While the S&P 500 moved higher today, shares of BJ's Wholesale Club (NYSE:BJ), Etsy (NASDAQ:ETSY), and Harley-Davidson (NYSE:HOG) were down by double digits. As of 1:38 PM EDT on Thursday, the three were down 11.4%, 13.4%, and 12.6%, respectively.
For Harley investors, there's news, and not the good kind. Late Wednesday, the motorcycle maker announced that it was suspending production and closing most of its U.S. factories until at least March 29.
BJ's and Etsy, on the other hand, haven't made any announcements, and both are falling on a day that's seeing many other retail and consumer-goods stocks move higher after heavy selling has driven them down over the past few weeks.
Let's not beat around the bush. BJ's, Etsy, and Harley all face a pretty rough next few months or more. We are on the cusp of a global recession that's probably already begun, something that will become more apparent as economic data comes in during the weeks ahead. In recessions, companies that make and sell discretionary goods feel the biggest hit, and to different degrees, all three of these companies fall into that category.
Of the three, BJ's is the least at-risk since it does sell plenty of staple goods, including food, cleaning supplies, and other household necessities (I promised my editor I wouldn't mention toilet paper). But Harley is on the other end of the spectrum and could see its sales fall sharply.
Etsy is somewhere in the middle; while it doesn't sell necessities, it also doesn't count on five-figure motorcycle sales to drive its results, and with many physical retailers potentially closing, it could become a go-to source for inexpensive items to keep people entertained and distracted during extended periods of isolation.
What happens next? That's anyone's guess, but it's likely going to get worse before it gets better for Harley. The company has $2.3 billion in debt maturing this year versus $834 million in cash on the books, and it's increasingly likely that 2020 could be a year it struggles to generate positive cash flows. Even with shares already down more than half, investors may want to hold off until its ability to deal with that debt becomes clear. I think the odds are in its favor, but there's risk that investors should consider before acting.
For BJ's and Etsy, their futures are probably more secure, at least over the long term. Both will likely struggle for most of the rest of 2020, but they don't have the same risk profile as Harley, which is facing a very tough environment to be selling an expensive premium item that people can do without.