PVH Corp. (PVH) stock is plummeting on Thursday, in part due to the U.S.-China trade war tempering results in two of the company's largest markets.
Shares of the New York-based clothing company slumped over 12% shortly after the market open, driven by sagging same-store sales in the U.S. and China.
"Our China business was soft during the quarter," CEO Emanuel Chirico told analysts on Thursday morning. "We believe that consumer sentiment is increasingly impacted by the ongoing headlines about trade and tariff wars with consumer's uncertainty resulting in consumers buying less."
He added that a shift in supply chains out of China has an effect not only by increasing expenditures of the company, but also on the Chinese consumer and economy that relies on these factories.
"As manufacturing shifts out of China factories are reducing their production of clothing facilities which is impacting not only the middle Class but is also having a spillover effect into the overall economy," Chirico added.
The strengthening of the U.S. dollar and decreased tourism, which is in part driven by the dollar dynamic, is also hurting sales on PVH's home soil. As is true with almost all retailers, an increase in costs due to import tariffs on goods sourced from China would also create a demand-side issue for PVH in America.
A weakening of the Chinese consumer could add to that effect as discretionary spend on traveling would likely be among the first to be cut.
Chirico remained confident that trade negotiations throughout 2019 could create grounds for some sort of agreement between the Trump and Xi administrations but lamented that the overhang of the tariff and trade impact is a key factor in the company's cut guidance.
The contrast of PVH's performance in foreign currency and trade-impacted regions with its strong numbers in markets outside the trade tussle's reach also helps highlight the external impact on the company.
"The European business continues to be outstanding as we're gaining market share from our peers and delivering excitement across our products marketing campaigns and capsule collections," Chirico said. "Asia was a mixed story for us. Our Japan businesses which is about half of the Tommy's revenues in Asia posted very strong results as our product positioning and consumer engagement initiatives are clearly resonating with consumers and the consumer backdrop is relatively healthy."
The "mixed story" was overwhelmingly driven by that weakness in China. Overall, that would indicate that it is not so much a problem with the company's products or popularity, but with the artificial constraints on demand in two of its largest markets.
The issue is that the trade headwinds don't appear as though they will be lifted any time soon and the revisions to the company's guidance and analyst price cuts will continue to weigh on PVH shares for the short term.
The company will have easier compares in coming quarters and it's already lowered guidance could put in a floor for expectations. That might encourage some buyers on the severe weakness seen on Thursday.
For now, retailers reporting significant impacts from the trade tensions are getting severely punished. PVH's plummet to its lowest share price in over two years at its daily low during the earnings call shows that sensitivity in spades.