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Our performance this quarter clearly demonstrates our strategies are working, driven by the strength of our brands, the growth of our direct-to-consumer business and the benefits of a globally diversified business model. We continue to make progress against our three strategic priorities, leading with our brands, prioritizing our direct-to-consumer business and diversifying our portfolio. Please note that for the balance of our remarks, Harmit and I will reference year-over-year revenue growth in constant currency. Starting with our first priority, leading with our brands. Beginning with the Levi's brand, we grew market share again this quarter, achieving share leadership in the U.S. amongst the key 18- to 30-year old target consumer group, and we continue to grow share in women's denim bottoms closing the gap to the number one position.

In the quarter, the Levi's brand was up 9%, with our men's bottoms business delivering a record Q1 and women's bottoms achieving its highest revenue of any quarter. Men's bottoms grew 9% with growth across all geographic segments, and we continue to fuel momentum in women's bottoms, which grew 18%. We're planning a steady cadence of newness through the year, and we continue to lean into trends, like with our newly launched women's XL Balloon and Noddy's Food and the shift in rise from high to mid and wider leg openings, all of which drove solid growth in the quarter. 2023 is an important year for the Company, marking our 170th anniversary and 150th of our iconic 501, the blueprint for today's modern blue jeans. As we celebrate the heritage of our namesake brand, we're using this important milestone to cement the next generation of Levi's pants.

In February, we launched our largest coordinated global marketing campaign the greatest story ever worn. It kicked off during the grams where Bad Bunny also opened the shell wearing a pair of vintage 501 and has helped drive nearly 3 billion impressions with consumers worldwide. After all these years, love for the 501 has only grown and continues to experience exponential growth, a solid proof point of the strength of the brand. Q1 net revenues were up 25% on top of 50% growth last year and revenues for the 501 this year are expected to reach close to $800 million, which is nearly 70% higher than pre-pandemic on a reported basis. As we move through the year, we're infusing energy and newness into our iconic 501 through new launches for him and her inspired by historical fits.

We also have a robust lineup of collaborations planned like our recent drop with the iconic streetwear brand Stussy, which sold out in one hour and an exciting partnership with NewJeans, the popular K-Pop girl band furthering our ambition to engage younger consumers. Our global DTC business delivered a record quarter, up 16% versus a year ago, driven by positive comp sales and traffic growth across brick-and-mortar mainline and outlet stores in all geographic segments as well as e-commerce. Our U.S. DTC business also achieved another record quarter of revenue, with especially strong performance in our U.S. flagships and larger tourist destinations. We continued our store expansion in Q1, opening 25 Levi stores globally including five mainline doors here in the U.S. The investments we're making to elevate our consumers' digital experience and strengthen their digital connection to our brands are paying off.

Even with consumers returning to our stores in large numbers, our e-commerce business grew 14%, driven by broad-based global growth and across all brands, including levi.com, which was up double digits. We continue to expand the breadth of our offering online while improving the user experience. Our loyalty membership was also up almost 40% in Q1 to nearly 25 million members, and this continues to translate to a higher level of spend among loyalty members. Our direct relationships with consumers and continued strong performance in our international wholesale business helped mitigate the impact of softer U.S. wholesale revenue. Global wholesale grew 4%, driven primarily by Asia and Canada. In the U.S., we accelerated approximately $100 million of revenue from Q2 to Q1 and primarily due to our Q2 ERP implementation.

As a result, our U.S. wholesale business grew low single digits on top of last year's strong 25% growth. Additionally, while our core consumer has generally remained resilient, we continue to experience demand softness from the value-oriented consumers, most notably impacting our Signature and Denizen brands. As for our diversification strategy, we continued the strong momentum we have achieved in each of our major growth opportunities with international, women's, tops and our other brands, Dockers and Beyond Yoga, each contributing positively to the first quarter growth. International revenues were up 11% or 14% excluding Russia. Europe saw 6% growth, excluding Russia, with most markets growing including our largest markets of France, the U.K. and Germany returning to growth.

Photo by Ian Deng Quddu on Unsplash

Asia continued its strong momentum, up 22% as we experienced growth across all markets other than China. In China, after the Zero COVID policy was lifted, we have seen a bounce back in traffic with our latest results trending back to pre-COVID levels. Total company women's revenue grew 12%, led by strong double-digit growth in both the Americas and Asia. Our tops business grew 4%, following 16% growth last year with strong performance in our DTC channel, up 12% for both women and men. And our other brands performed well in the quarter. Dockers continued to build momentum with net revenues up 29% and driven by broad-based double-digit growth across geographies and channels with DTC especially strong. Dockers e-commerce remained robust with over 30% growth in part supported by increased repeat customers and the brand's loyalty program, which is now driving over 30% of sales in this channel across the U.S. and Europe.

And Beyond Yoga continues to make solid progress with revenues up 11%, driven by DTC AURs and volume and continued success with the brand's expanded line of dresses. Our first two stores are off to a good start with two more planned to open in Q2, along with several further openings through the balance of the year. Finally, Michelle Gass has now been with the Company for 100 days as company President, responsible for the Levi's brand and our global commercial and digital operations. As I expected, she and I are working together really well with both of us determined to make this a very successful transition. She has not surprisingly, landed great inside the organization, establishing her leadership very clearly on our business. For deep retail and e-commerce experience is obvious to the organization and she is already identifying both executional and organizational opportunities, which will help us accelerate profitable growth in our DTC women's and tops businesses.

I was excited and confident when we hired Michelle as my eventual successor, and I'm even more optimistic about this company's future today than it was before. And with that, I will turn the call now over to Harmit.

Harmit Singh: Thanks Chip. We achieved solid results in Q1 with sales up 9%, excluding the benefit from accelerated U.S. wholesale shipments primarily related to the ERP transition, our business grew low single digits. Focus on our strategic initiatives and the structural shift in our business fueled our results with our international business and direct-to-consumer channels driving almost 70% of the growth in the quarter. And we made significant progress reducing our inventory with total inventory dollars and units down meaningfully. We have achieved this in part by taking deliberate actions to clear inventory in the U.S. as well as reducing receipts in H1, putting us in a stronger position as we move through the balance of the year.

We remain committed to controlling costs with a focus on discretionary expenses while continuing to invest for the long term, including opening 18 net new stores and our ERP implementation in the U.S. following two successful implementations in Canada and Mexico. And despite the beat we delivered this quarter, we are maintaining our annual revenue and EPS guidance range, reflecting a cautious outlook on the macro environment even as we remain excited about the momentum in our direct-to-consumer and international businesses and the progress we're making against our strategy. I will now provide more color on our Q1 performance and 2023 outlook. Net revenue increased 9%, driven by continued global momentum in our direct-to-consumer business. International revenues were up 11% with greater-than-expected results across most markets, while the U.S. was up 6%.

AURs were up mid-single digits, driven by broad-based growth across geographies, genders, categories and brands. Our direct-to-consumer channel sequentially accelerated with net revenues up 16%, driven by broad-based positive comp sales growth on top of extremely strong first quarter comp sales last year, driven by higher traffic, and higher volumes across geographies, including in the U.S. and Europe. Adjusted reported gross margin was 55.8%, 360 basis points below last year's record 59.4% and but 120 basis points ahead of 2019 pre-pandemic levels. The deliberate actions that we took to reduce inventories in the U.S. that I mentioned a moment ago, coupled with a more promotional environment resulted in greater-than-expected pressure on gross margin in the short term, but the inventory level sets us up in a stronger position as we move through the year.

Gross margin benefited from price increases, lower freight expenses and favorable channel mix despite a negative 40 basis points impact from accelerated wholesale shipments. However, those benefits were offset by several logic transitory factors, including a 200 basis point impact from higher product costs, reflecting record cotton prices, higher ocean freight and demo charges as well as nearly 300 basis points impact from lower full-price sales. As we move through the year, the headwinds impacting gross margin should begin to recede, including from product costs given lower cotton pricing, freight and demurrage charges as well as lapping lower full-price selling and unfavorable FX from H2 last year. And the key contributors to our structurally higher margins that we have spoken to you about such as favorable channel, geographic and women's mix will continue to benefit margins.

Adjusted SG&A expenses in the quarter was $757 million, up 7% from last year, driven primarily by a four-wall investment in support of the higher DTC sales and A&P investment to support our 501 marketing campaign for which the spend is skewed to the first half of the year. While adjusted EBIT margin came in line with our expectation at 11%, down from 14.9% last year, the decrease was driven almost entirely by the decline in our gross margin rate. Adjusted diluted EPS was $0.34, with a penny negative impact from foreign exchange. I'll now take you through our key highlights by segment. In the Americas, net revenues grew 7% driven by the strength in DTC. The channels upload double-digits in the U.S. and achieved our second quarter of record revenue.

Overall, Canada was up double-digits and Latin America grew high-single-digits driven by increases across nearly all markets in the region. Europe returned to growth, with net revenues of 6%, excluding Russia on top of 21% growth in the prior year, driven by our DTC business. Geographically, growth was seen across most countries. Our largest markets France, the UK and Germany were collectively up low-single-digits with Spain and Italy were up double-digits. Strong demand for the Levi's brand in Asia continued with revenues accelerating to 22% growth driven by all channels and markets outside China led by India. Asia ex-China was up 28%. As Chip mentioned, we are seeing trends improve in China and now expect China to turn profitable this year.

Asia operating margins also expanded 160 basis points to 18.5%, due to higher revenues and lower SG&A. And operating margin dollars were an all time record. Now looking to our balance sheet and cash flow. As discussed over the past year, as we execute the ERP transition, and as a result of actions to reduce receipts in H1, we are rapidly reducing our inventory levels. Q1 inventory was up 33% on a dollar basis a 25% sequential improvement from last quarter of up 58%. Core product represents more than 2/3 of our total inventory. We continue to expect sequential improvement quarter-over-quarter with quarter two being substantially lower than Q1 and expect levels to be in line with sales growth by the end of the year. Adjusted free cash flow was negative $272 million in the first quarter, driven by the timing of capital and the implementation of our ERP.

As a result of this, we used our revolver to support our cash position, as we sequentially improve our inventory through the year. We expect free cash flow to turn positive, enabling us to pay back our ABL draw. And of course net debt was approximately $834 million and overall liquidity was $1.2 billion. Our leverage ratio remains strong, although it did increase to 1.4 times compare to 1.1 times at the end of Q1 2022 due to a negative free cash flow. In the quarter, we returned approximately $56 million in capital to shareholders, including dividends of 48 million up nearly 20% from the first quarter of prior year. And in Q2 '23, the Company declared a dividend of $0.12 per share in line with last quarter. Moving on to our outlook, even though we exceeded expectations in Q1, given it is early in the year and macro uncertainty, we are maintaining a cautious stance and reaffirming our fiscal 2023 revenue and EPS outlook.

We continue to expect net revenues between $6.3 billion and $6.4 billion reflecting reported growth are 1.5% to 3% year-over-year, and EPS in the range of $1.30 to a $1.40. While we're maintaining our guidance overall, the way in which we get the head change from previous expectation, we expect the strong momentum in our global DTC and international businesses to offset softer wholesale trends in the U.S. and Europe as retailers continue to be cautious with your open to buy. As a result for the year, we expect nearly 60% of Levi's brand revenue coming from international and DTC as a mix of our total business in the mid 40% range. Our DTC channel and international businesses are both fast growing with tremendous opportunity given our under penetration in these categories and importantly our high gross margin businesses.

In reported dollars, we continue to expect low single-digit growth in the Americas for the full year as strong growth in our U.S. DTC business and Latin America will be tempered by U.S. wholesale. We are pleased to see Europe return to growth in Q1, driven by the strength with trends coming in better than expected. The outlook has improved, but it's still within the previously guided range of up low single digits. And based on the stronger trends we're seeing in Asia, we now expect low double-digit growth and improvement from mid-single-digit growth in our previous guide. As I mentioned last quarter, we continue to expect '23 to be a tale of two halves, with the first half weaker and the second half considerably stronger given a number of factors including the year, we are lapping promotional levels, record cotton prices impacting COGS in H1 and supply chain disruptions progressively getting better.

I will now provide color on Q2 and the full year. For the second quarter, the over delivery reported in Q1 will temper growth in Q2 but will not have an impact in the first half or full year. In Q2, we now expect revenues down high single digits to low double digits, given that we are in our ERP implementation and associated downtime our ability to ship product in the U.S. in excess of what we have contemplated in our guide is limited. Q2 gross margin is expected to meaningfully improve versus Q1 as a result of a higher contribution from DTC, but will be down slightly to last year's and we continue to expect SG&A to be up mid-single digits relative to a year ago. In respect to the full year, given the higher levels of promotion than we previously anticipated, we now expect full year gross margin to be down approximately 50 basis points versus prior year's 57.5%.

We remain confident that second half gross margin will sequentially improve as headwinds moderate. And we now expect the full year tax rate to be low to mid-teens versus our prior expectations of mid- to high teens. Prior to Q&A, I'd like to make three key points. First, while we expect to face continuing challenges through the year, the strength of our brand gives us confidence in sustaining our top line momentum and our Q1 performance serves as a proof point that our strategies are working. Europe's returned to growth as well as our strengthening international performance and broad-based momentum in our direct-to-consumer business are all fueling profitable growth. Two, gross margin will progressively improve as we move through the year and headwinds abate and we expect to end the year with gross margins above 57% on our way to our long-term goal of 60%.

And three, we will continue to focus on controlling the controllables by reducing discretionary spending while continuing to invest in growing DTC as we open new doors, growth comp sales and accelerate e-commerce. With that, I'll now go ahead and open the call for Q&A.

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