What happened
Shares of several big retailers were down on Thursday afternoon, a day after a broad-based sector sell-off driven by a slew of credit downgrades and ongoing coronavirus worries.
Here's where things stood for these three companies' stocks as of 2:30 p.m. EDT today, relative to their closing prices on Wednesday:
- Bed Bath & Beyond (BBBY +0.00%) was down 6.7%.
- Gap (GPS 0.51%) was down 9.8%.
- Kohl's (KSS 0.47%) was down 8.7%.
So what
Here's what these three companies have in common: All three generate much of their revenue via sales in their brick-and-mortar stores, all three have closed those stores for the time being in response to the coronavirus pandemic, and all three are now hoarding cash and hoping to hold on until stores reopen and the economy recovers.
Gap furloughed over 80,000 store employees on Monday. Image source: Gap.
All three were also down sharply in trading on Wednesday, and were down again on Thursday afternoon. Here are the most recent developments for each:
- Bed Bath & Beyond's credit rating was cut to deep-junk levels (B+) by Standard & Poor's late last Friday, on concerns that the company (which was already struggling before the COVID-19 outbreak) will have to burn much of its cash just to hang on while its stores are closed. The company closed most of its retail stores in the U.S. and Canada on March 23, and said that it will pay store employees at least through April 3.
- Gap's shares are still falling following its decision to furlough most of its store teams in the U.S. and Canada, more than 80,000 people in all. Those employees won't be paid until stores reopen, but those who had healthcare benefits before stores closed will continue to receive them, the company said on Monday. Gap has about $1.7 billion in cash, which should be enough for new CEO Sonia Syngal to navigate through the pandemic and the likely economic aftermath.
- Kohl's credit rating was cut by Fitch on Wednesday, to BBB- from BBB, with a negative outlook. (That's still investment-grade, but just barely.) In their Wednesday note, Fitch's analysts said that they expect Kohl's revenue to drop by about 20% this year. But with $1.7 billion in cash, the company likely has the liquidity to ride out the crisis, they said. However, when the company furloughed its retail employees and suspended its share-buyback program on Tuesday, it also said that it is "evaluating" its dividend, a word of warning that is likely adding to the selling pressure today.
Now what
Bed Bath & Beyond investors won't have to wait too long for an update, since the company is scheduled to report its earnings for the fourth quarter of fiscal 2019 on April 15.
As for Gap and Kohl's, while both companies have suspended their prior guidance for 2020, neither has yet to offer any further insight into how they see things unfolding over the next several months.
