Africa Sourcing Strat

PArfreicsaenStaotuiorcninNgaSmtreategy

Location / Presenter / Team / etc.
DOactoeber 2017

TUG Partner Summit in Africa 0

Confidentiality:

“This presentation includes confidential and proprietary information of PVH Corp.
(together with its subsidiaries, “PVH”).

PVH associates are bound to keep this information confidential pursuant to PVH
policies.

All other attendees are bound under the terms of their respective agreements with
PVH.

By your attendance at this presentation, you acknowledge your obligation to keep
in strict confidence all such confidential and proprietary information.”

TUG Partner Summit in Africa Confidential Information 1

Background

Africa is an optimal and sustainable destination with long term viability:
untapped low cost labor pool, duty free access, high operational efficiencies,
supportive governments, available land, clean & affordable energy.

TUG has developed and is growing a strategic L1 footprint in Africa that can
service multi brand, multi category, and both genders’ product needs.

In order for Africa to be a long term sustainable resource for TUG and PVH, and to unlock
supply chain efficiencies, verticality, and speed, L2 partners must invest and set up in-
region. The potential of Africa will not be fully realized if raw material inputs are imported.

TUG cannot exclusively support an L2 supplier based on high capital investment & volume
requirements. In order for L2 partners to understand the value and potential of Africa, TUG &
PVH must combine efforts & partner with other brands setting up in the region.

TUG Partner Summit in Africa Confidential Information 2

Objective in Africa

Develop strategic & sustainable manufacturing presence in Africa
to drive long term growth and value for TUG & PVH

TUG Partner Summit in Africa 3

Confidential Information

Agenda 4

Journey in East Africa
Strategic overview – Africa focus
RM (L2) sourcing plan to support growth
Evaluating Potential L2 Partners for Africa
L2 Priorities

TUG Partner Summit in Africa

PVH and TUG journey in East Africa

2013 2014 2015 2016 2017 2018-
future

Selected Visited with Broke ground Park opened 1St dress Build vertical
shirt shipped supply chain
Ethiopia & EA other industry in Hawassa

leaders

Selected Hela 1st order 1st order More partners
as 1st mover shipped from shipped from to invest in
Africa
partner Kenya Hawassa

TUG Partner Summit in Africa 5
Confidential Information

Agenda 6

Journey in East Africa
Strategic overview – Africa focus
RM (L2) sourcing plan to support growth
Evaluating Potential L2 Partners for Africa
L2 Priorities

TUG Partner Summit in Africa

Strategic overview

Africa:

• Expand global footprint within current
vendor base

• Reduce over-penetration in Sri Lanka
• Capture cost of goods & duty benefits

Kenya Ethiopia
Men’s: CKUM & HUW Women’s: Core Intimates & CKUW

• Established a multi-category offering in • Established women’s bottoms
men’s underwear bottoms and tops • Expand category offering to bras by 2019
• Develop dedicated supply chain capability to
• Opportunity for synthetic bottoms growth
support Mass channel growth

TUG Partner Summit in Africa 7
Confidential Information

Into Africa: Advantages

 Oversight & “right first time” opportunity in Ethiopia
− Input into factory construction & set up within Hawasa park (PVH investment)

 Sustainability & environmental focus
− Operating in a new country without negatively impacting environment

 Manufacturing excellence
− MET will create best in class facility, with accurate benchmarking & optimized process

 Simple product with significant volume
− CKU Men’s Cotton Stretch in Kenya
− Warner’s ‘No pinching, no problems’ panty in Ethiopia [will be referred to as NPNP panty]

 Setting example for other vendor partners
− Significant increase in share of business for Foundation- “first-mover”
− Opportunity to influence raw material suppliers based on growth

 Cost of goods benefits
− Lower wages & cost inputs

 Duty benefits
− Biggest win in synthetics

TUG Partner Summit in Africa 8

Confidential Information

Sizing the opportunity in EA: 2020 view

Additional opportunity of 7M TUG units in Egypt

Bras Underwear Active Bottoms Women’s Knitted tops Woven Shirts Kids Outer- Men’s
tops wear Suits

Estimated annual unit volume 2020:

Overall sourcing volume: 120M PVH total volume: 61M Total TUG volume: 30M

TUG Partner Summit in Africa 9
Confidential Information

Evolving our global footprint with best in class partners

Country of origin landscape (mfg. units)
32%

25% 2017
>150% 2020
Growth
11%11% 11% 8% 8% 4% 4% 3% 3% 1% 2%
17% 17% India 10% 7% 7% Indonesia
13% Thailand Egypt Near shore
China Vietnam
5%

Sri Lanka Bangladesh E Africa

Optimizing COO landscape to support regional business needs 10
Confidential Information
TUG Partner Summit in Africa

Growth of TUG volume in Africa

5% 8% 11% 13%

TUG Partner Summit in Africa 11
Confidential Information

TUG men’s Kenya overview

Volume overview Current program details

Mfg units (M)  CKU Men’s Cotton Stretch bottoms
− Transitioned North America volume to
maximize LDP benefits for North America

 Heritage Brands Men’s cotton tops
− Transitioned program from Sri Lanka to
Kenya in 2017

TUG Partner Summit in Africa 12
Confidential Information

Women’s Ethiopia strategy overview

Volume overview Current program details

Mfg units (M)  Core IA Panties
− NPNP panty 5609W transition started May
2017
− Aim to move all volume of the program to
Ethiopia by 2020 to maximize LDP benefits

 Bras
− First Bra production with PT Sumbar planned
for Q2 2018
− Starting with leveraged Bra style
1269/RM1691 that sells across multiple
channels.

TUG Partner Summit in Africa 13
Confidential Information

How big can Africa be?

What needs to happen for this growth………………A…bi…lit.y to support additional growth within TUG
(future acquisitions, etc.)

• Ability to support additional growth within TUG (future acquisitions, etc.)

• Future sourcing diversification  Future sourcing diversification

• 17.4% unemployed workforce  To partner with vendors through MET to deliver highest
level of productivity & efficiency

• To partner with vendors through MET to deliver highest level of productivity & efficiency

 Speed capabilities

• Speed capabilities

 Leverage presence in EA to supply broader Africa region

• Leverage presence in EA to supply broader Africa region

TUG Partner Summit in Africa Confidential Information 14

Agenda 15

Journey in East Africa
Strategic overview – Africa focus
RM (L2) sourcing plan to support growth
Evaluating Potential L2 Partners for Africa
L2 Priorities

TUG Partner Summit in Africa

Evolving the RM COO global footprint

63% 2017
42% 2020

19%

15% 12% 12%

9% 8% 4% 3% 0% 2% 1% 1% 0 1% 0 0%
4% 4% 0% 0% Kenya Italy Near Indonesia
Shore
China Sri Lanka India Egypt Ethiopia Vietnam
16
Bangladesh Confidential Information

Level 2 should support Level 1 strategy

TUG Partner Summit in Africa

Packaging COO global footprint

70% 2017
2020

51%

38%

22%

4% 4% 3% 2% 2% 1% 1% 1% 0% 0% 0% 0%
Turkey Italy
China Sri Lanka Ethiopia Bangladesh India Near Shore Taiwan

Level 2 should support Level 1 strategy

TUG Partner Summit in Africa 17
Confidential Information

TUG total RM volume

Raw material strategy: total volume by 2020

Men’s Women’s Total
2020 2020
2020 15,000,000
RM 4,300,000 10,600,000 30,000,000
21,200,000 45,000,000
Elastics 7,185,400 31,800,000

Grand Total 11,485,400

Unit of Measure 18
RM- Yards Confidential Information
Elastics- Yards

TUG Partner Summit in Africa

TUG Men’s East Africa component volume

2017 2020

Cotton Stretch RM Elastics RM Elastics

Knit Boxer 2,750,000 5,500,000 2,800,000 5,600,000

Liquid Stretch Micro 100,000 198,000

Monogram 2,200 4,400

THU Cotton Classics 42,000 83,000

Woven Boxer 1,250,000 700,000
136,000
Grand Total 4,200,000 272,000 650,000 1,300,000
5,800,000
Unit of Measure 4,300,000 7,185,400
RM- Yards
Elastics- Yards 19
TUG Partner Summit in Africa Confidential Information

TUG CI Women’s component volume

NPNP Panty Cloud 9 Wire free

2017 2018 2020 2017 2018 2020

RM 700,000 3,000,000 9,000,000 Ramp up 140,000 1,600,000

Elastics 1,400,000 6,000,000 18,000,000 2018 278,000 3,200,000

Pads 278,000 3,200,000

Rings/Slides 1,100,000 12,900,000

Grand Total 2,100,000 9,000,000 27,000,000 1,796,000 20,900,000

Unit of Measure 20
RM- Yards Confidential Information
Elastics- Yards
Pads- Pair
Rings/Slides- per piece
TUG Partner Summit in Africa

TUG Men’s East Africa Packaging volume

2017

Jboard Box Zip Size Hang Label/ PDQ
Pouch Sticker tag HT -
Cotton Stretch 2,000,000 2,000,000pp
- 2,000,000 - 5,500,000

Knit Boxer - - -- - --

Liquid Stretch Micro - - -- - --

Monogram - - -- - --

THU Cotton Classics 900,000 - 900,000 900,000 - 2,500,000 -

Woven Boxer 65,000 120,000paper 65,000 185,000 - 272,000 3,750

Total 2017 2,965,000 2,120,000 965,000 3,085,000 8,272,000 3,750

TUG Partner Summit in Africa 21
Confidential Information

TUG Men’s East Africa Packaging volume

Jboard Box Zip 2020 Hang Label/ PDQ
2,050,000 Pouch tag HT -
Size -
Cotton Stretch 2,050,000pp - Sticker - 5,600,000 -
Knit Boxer 2,050,000 -
Liquid Stretch Micro -
Monogram - 42,000paper - 42,000 355,000 397,000
THU Cotton Classics 4,050
Woven Boxer - 4,400paper - 4,400 - 4,400

- 83,000paper - 83,000 20,000 83,000

450,000 - 450,000 450,000 - 1,400,000

300,000 130,000paper 300,000 430,000 - 1,300,000

Total 2018 2,800,000 2,309,400 750,000 3,059,400 375,000 8,784,400 4,050

TUG Partner Summit in Africa 22
Confidential Information

TUG CI Women’s Packaging volume

NPNP Cloud 9 Wire free

2017 2018 2020 2017 2018 2020

Hangtag/joker 1,400,000 6,000,000 18,000,000 278,000 3,200,000
278,000 3,200,000
Flasher Ramp up 278,000 3,200,000
to
Feature tag
2018

Hanger 1,400,000 6,000,000 18,000,000 278,000 3,200,000

*Grand Total 2,100,000 12,000,000 36,000,000 1,112,000 12,800,000

*All calculations are based on singles selling units 23
Confidential Information
TUG Partner Summit in Africa

Agenda 24

Journey in East Africa
Strategic overview – Africa focus
RM (L2) sourcing plan to support growth
Evaluating Potential L2 Partners for Africa
L2 Priorities
Appendix

TUG Partner Summit in Africa

Strategic L2 partners’ attributes

Criteria for evaluating Strategic
suitable partners for EA manage-

ment

Suppliers to be evaluated Operational CR &
based on 7 key areas. excellence sustain-
ability

Strategic Geo-agility
L2 Partner

PresToteal const tation Name

Location / Presenter / Team / etc.

Date Customer Product
focus excellence
Note: Detailed evaluation points under 7 key areas are appendixed
25
TUG Partner Summit in Africa Confidential Information

Strategic L2 Partner Attributes

Strategic Management  Purpose Driven - Vision, Mission, 5 year Strategy
 Documented - People, Quality, Customer operations Policies
 Robust IT Infrastructure & IT & IP Governance Policy (Cybersecurity)
 Financial Stability / Robustness – Part of a bigger Group
 Business model / Fiscal transparency

 Demonstrate leadership in Corporate responsibility

Corp Responsibility &  Strong Employee relationships - no history of work disruptions
Sustainability  All products and finishes are Oeko-tex Certified, commitment to MRSL and ZLD ETP as appropriate
 Robust Product Safety & Environmental Protection practices

Geographical Agility  Multiple Regions - North Asia, South Asia & Near Shore

 Stays ahead of the curve in Diversification

Presentation Name Currently experienced in shipping to Multiple COOs

 Demonstrates Keen Interest in expanding to Africa

Product Excellence  Best in CLlaosscParotdioucnt Q/uaPlitrye- SseervniceteGlrob/alTBeraandms / etc. 26
Date Strong Product Development Processes Confidential Information
TUG Partner Summit in Africa
 Offer Seasonal Newness & Innovation
 Multi Product capability

Strategic L2 Partner Attributes

Customer Focus / Ease of  Proactive Collaboration , Ownership; Ability to support Point to Point business
Business  Willing to experiment and take on new initiatives
 Strong Relationship & active engagement with L1 partners
Total Cost  Strength of Partnership with TUG

Operational Excellence /  Product cost is competitive
Results  Provides transparency to cost inputs & partners in cost mitigation
 Invest in Technology to reduce failure costs & improve productivity
TUG Partner Summit in Africa  Offer Speed & Flexibility : Short Leadtimes & lower MOQs

Presentation Name Consistently strong Delivery and Quality Performance

 Internal ERP systems for visibility operations management

 ContLinuoocusaitmioprnove/mPenrteCuslteurne t- eLeran/, T6 eSigamma, V/isuealtMca.nagement etc

 Invests in Technology to improve Productivity & Quality

Date

27
Confidential Information

Agenda 28

Journey in East Africa
Strategic overview – Africa focus
RM (L2) sourcing plan to support growth
Evaluating Potential L2 Partners for Africa
L2 Priorities

TUG Partner Summit in Africa

Priorities for EA in 2017/18 Confidential Information

To identify and drive investments of strategic L2 partners in Ethiopia on following
RM categories:

Key RM Phase 2

Phase 1 Finalize partners for functional bra trims:
• Bra pads
Knit fabric verticality • Wires, H&E, Rings and slides
• Warp knit

Elastics
• Identify which partner/s to move

forward with

Packaging & Labelling Phase 2
• Litho (Paper, Stickers & Plastic)
Phase 1 – Evaluate best partner in Hawasa
• IPP*
• Heat Transfers Phase 2 – Proposals finalized by end 2018

Phase 1 – operational within 2018 29
Note: IPP = ability to print GCL & barcoded items within the garment factory.
TUG Partner Summit in Africa

Priorities for Egypt in 2017/18 Confidential Information

Key RM Key RM

Elastics – developing elastics capability Weft-knit Fabric
• Review fabric expansion plan to
Lace determine possibility of supplying
• Evaluate lace capabilities in region fabric to EA

Phase 1 – operational within 2018 Phase 2 – Proposals finalized by end 2018

TUG Partner Summit in Africa 30

Presentation Name

Location / Presenter / Team / etc.
Date

TUG Partner Summit in Africa 31