Investing.com -- Shares of PVH Corp (NYSE:PVH) fell sharply by 10% following the announcement from China that a preliminary investigation has found the apparel maker may have engaged in inappropriate activities related to Xinjiang. The Chinese authorities have been conducting an investigation into the American company under the unreliable entity list, a mechanism used to address foreign entities that threaten China's national security.
The investigation, which commenced on September 24, 2024, has involved multiple hearings with PVH Corp to review statements and written materials submitted by the company. According to the Chinese officials, initial findings suggest that PVH Corp has been involved in improper conduct concerning Xinjiang, a region that has become a focal point of global scrutiny over human rights concerns. The office in charge of the mechanism plans to hold further talks with PVH Corp in the near future, with the final results of the investigation to be disclosed to the public in accordance with the law.
This development comes as a significant blow to PVH Corp, which, like many global apparel manufacturers, has supply chains and business interests that are deeply intertwined with Chinese markets. The Chinese government has stated that it handles the unreliable entity list prudently, targeting only a very small number of foreign entities that endanger the country's national security. It also reassured that foreign entities that comply with laws have nothing to worry about and reiterated its commitment to providing a stable, fair, and predictable business environment for foreign investments in China.
The stock's decline reflects investor concerns over the potential impact of the investigation on PVH Corp's operations and its future in the Chinese market. This news has overshadowed any recent financial performance and has become the primary driver of the stock's movement in today's trading session. The company has not yet provided a public response to the preliminary findings of the investigation.
Investors and stakeholders of PVH Corp are closely monitoring the situation, as the outcome of the investigation could have far-reaching implications for the company's business and reputation.
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