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These Retail Stocks Are Rising as Congress Nears Approval of $2 Trillion Coronavirus Aid Deal

By John Rosevear - Mar 25, 2020 at 3:51PM

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Anything that shortens the post-virus recession is bullish for these three.

What happened

Shares of several brick-and-mortar retail chains were moving up on Wednesday afternoon, as Congress and the Trump administration neared agreement on a $2 trillion deal intended to support the U.S. economy through the coronavirus pandemic.

Here's how these three retail stocks were performing as of 3 p.m. EDT on Wednesday:

  • Designer Brands (DBI -2.10%), owner of DSW Designer Shoe Warehouse and other retail shoe chains, was up about 10%.
  • RH (RH -10.56%), parent company of luxury home-goods chain Restoration Hardware, was up about 10.1%.
  • Ulta Beauty (ULTA -1.57%) was up about 12.7%.

So what

While it's not immediately clear whether (or how much) these three companies will benefit directly from the economic-rescue package, it's clear that all three (and many other companies) will benefit if the post-pandemic economy recovers quickly, avoiding a protracted recession.

Here's what each of the three companies has done in recent weeks to prepare for the effects of the pandemic:

  • Designer Brands closed all of its stores in North America on March 17, and announced that it is reducing its quarterly dividend from $0.25 per share to $0.10 per share in an effort to conserve cash. The company will pay its retail employees through the end of March.
  • RH said on March 17 that it will close all of its stores until at least March 27, and that it will continue to pay employees while stores are closed. It has yet to provide any further updates, but it's expected to report earnings sometime in the next week or two.
  • Ulta Beauty also closed all of its stores on March 17, and said that it will continue to pay all of its retail employees for the time being. Late on Monday, it said that it has drawn down about $800 million from an existing line of credit, giving it a total cash reserve of $1.3 billion as of March 18.
A samples counter in a Restoration Hardware retail store

All Restoration Hardware stores are closed for now. Image source: RH.

Now what

Clearly, the short-term outlook for all three companies isn't great. All three generate most of their revenue from sales in their brick-and-mortar stores, and all of those are shut down for now.

But it's what happens after the pandemic passes that interests investors most. The bill that's nearing approval will improve the chances of a quick economic recovery, and that in turn improves the chances that all three of these retailers will recover quickly as well.

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Stocks Mentioned

RH Stock Quote
RH
RH
$212.26 (-10.56%) $-25.06
Ulta Beauty, Inc. Stock Quote
Ulta Beauty, Inc.
ULTA
$385.48 (-1.57%) $-6.16
Designer Brands Inc. Stock Quote
Designer Brands Inc.
DBI
$13.06 (-2.10%) $0.28

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

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