What Happened?
Shares of fashion conglomerate PVH (NYSE: PVH) fell 3.1% in the afternoon session after investors looked past the company's second-quarter revenue and earnings beat to focus on shrinking profitability.
The owner of Calvin Klein and Tommy Hilfiger reported revenue of $2.17 billion, up 4.5% year-over-year and ahead of Wall Street's expectations. However, the company's profitability showed signs of strain. Adjusted earnings per share, while beating estimates at $2.52, declined from $3.01 in the same quarter last year. More significantly, the company's operating margin contracted to 6.1% from 8.4% a year ago, indicating that expenses grew faster than sales. Additionally, adjusted EBITDA of $201.9 million missed analyst consensus estimates by 4.8%, signaling underlying weakness in core profitability that likely concerned investors.
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What Is The Market Telling Us
PVH’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 15 days ago when the stock gained 3.1% on the news that the latest Consumer Price Index (CPI) report showed inflation holding steady, bolstering investor optimism for a potential interest rate cut by the Federal Reserve. The data, which revealed that inflation remained at 2.7% for the year ending in July, was seen as a positive sign by investors. This stability increases the likelihood that the Federal Reserve might lower interest rates at its upcoming September meeting. Lower interest rates can stimulate the economy by making borrowing cheaper for both consumers and businesses, which often translates into higher consumer spending. This is particularly beneficial for the Consumer Discretionary sector, which includes companies selling non-essential goods and services like apparel, travel, and electronics.
PVH is down 22.6% since the beginning of the year, and at $81.13 per share, it is trading 28.1% below its 52-week high of $112.86 from December 2024. Investors who bought $1,000 worth of PVH’s shares 5 years ago would now be looking at an investment worth $1,474.
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