What happened

Shares of Chico's FAS (CHS) plummeted 17% in morning trading Tuesday after the women's apparel retailer reported second-quarter earnings. The drop came even though the company returned to profitability, beat Wall Street's expectations, and raised full-year guidance.

So what

It's not often businesses that handily beat analyst forecasts and raise their outlook are summarily beaten down by the market, but Chico's is not alone. Shoe retailer Designer Brands (DBI -1.34%) also posted analyst-beating earnings today, and it's down 10% this morning.

Teens shopping

Image source: Getty Images.

In fact, virtually all apparel retailers are in the red today, and it could have to do with rising inflation, a difficult labor market, lingering supply chain disruptions, and a belief among the biggest retailers that the impacts from the pandemic (both bad and good) will be permanent.

Taulia, a fintech that provides working capital solutions, surveyed the 50 biggest retailers and found that one-third of them think their industry is irreparably changed. The retail landscape, particularly at shopping malls, remains precarious.

Now what

Chico's benefited from surging sales at Soma, which soared 53% year over year. The company says Soma is poised to become one of the biggest intimate apparel brands. But sales at Chico's namesake chain and at its White House Black Market (WHBM) brand were not up to snuff, despite reporting 59% and 48% gains, respectively.

That's because comparable store sales plunged 14% at Chico's and 5% at WHBM. The 38% comps gain at Soma was not enough to offset the weakness elsewhere, and comps were down 1.6% companywide.