What happened

Shares of brick-and-mortar retail chains were dropping sharply on Wednesday, with many down by double digits, after a series of downgrades following a brutal second half of March. Nearly all department stores in the U.S. and Canada have been closed since mid-March as health authorities work to contain the COVID-19 pandemic. 

Here's where things stood for shares of these four companies as of 3:30 p.m. EDT:

  • Dillard's (DDS 0.16%) was down 24.4%.
  • Gap (GPS -1.44%) was down 17.6%.
  • Kohl's (KSS -0.13%) was down 11.9%.
  • Macy's (M -2.35%) was down 9.3%.

So what

The stories with these four stocks vary, but there's a common theme: All of the companies operate extensive chains of brick-and-mortar retail stores, nearly all of those stores are closed for the foreseeable future, and all of them are now reeling from sudden, steep declines in revenue.

Here are the latest developments on each:

  • Dillard's credit rating was cut to BB from BBB- by Fitch Ratings on Wednesday morning, with a negative outlook. With stores closed and the economy disrupted, Fitch expects Dillard's revenue in the current fiscal year to be down about 20% from fiscal 2019. Fitch's analysts noted that Dillard's had $227 million in cash as of Feb 1., as well as an additional $779 million available via its existing credit facility, and no major debt payments until early 2023; it should have enough to ride out the pandemic and the recession that's likely to follow. 
  • Gap's shares continued to fall after the company said on Monday that it is furloughing most of its store teams in the U.S. and Canada -- over 80,000 employees in all. While those employees won't be paid until stores reopen, those that had healthcare benefits before stores closed will continue to receive them, Gap said. The company has about $1.7 billion in cash -- likely enough to get through the pandemic and the aftermath. 
  • Kohl's credit rating was also cut by Fitch, to BBB- from BBB, with a negative outlook. Fitch's analysts also expect Kohl's revenue to drop about 20% this year, but note that with $1.7 billion in cash, the company has ample liquidity to ride out the pandemic and its likely economic aftermath.
  • Macy's credit rating was cut by Fitch as well, to BB+ from BBB-, with a negative outlook. Fitch expects Macy's revenue to decline nearly 25% in 2020, to $19.2 billion. Macy's ended 2019 with $685 million in cash and recently drew down its $1.5 billion line of credit; Fitch's analysts believe that it has sufficient liquidity to get through the downturn. 
A Macy's sign on the outside of a store.

Image source: Macy's.

Now what

For investors who understand retail, none of this should be surprising, but it is sobering. At this point, all four companies are in survival mode, cutting costs and trying to stretch their cash reserves until they can reopen stores and ramp up sales. 

The good news is that all four companies probably have sufficient cash to get through the crisis. The not-as-good news is that they'll have much less cash -- and uncertain prospects -- when we finally enter the post-coronavirus world.