What Happened?
A number of stocks fell in the afternoon session after data from the The U.S. Census Bureau (part of the U.S. Department of Commerce) revealed an unexpected drop in consumer spending for July, marking the largest decrease in over a year. Retail sales fell 0.6% in July, a stark contrast to economists’ projections of a small increase.
The report indicated specific weakness in motor vehicle and parts dealers, which saw sales decline by 1.8%, and in non-store retailers, where sales dropped 2.2%. This pullback in spending raises concerns about the health of the U.S. consumer, who has been a key driver of the economy. The unexpected slump suggests that persistent inflation may finally be causing shoppers to tighten their budgets, signaling potential headwinds for the retail industry.
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:
Zooming In On Dillard’s (DDS)
Dillard’s shares are quite volatile and have had 16 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 dropped 4% on the news that the company’s second-quarter 2026 earnings report, as a significant headline earnings beat was undermined by a large one-time gain and weaker underlying sales. Dillard’s posted earnings of $6.25 per share, handily beating estimates, but this figure included a $1.82 per share after-tax boost from a non-recurring tariff refund. Investors looked past the one-time gain to focus on more fundamental metrics.
Total retail sales grew by a modest 1%, while overall revenue of $1.508 billion slightly missed analyst expectations and fell 0.4% compared to the prior year. While the tariff refunds helped expand the retail gross margin to 40.9%, the lack of top-line growth and the reliance on a one-time benefit to drive the earnings beat likely fueled investor concern about the department store’s core operating momentum.
