PVH’s Q2: Tariff Refunds Were a One-Time Mask, but a New Cost Engine Could Be the Real Gift

Beating on One-Time Gains

PVH's fiscal second-quarter report was, on the surface, a beat-and-reaffirm affair. Revenue came in line with guidance while operating margin and EPS topped expectations, but the beat was almost entirely manufactured by a one-time event: the receipt of ~$107 million in tariff refunds. That chunk boosted gross margin by 510 basis points and EPS by ~$1.80. As “Tariff refunds were received during the quarter as expected and contributed approximately 510 basis points to our operating margin and approximately $1.80 to our EPS,” — Melissa Stone, Interim Chief Financial Officer and Executive Vice President · 2026-09-03 CFO Melissa Stone explained. Without those refunds, operating margin would have been ~6% and EBIT would have declined year-over-year, underscoring the fragile state of the underlying business. The company's global revenue fell 3% and D2C sales were roughly flat, with Europe once again the laggard.

Indeed, the continuity of the narrative is striking. Management's language around the Middle East conflict and its downstream effects on European wholesale echoes prior quarters. In June, Melissa had already flagged that "the most acute deleverage impact" would land in Q2, offset by refunds. As she put it: “we see the pressure related to the effects of the prolonged conflict with the most acute deleverage impact in Q2, and that's offset by the benefit from the tariff refund” — Melissa Stone · 2026-06-04. From the same call, Stefan had insisted that “We see the positive momentum in e-commerce, we see across both brands.” — Stefan Larsson · 2026-06-04 That prediction has now come to pass, though it hasn't been enough to allay market skepticism—shares are down 24% in three months.

A Proper Cost Program Finally Takes Shape

Yet buried in the call is a more strategic message. Stefan Larsson, the CEO, outlined a new, systematic approach to cost: "We are embedding a culture of cost discipline." This program goes beyond previous tactical cuts by centralizing procurement and appointing senior leaders to manage spend across the enterprise. Already, it has identified annualized run-rate savings of roughly $45 million. This aligns with the arrival of new CFO Alexi Rollier from Sephora, whom Larsson hinted will press on both consumer-facing improvements and the efficiency drive. As he said in Q&A: “We are really leaning into cost as a real driver of EBIT margin expansion.” — Stefan Larsson, Chief Executive Officer · 2026-09-03

While cost savings are a top priority, it doesn’t come at the expense of our brand-building efforts to further strengthen our products, consumer engagement, and marketplace presence.

Equally encouraging is the progress on the brand side. Larsson touted marketers finally being able to convert heat into sales. The launch of a new denim campaign featuring Tate McRae and Sadie Sink, and the Tommy Hilfiger campaign with Travis Kelce, is generating outsized social engagement and, critically, converting into sales among the status shopper and "style enthusiast" segments. Global e-commerce traffic is up double-digits for Calvin and high-single-digits for Tommy, and the company claims to be gaining share of online search. Even in Europe, e-commerce is growing, and D2C trends improved sequentially.

Europe Is Still the Counterweight

But the elephant still in the room is Europe. Wholesale revenue declined high-single digits, and management disclosed that the Spring 2027 order book is down mid-single digits. While the company is working with key accounts to curate assortments and offers more in-season replenishment, the cautious wholesale backdrop is a direct consequence of the prolonged conflict. This is not a new worry—previous calls have stressed the same challenges—but the persistence is why PVH continues to guide conservatively. Amid this, PVH also took a $439 million goodwill impairment, reflecting changes in valuation assumptions tied to geopolitical and macroeconomic factors. That non-cash charge implicitly acknowledges the earnings power of at least parts of its brand portfolio has been re-rated.

Still, the balance sheet remains healthy with net debt down to $1.7 billion, and the company is repurchasing at least $300 million in shares. Gross margin, even excluding refunds, expanded ~20 basis points, driven by lower input costs and favorable mix. PVH is doing the hard work of controlling what it can—product, marketing, and now costs—even when the macro refuses to cooperate.

In fact, the most compelling sign of a potential pivot is the shift in tone. In the previous two quarters, "Middle East conflict" and "tariff refunds" dominated the call. This time, management emphasized key categories and hero products. The company also has a clear path to clean up its licensing business, with the North American women's transition expected to wrap by year-end. As that drag fades and if the new cost program delivers, PVH could finally produce the operating leverage the market has been waiting for.