What Happened?
A number of stocks fell in the afternoon session after reports pointed to a broad-based weakening of consumer health, highlighted by rising loan delinquencies and falling spending intentions.
This downturn was fueled by multiple reports signaling a deteriorating financial situation for consumers. Data revealed that even upper-income Americans are increasingly falling behind on credit card and auto loan payments, suggesting big-ticket spending is fading. Further dampening sentiment, the latest Consumer Confidence report, despite a headline increase, showed that consumers are being more cautious. The auto sector also flashed warning signs, with projections for July showing flat sales compared to last year, weighed down by high prices and interest rates.
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 American Eagle (NYSE:AEO) fell 3%. Is now the time to buy American Eagle? Access our full analysis report here, it’s free.
- Footwear Retailer company Shoe Carnival (NASDAQ:SCVL) fell 3.8%. Is now the time to buy Shoe Carnival? Access our full analysis report here, it’s free.
- Apparel Retailer company Zumiez (NASDAQ:ZUMZ) fell 3.5%. Is now the time to buy Zumiez? Access our full analysis report here, it’s free.
Zooming In On Shoe Carnival (SCVL)
Shoe Carnival’s shares are very volatile and have had 24 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 biggest move we wrote about over the last year was 11 months ago when the stock gained 13.3% on the news that the company reported strong second-quarter earnings.
Notably, the Back-to-School shopping season (the company's most important sales period) was highly successful, driving strong sales momentum. As a result, the company achieved its highest second-quarter sales on record. However, same-store sales came in below expectations, leading to a revenue miss. Its full-year revenue guidance was underwhelming as well.
Regardless, the company provided encouraging long-term projections, indicating strong demand for its offerings, as it expected to operate more than 500 stores by 2028 (vs the current count of 430). Overall, this was a decent quarter, with the market cheering the improved momentum following the successful Back-to-School campaign.
Shoe Carnival is down 33.3% since the beginning of the year, and at $21.56 per share, it is trading 53% below its 52-week high of $45.82 from September 2024. Investors who bought $1,000 worth of Shoe Carnival’s shares 5 years ago would now be looking at an investment worth $1,574.
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