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Why (Most, Not All) Retail Stocks Dropped a Bit Today

By Rich Smith - Feb 28, 2020 at 1:23PM

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Walmart, Dollar Tree, and Dollar General follow the market down. Chico's and Big Lots diverge.

What happened

Coronavirus concerns continue to take a toll on the American economy -- and the retail sector in particular.

Taking a snapshot of the market at 12:35 p.m. EST, Walmart (WMT 1.85%) stock is down 3.5%, Dollar Tree (DLTR 0.84%) is getting chopped 3.4%, and Dollar General (DG 0.57%) is 4% cheaper.

No surprise there. These are all big consumer staple companies (the smallest, Dollar Tree, is still a bona fide big cap at $19.5 billion in market value), and you'd expect them to broadly track the course of the economy. With the Dow Jones Industrial Average down 2.2% today and the S&P 500 off 1.7%, it makes sense that many retailers would be down as well.

But here's something unusual: Shares of Big Lots (BIG 2.29%) are down 29%, and Chico's FAS (CHS 2.18%) stock is up 11%.

Let's dive in to see what's going on.

Green up arrow and red down arrow

Image source: Getty Images.

So what

In the case of Big Lots, an earnings miss is exacerbating the stock's decline today. Q4 earnings at Big Lots, announced last night, came in light at just $2.39 per share, whereas Wall Street had expected $2.52. Sales likewise missed expectations by a smidge.  

Perhaps Big Lots' biggest sin, however, was in telling investors that it expects to earn no more than $0.45 per share next quarter (where Street analysts had predicted $0.95), and to close out the year with no more than $3.40 per share in earnings, well short of Wall Street's targeted $4.04 profit.  

Conversely, Chico's reported a stronger-than-expected quarter yesterday, and is receiving its reward today. Q4 sales eked out a win over analyst estimates, with same-store sales up 2.2% and total quarterly sales at $527.1 million. Chico's lost money for the quarter ($0.04 per share), but because Wall Street was anticipating a $0.06-per-share loss, this is being marked down as a "beat" for Chico's.  

Now what

In contrast to Big Lots, which warns that "we expect a challenging first quarter of 2020, due in part to upfront investments in our higher-return growth initiatives, combined with a slow start to the quarter and the sales impact of supply chain disruption related to the coronavirus," Chico's struck an optimistic note about the year ahead. The women's clothier sees sales rising by at least "low single digits" for both Q1 2020 and fiscal year 2020.

With Wall Street still warning that sales will decline, but Chico's saying the opposite, investors are right to be cheering this lone bit of good news on this otherwise dreary day for stock investors.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Chico's FAS, Inc. Stock Quote
Chico's FAS, Inc.
CHS
$6.57 (2.18%) $0.14
Big Lots, Inc. Stock Quote
Big Lots, Inc.
BIG
$23.68 (2.29%) $0.53
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$132.22 (1.85%) $2.40
Dollar Tree, Inc. Stock Quote
Dollar Tree, Inc.
DLTR
$166.76 (0.84%) $1.39
Dollar General Corporation Stock Quote
Dollar General Corporation
DG
$253.30 (0.57%) $1.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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