Warby Parker, Tilly's, Advance Auto Parts, RH, and Victoria's Secret Shares Plummet, What You Need To Know

What Happened?

A number of stocks fell in the morning session after a hotter-than-expected wholesale inflation report fueled concerns about slowing consumer spending. The market was rattled by a Labor Department report showing the Producer Price Index (PPI), a measure of wholesale inflation, jumped 0.9% in July, significantly exceeding economists' expectations of a 0.2% rise. This was the largest monthly increase since March 2022, reigniting worries that businesses will be forced to pass higher costs on to consumers, who are already showing signs of price sensitivity. This inflation data has fanned concerns that U.S. tariffs on imported goods could start to translate into higher prices for shoppers. The inflation report landed amid growing evidence of consumer caution, with recent reports highlighting that shoppers are cutting back on non-essential spending, seeking out sales, and trading down to cheaper brands.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Beauty and Cosmetics Retailer company Warby Parker (NYSE:WRBY) fell 3.2%. Is now the time to buy Warby Parker? Access our full analysis report here, it’s free.
• Apparel Retailer company Tilly's (NYSE:TLYS) fell 9.4%. Is now the time to buy Tilly's? Access our full analysis report here, it’s free.
• Auto Parts Retailer company Advance Auto Parts (NYSE:AAP) fell 8.5%. Is now the time to buy Advance Auto Parts? Access our full analysis report here, it’s free.
• Home Furniture Retailer company RH (NYSE:RH) fell 4.5%. Is now the time to buy RH? Access our full analysis report here, it’s free.
• Apparel Retailer company Victoria's Secret (NYSE:VSCO) fell 3%. Is now the time to buy Victoria's Secret? Access our full analysis report here, it’s free.

Zooming In On Tilly's (TLYS)

Tilly’s shares are extremely volatile and have had 74 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 1 day ago when the stock gained 18% after 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.

Tilly's is down 68% since the beginning of the year, and at $1.46 per share, it is trading 75.3% below its 52-week high of $5.90 from August 2024. Investors who bought $1,000 worth of Tilly’s shares 5 years ago would now be looking at an investment worth $245.38.

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