Shares of upscale apparel companies and retailers were falling on Friday afternoon, caught in a broad-based market sell-off that appeared to be driven by concerns about the duration -- and economic after-effects -- of the coronavirus-related retail shutdowns. Here's where these three stocks stood as of 2:30 p.m. EDT:
- Upscale retailer Nordstrom (NYSE:JWN) was down 9.4% from Thursday's closing price.
- Ralph Lauren (NYSE:RL) was down 3.9%.
- Tapestry (NYSE:TPR), the parent company of Coach and other luxury brands, was down 7.9%.
The story is similar for all three of these companies (and many more). First, with their retail stores closed for the time being, sales are down sharply right now. Second, investors are growing worried that consumers -- including affluent consumers -- may cut discretionary spending on economic concerns that could last well after the pandemic fades.
Put another way, hitting Nordstrom for Coach bags and Ralph Lauren boots may not be on too many people's Saturday-afternoon plans this fall.
Those are the broad concerns driving Friday's sell-off. Here's where things stand at each company.
- Nordstrom has closed all of its stores in the U.S. and Canada. (It has continued to pay store employees.) Its online stores remain open for now. It's also suspended its dividend, paused its share-repurchase program, and drawn down $800 million from its credit lines in a bid to conserve cash until it can reopen and restock its stores.
- Ralph Lauren has also closed all of its U.S. stores until at least April 1. (It will continue to pay store employees at least through that date.) Like Nordstrom, its online stores remain open for now. The company hasn't yet announced any balance-sheet moves since closing its stores, but it has about $2.4 billion in liquidity available, equal to 38% of its 2019 sales, so it can hang on for a while. Its next earnings report is in May.
- Tapestry's brands' stores (Coach, Stuart Weitzman, and Kate Spade) are also closed and will stay closed until at least April 10. (It's also paying store employees throughout the shutdown.) The company said yesterday that it has suspended its dividend and share-buyback program, and drawn down $700 million of an existing $900 million line of credit while looking for other ways to reduce costs.
As we've noted, the question for all three companies isn't just how much cash they'll burn while their stores are shut, but also how they'll fare -- and how the broader economy will fare -- once the pandemic fades.
All three will have to deal with outdated inventory, suppliers facing challenges, and employees who may not return after an extended period. It's impossible to do more than guess how all that will play out right now, so I think we should expect continued ups and downs for all three stocks until the post-pandemic picture starts to come into focus.