What Happened?
A number of stocks jumped in the afternoon session after the major indices surged as consumer-wallet relief from falling oil prices restored confidence in discretionary spending.
Apparel is arguably the most discretionary category in retail. When consumers feel pinched, they skip the new outfit. When they feel flush (market at all-time highs, gas at $93), they refresh the wardrobe. Apparel retailers carry seasonal inventory that has to clear at full price or it gets marked down 30-50%.
When consumer confidence improves, full-price sell-through rises and the gross margin difference is enormous. Lower freight costs from cheaper oil also help, since apparel travels long supply chains from Asia. Ralph Lauren's 10% jump the previous week (on the Q1 beat) showed how quickly the apparel group can move when sentiment shifts.
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:
- Apparel Retailer company Victoria's Secret (NYSE: VSCO) jumped 5.2%. Is now the time to buy Victoria's Secret? Access our full analysis report here, it’s free.
- Apparel Retailer company American Eagle (NYSE: AEO) jumped 3.5%. Is now the time to buy American Eagle? Access our full analysis report here, it’s free.
- Apparel Retailer company Torrid (NYSE: CURV) jumped 5.8%. Is now the time to buy Torrid? Access our full analysis report here, it’s free.
Zooming In On Torrid (CURV)
Torrid’s shares are extremely volatile and have had 48 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 13 days ago when the stock dropped 5.6% on the news that the release of a hotter-than-expected Producer Price Index (PPI) report signaled persistent inflationary pressures.
The U.S. Bureau of Labor Statistics reported that the PPI, which tracks inflation before it reaches consumers, surged by 1.4% in April, more than double the 0.5% that analysts had forecasted. This marks the most significant monthly increase since March 2022. On a yearly basis, the index rose 6.0%, its largest gain since December 2022.
This unexpected spike in wholesale prices fuels concerns that inflation is reaccelerating, which could lead the Federal Reserve to maintain or even increase interest rates. Higher rates can increase borrowing costs for businesses and slow economic activity, prompting a negative reaction from investors across the market.
Torrid is up 39.6% since the beginning of the year, but at $1.48 per share, it is still trading 72.3% below its 52-week high of $5.35 from June 2025. Investors who bought $1,000 worth of Torrid’s shares at the IPO in June 2021 would now be looking at an investment worth $61.28.
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