What Happened?
Shares of footwear and accessories discount retailer Designer Brands (NYSE: DBI) jumped 4% in the morning session after the stock traded higher in sympathy with peer company PVH Corp., which reported second-quarter results that beat expectations. PVH announced that its revenue and earnings for the quarter came in above its prior guidance. Furthermore, the apparel company reaffirmed its full-year non-GAAP earnings outlook. The positive results from a significant player in the retail and apparel space likely lifted investor sentiment across the sector, benefiting shares of companies like Designer Brands.
After the initial pop the shares cooled down to $3.75, up 4.5% from previous close.
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What Is The Market Telling Us
Designer Brands’s shares are extremely volatile and have had 68 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 14 days ago when the stock gained 9.8% on the news that markets continued to rally amid growing investor optimism for a Federal Reserve interest rate cut in September. This optimism was spurred by a recent Consumer Price Index (CPI) report that did not show runaway inflation, increasing the perceived probability of a rate cut to over 90%. Lower interest rates are generally seen as a positive for the economy as they reduce borrowing costs for consumers, which can stimulate spending on non-essential goods. Consequently, investors bid up shares in the apparel, home furnishings, and automotive retail industries in anticipation of stronger consumer demand.
Designer Brands is down 29.3% since the beginning of the year, and at $3.75 per share, it is trading 51% below its 52-week high of $7.65 from August 2024. Investors who bought $1,000 worth of Designer Brands’s shares 5 years ago would now be looking at an investment worth $520.86.
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