overall, we delivered earnings per share of $8.97, delivering our initial start-of-year guidance of approximately $9 per share. Additionally, we delivered on our commitment under the PVH+ Plan to return excess cash to shareholders, returning over $400 million to shareholders during the year through the repurchase of 6.2 million PVH shares and our dividend, including approximately $73 million for the repurchase of 1.1 million shares in the fourth quarter.
Moving on to our outlook. In 2023, we expect to continue to execute our strategic priorities to unlock the full potential of our 2 global brands, Tommy Hilfiger and Calvin Klein and as a result, drive strong financial performance across all regions. We ended 2022 strongly and are entering 2023 with momentum behind the PVH+ Plan. With that said, we acknowledge that macroeconomic uncertainties still exist with consumer sentiment tempered by inflationary concerns, particularly in North America and to a lesser extent in Europe and retailers planning cautiously due to elevated inventory levels industry wide. As such, we’ve approached our plans for 2023 with a healthy balance of optimism and prudence. We are projecting revenue growth in all regions with operating margin expanding to approximately 10% and earnings growing 11% to approximately $10 per share.
For the full year, our overall revenue is projected to grow approximately 3% to 4% as reported and approximately 2% to 3% on a constant currency basis compared to 2022. This reflects a benefit of less than 1% from the 53rd week of 2023. Europe and North America are planned to grow low single digits with strong growth in our direct-to-consumer channel, tempered by wholesale as retailers remain cautious on buys. In Asia Pacific, plan to grow by low double digits as China has eased COVID restrictions. We expect our full year gross margin rate to increase over 100 basis points compared to 2022 despite approximately 100 basis points of higher cost due to exchange, which we have previously discussed. The improvement in our gross margin is supported by a favorable shift in channel and regional mix compared to 2022 as we accelerate growth in our higher-margin DTC business in line with our PVH+ strategies.
And our DTC and international businesses make up a larger portion of total revenue. Additionally, we are seeing ocean freight rates coming down rapidly. We are using significantly less airfreight and abnormally high raw material costs will ease as we move through 2023, particularly in the second half of the year. SG&A expense as a percentage of revenue for the full year is expected to increase approximately 70 basis points compared to 2022. We continue to drive cost efficiencies across the business while targeting our investment focus on key areas that drive growth, especially marketing. We expect to generate increasing savings as we move through the year related to our plan to reduce people cost in our global offices by approximately 10% by the end of 2023.
But these benefits are more than offset by the impact of regional and channel mix, which although favorable to our gross margin, carry higher expenses. We expect our full year operating margin will increase to approximately 10%, reflecting high single-digit EBIT growth. Interest expense is projected to be approximately $100 million and our tax rate for the year is estimated at approximately 24%. For the full year 2023, we are projecting earnings per share to be approximately $10, up 11% versus 2022. Looking at the balance sheet, we expect to build cash with a significant increase in cash from operations, reflecting an improvement in working capital due to lower inventories compared to 2022 as receipt flow normalizes. We are projecting capital spending of $350 million, which is approximately 4% of sales as we invest in our stores, supply chain and technology and in line with our PVH+ Plan priorities.
We are also currently planning at least $200 million of share repurchases and will continue to review opportunities for capital deployment as we move through 2023. To zero in on the first quarter specifically, we expect to continue to be challenged by residual inflationary pressures and lingering macroeconomic uncertainties. Our overall revenue is projected to be relatively flat as reported and to increase by approximately 3% on a constant currency basis compared to the prior year. First quarter earnings per share are projected to be approximately $1.90, which reflects a negative impact of approximately $0.10 due to exchange translation. Our tax rate for the first quarter is estimated at approximately 24% and interest expense is projected to be approximately $23 million.
Before I open up for questions, I just want to reiterate that we remain confident in our ability to win in a tough environment as evidenced by our performance in 2022. And while we expect the macro environment will continue to be volatile in 2023, we are continuing to focus on executing our strategies to drive top line growth, improve profitability and strong double-digit EPS growth in 2023. And with that, operator, we would like to open it up to questions.
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