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Why Shares of These Upscale Retailers Are Surging Today

By John Rosevear - Apr 6, 2020 at 1:46PM

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Right now, less-bad news counts as good news for these companies.

What happened

Shares of many upscale retailers were up sharply on Monday afternoon, as the market rallied amid signs that the economic impact of the coronavirus pandemic might not be quite as bad as previously feared.

Here's where things stood for these companies' stocks as of 2 p.m. EDT, relative to their closing prices on Friday:

  • RH (RH 1.34%) was up 16.8%.
  • Urban Outfitters (URBN 1.55%) was up 18.6%.
  • Williams-Sonoma (WSM 1.98%) was up 18.4%.

So what

There were several data points that retail-minded investors found encouraging on Monday. Key among them: Online home-goods retailer Wayfair (W 6.36%) said that its revenue-growth rate surged in mid-March, when consumers started staying home -- and has stayed high since.

Translation: Affluent stuck-at-home consumers are still shopping and spending online. That's one piece of good news for all upscale retailers, even those that haven't generated significant revenue from their online stores in the past. 

The inside of a Williams-Sonoma store, with shoppers and home goods visible.

Image source: Williams-Sonoma.

Here are the latest developments for each of these three companies:

  • RH said on Monday that it has temporarily furloughed about 2,300 store employees and permanently cut 440 jobs. It's also implementing salary reductions for managers and executives, cutting capital expenditures by $130 million for the year, and reducing other costs by $150 million. The company is tentatively assuming that its stores will reopen in June, but CEO Gary Friedman was clear that that date is far from certain at the moment. 
  • Urban Outfitters said last week that it will furlough most of its store, wholesale, and home-office employees for 60 days; that it has borrowed $220 million to bolster its cash reserves; and that it will not pay rent to its brick-and-mortar landlords for the time being. The company's stores closed on March 14; it paid employees through the end of March. 
  • Williams-Sonoma said on March 31 that it has extended its store closings in North America for two weeks, and that it will continue to pay store employees through that time. All of its corporate offices are closed, with employees working from home when possible, but its distribution centers (supporting its online businesses) remain open with enhanced safety protocols in place. Employees at the distribution centers are receiving bonuses for the duration of the pandemic. That's important: CEO Laura Alber noted in a statement that the company's online businesses contribute about 56% of its revenue. 

Now what

For the moment at least, all three companies appear to have sufficient liquidity to weather the COVID-19 storm. If the economic hit is less severe than many of us have expected, all three could be in good positions to recover later this year. 

But if there's anything that investors have learned over the last few weeks, it's that things can change very quickly.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Wayfair. The Motley Fool recommends RH and Williams-Sonoma. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Urban Outfitters, Inc. Stock Quote
Urban Outfitters, Inc.
$22.29 (1.55%) $0.34
RH Stock Quote
$307.56 (1.34%) $4.06
Williams-Sonoma, Inc. Stock Quote
Williams-Sonoma, Inc.
$158.83 (1.98%) $3.09
Wayfair Inc. Stock Quote
Wayfair Inc.
$68.62 (6.36%) $4.10

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

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