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Why the Panic Sell-Off Crashed These Retail and Consumer Stocks on Thursday

By Jason Hall - Mar 12, 2020 at 6:20PM

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Retailers and consumer goods makers are taking it on the chin.

What happened

Shares of more retailer and consumer goods companies fell hard in today's massive stock sell-off. Four of the hardest hit included discount retailer Ollie's Bargain Outlet Holdings (OLLI 4.50%), footwear and apparel makers Skechers (SKX 5.21%) and Under Armour (UA 2.19%)(UAA 5.39%), and Latin-American e-commerce giant MercadoLibre (MELI 5.84%). All four fell by double digits during the trading session, with only MercadoLibre avoiding a 10% drop at the close, finishing down 9% on the day. After-hours trading has seen several fall even more: OLLI Price Chart

OLLI Price data by YCharts

So what

Today was the worst day for stocks in more than 30 years. Both the Dow Jones Industrial Average and S&P 500 index fell 10%, with the NASDAQ nearly joining the two with a 9.4% decline. Stocks haven't fallen this sharply since the 1987 crash, and we have now seen the market lose almost 27% of its value in less than a month. The stocks above have fallen even further, losing between 32% and 46% of their values over the same period of time. 

Line on a chart, crashing down

Image source: Getty Images.

There's no getting around it: Investors are running scared, and largely for the first time in over a decade, when the global financial crisis was sending the world into recession with no clear end in sight. Today, investors are moving to get out of stocks seen as being heavily exposed to both in-person interactions such as Ollies, discretionary consumer goods makers like Skechers and Under Armour, and retail commerce as global recession becomes a very real -- and increasingly likely -- possibility. That concern is even more heightened for companies like MercadoLibre, with heavy exposure to geographies that could suffer more than others from coronavirus outbreaks and the risk of unchecked spread of COVID-19 (the disease the novel coronavirus causes). 

Now what

There's quite possibly more bloodletting to come. Markets are in near free fall, and fear and uncertainty are driving many investors to sell. There's a good chance that we'll see more days where prices fall and investors look to sell stocks they view as being at risk of struggling under the worldwide spread of coronavirus. 

But this is also getting to the point where long-term investors really need to start looking for opportunities to buy. Sure, the next few months or quarters or even a year or two ahead could be painful. Business results will likely decline as government actions to arrest the spread of coronavirus -- along with people choosing to reduce their risk of exposure -- take a bite out of the global economy.

But looking out at the future, things will return to normal. And when they do, the best businesses will still be around, still offering the same things that set them apart to begin with. The investors who profit during the current sell-off will prove to be the ones who held through the turmoil, and bought when things seemed like they could only get worse. I think that's likely to prove the case for the stocks above. 

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Stocks Mentioned

Under Armour, Inc. Stock Quote
Under Armour, Inc.
UAA
$9.58 (5.39%) $0.49
Skechers U.S.A., Inc. Stock Quote
Skechers U.S.A., Inc.
SKX
$38.58 (5.21%) $1.91
Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
MELI
$739.46 (5.84%) $40.82
Ollie's Bargain Outlet Holdings, Inc. Stock Quote
Ollie's Bargain Outlet Holdings, Inc.
OLLI
$63.43 (4.50%) $2.73
Under Armour, Inc. Stock Quote
Under Armour, Inc.
UA
$8.39 (2.19%) $0.18

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

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