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Retail Stocks Are Falling on Renewed Coronavirus Concerns

By John Rosevear - Mar 27, 2020 at 10:45AM

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How long will stores be closed? A while longer, it now seems.

What happened

Shares of Urban Outfitters (URBN 6.88%) and the parent companies of the DSW Designer Shoe Warehouse and Restoration Hardware retail chains all fell sharply after the market opened on Friday amid a broad-based market sell-off on renewed concerns about the economic implications of the coronavirus pandemic.

All three recovered somewhat as the morning went on but were still down as of 11:00 a.m. EDT:

  • Designer Brands (DBI 3.46%), DSW's parent, was down 5.5%;
  • RH (RH 5.41%) was down 5.3%.
  • Urban Outfitters' shares were down 6.3% from Thursday's closing price.
An Urban Outfitters store.

Image source: Urban Outfitters.

So what

All three companies are in much the same boat now. All have closed their brick-and-mortar stores in North America in response to the coronavirus pandemic, and all are trying to make the most of their online sales until they can reopen -- but all three have historically depended on in-store sales for much of their revenue.

Most retail chains in the U.S. closed their stores in mid-March, saying that they would reevaluate at the end of the month. With the end of March now close, it's clear that most stores in the U.S. (and Canada and much of Europe) will likely remain closed for at least a few more weeks.

Here's where things stood for each company on Friday morning:

Designer Brands

Designer Brands owns the DSW Designer Shoe Warehouse, Shoe Company, and Shoe Warehouse retail chains, as well as the Camuto Group of footwear and accessory brands.

The company closed all of its stores in North America on March 17 and said that it would pay store employees for two weeks. It also cut its quarterly dividend from $0.25 per share to $0.10 per share in an effort to conserve cash.

The company reported its fourth-quarter and full-fiscal-year earnings on March 17.

RH

RH, owner of the Restoration Hardware luxury home-goods chain, also said on March 18 that its stores will be closed at least through today, March 27. It has promised to continue to pay its retail employees while stores are closed.

As of Friday morning, RH had not yet announced a date to reopen its stores.

The company will report its earnings for the quarter and fiscal year that ended on Feb. 1 on Monday, March 30, after the market closes. CEO Gary Friedman and other senior executives will provide updates and an outlook at that time, the company said.

A fabric display in a Restoration Hardware store.

Image source: RH.

Urban Outfitters

Urban Outfitters closed all of its stores on March 14, saying at the time that its stores will stay closed until March 28. It has promised to pay its retail employees while stores are closed.

The company gave a further update to investors on Wednesday, March 25. It said that while most of its nonretail employees are working from home, a small number continue to work in its Philadelphia headquarters. It is taking measures to keep its offices disinfected and to keep employees well apart from one another, it said.

Urban Outfitters reported its fiscal fourth-quarter and full-year earnings on March 3.

Now what

For investors in all three companies, it's now a waiting game: When will stores be able to reopen, and how much will it cost each company to wait?

Investors in RH can look forward to updates during the company's earnings call on Monday afternoon. As for the others, we'll have to wait and see.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends Designer Brands Inc. and RH. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Urban Outfitters, Inc. Stock Quote
Urban Outfitters, Inc.
URBN
$24.38 (6.88%) $1.57
RH Stock Quote
RH
RH
$329.31 (5.41%) $16.91
Designer Brands Inc. Stock Quote
Designer Brands Inc.
DBI
$18.83 (3.46%) $0.63

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

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