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Why Brick-and-Mortar Retail Stocks Are Rising Today

By John Rosevear - Apr 17, 2020 at 2:46PM

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Investors are feeling optimistic about the post-coronavirus world.

What happened

Shares of several brick-and-mortar retail chains were rising on Friday, after news about a potential treatment for COVID-19 drove a broad-based market rally. 

Here's where things stood for these companies' stocks as of 2:15 p.m. EDT:

  • Designer Brands (DBI 7.91%) was up 12.5%.
  • Gap (GPS 8.86%) was up 8.4%.
  • Kohl's (KSS 2.27%) was up 4.8%.
  • TJX Companies (TJX 5.13%) was up 5.1%.

So what

Brick-and-mortar retail chains -- particularly those focused on apparel, footwear, and accessories -- have been hard-hit since the outbreak of the novel coronavirus in North America. Retail-focused investors know that it's easy to understand why: Most physical stores were closed in March, depriving these companies of the majority of their revenue -- and leaving them with sizable seasonal inventories. 

A Gap sign outside a store.

Image source: Gap.

Here are the latest developments with each of these companies as of Friday afternoon:

  • Designer Brands, owner of DSW Designer Shoe Warehouse and other shoe-store chains, said that it is piloting a program with midwestern grocery chain Hy-Vee to sell DSW shoes in Hy-Vee's grocery stores. For the time being, the partnership will be online-only, via Hy-Vee's website, but the hope is that DSW's shoes will find a permanent place in Hy-Vee's stores once the pandemic subsides. 
  • Gap's most recent update was on March 30, when it said that it had furloughed its store teams in the U.S. and Canada without pay, but with benefits, until it can reopen its stores. All of the company's stores in North America and Europe have been closed since mid-March, and Gap has canceled most of its merchandise orders for the summer and fall seasons. The retailer had about $1.7 billion in cash as of mid-March, likely enough for new CEO Sonia Syngal to navigate through the pandemic and any economic aftermath. 
  • Kohl's said in a regulatory filing on Friday that it has entered into a new credit agreement with a group of lenders led by Wells Fargo for a $1.5 billion asset-based revolving credit line. The line is secured by "substantially all of the assets of the company and its subsidiaries" aside from its real estate, Kohl's said. 
  • TJX, the corporate parent of TJ Maxx, Marshall's, and other off-price store chains, was upgraded to buy from hold by Jeffries analyst Janine Stichter on Friday morning. In a new note, Stichter said that she sees TJX as a "secular share gainer" that is well positioned to pick up market share during the post-virus recovery because of its recession-resistant off-price business model. The analyst noted that TJX's same-store sales increased during the last recession as consumers moved away from full-price offerings, and she expects to see the same effect when the U.S. economy reopens later this year.

Now what

Long story short: All four of these companies are doing what they can to weather the coronavirus storm. Kohl's has a new credit line to tap; Designer Brands has a new retail channel; Gap has cut costs to the bone; and TJX's buyers are no doubt looking forward to scooping up out-of-season inventory from full-price retailers once the U.S. economy gets rolling again.

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Stocks Mentioned

Kohl's Corporation Stock Quote
Kohl's Corporation
KSS
$39.25 (2.27%) $0.87
The Gap, Inc. Stock Quote
The Gap, Inc.
GPS
$9.46 (8.86%) $0.77
The TJX Companies, Inc. Stock Quote
The TJX Companies, Inc.
TJX
$60.24 (5.13%) $2.94
Designer Brands Inc. Stock Quote
Designer Brands Inc.
DBI
$14.60 (7.91%) $1.07

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

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