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Why Shares of Ulta Beauty, L Brands, and Designer Brands Are Swooning Today

By John Rosevear - Mar 16, 2020 at 2:29PM

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Retail traffic is about to fall off a cliff.

What's happening

Shares of retailers Ulta Beauty (ULTA 1.21%), L Brands (BBWI -8.00%), and Designer Brands (DBI -4.88%) were all hit hard in Monday's marketwide sell-off, as investors came to terms with the likelihood that retail shopping in the U.S. and Europe will likely come to a near-halt soon due to measures to contain the novel coronavirus.

As of 1 p.m. EDT, shares of Ulta Beauty were down 18%, shares of L Brands were down about 30.4%, and Designer Brands' shares were down about 46% from Friday's closing prices.

So what

Here's what investors need to know about these three stocks on Monday afternoon:

Ulta Beauty

CEO Mary Dillon said on Saturday that Ulta is closing many of its retail stores and asking its corporate employees to work from home at least through March 27. Ulta last week suspended many of its in-store services in a bid to reduce the risk of spreading the COVID-19 virus.

Ulta reported strong earnings last week; investors are concerned about the road ahead as measures to contain the virus will keep consumers away from stores for at least the next several weeks.

A row of lipstick and makeup testers in a beauty store.

Image source: Getty Images.

L Brands

L Brands is in the process of selling a majority stake in its troubled Victoria's Secret businesses to a private-equity firm, in order to focus on its more successful Bath and Body Works retail chain. That's probably good news for investors in the long run -- but the imminent falloff in retail foot traffic is bad news for both the Victoria's Secret and Bath and Body Works chains. 

Designer Brands

Designer Brands is the parent company of the DSW Shoe Warehouse retail chain. It also owns brand designer Camuto Group, which gives it some in-house design and manufacturing capabilities.

While DSW has an online storefront, it -- like Ulta and L Brands -- is still heavily dependent on foot traffic to its brick-and-mortar stores. Retail foot traffic was already down significantly in the U.S. as of a week ago; it almost certainly dropped more in recent days.

Now what

Investors won't have to wait too long for updates from Designer Brands, which is scheduled to report quarterly earnings on Tuesday, March 17. Ulta's CEO has been good about communicating with shareholders as the virus pandemic has unfolded, and investors can expect that to continue. 

And as for L Brands, investors will have to wait for confirmation that the Victoria's Secret transaction has closed. 

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Stocks Mentioned

Ulta Beauty, Inc. Stock Quote
Ulta Beauty, Inc.
ULTA
$390.56 (1.21%) $4.66
Bath & Body Works, Inc. Stock Quote
Bath & Body Works, Inc.
BBWI
$26.68 (-8.00%) $-2.32
Designer Brands Inc. Stock Quote
Designer Brands Inc.
DBI
$13.26 (-4.88%) $0.68

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

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