What happened

Retail stocks were gaining for the second day in a row today as investors were encouraged by states beginning to reopen their economies and signs that the coronavirus pandemic had passed its peak.

Among winners today were The TJX Companies (TJX 0.57%), Mattel (MAT 4.15%), and Best Buy (BBY -2.13%), since all stand to benefit from the end of stay-at-home orders, the reopening of nonessential retailers, and consumers returning to their regular shopping routines.

TJX, the parent of T.J. Maxx, Marshalls, and Home Goods, also got a bullish analyst note, which helped lift the stock.

At the end of the day, TJX stock was up 2.6%, while Mattel had gained 4.8%, and Best Buy finished up 4%. The S&P SPDR Retail ETF (XRT -0.03%) gained 1.3% on the day, showing the industry made broad gains, while the S&P 500 was down 0.5%.

A stock chart going up

Image source: Getty Images.

So what

This morning, Jefferies analyst Janine Stichter said that data from a recent survey led her to believe that TJX would see a "measured" return of customers to its stores. Her research showed that 60% of respondents would make some change to their spending in stores, including avoiding fitting rooms, but after three months the percentage that plan to shop in stores increases significantly, indicating that the headwinds from social distancing and the stay-at-home orders would be temporary. Stichter kept her buy rating on the stock and a price target at $60, representing an upside of more than 20%. 

TJX, which is the most valuable general-apparel retailer in the U.S., has been hit hard by the pandemic as its off-price model is heavily reliant on customers visiting its stores. It said in March that it would close stores in North America, Europe, and Australia; draw down $1 billion from its credit facility; suspend share buybacks; reduce capital expenditures, and review operating expenses. The company also sold $4.25 billion in debt earlier this month to help its liquidity position.  

Best Buy, which initially saw a spike in sales of work-from-home products like monitors and webcams at the beginning of the outbreak, converted to a curbside-pickup model in March and has slumped through April. On April 16, the company said it would begin furloughing 51,000 employees on April 19 as one of a number of cost-reduction measures.

The company said that overall sales had declined about 30% from a year ago during the shutdown period, while domestic online sales had jumped 250%.  Like TJX, Best Buy is clearly struggling with store closings and not only needs stay-at-home orders to be lifted, but also for shoppers to return. Stichter's research gives hope that they will come back.

Mattel is not a retailer, but the consumer-facing company's fortunes are closely tied to retailers. And with the shock to the industry from the coronavirus, stores may be reluctant to stock up on toys this holiday season. Similarly, store closures and the delay of movie releases, like the Minions series, could also dampen toy sales.

Still, Mattel could benefit from the crisis in other ways as kids have more at-home time, and parents may feel compelled to buy them new toys in order to alleviate some of the boredom during quarantine. Mattel was struggling before the outbreak since it was burdened with nearly $3 billion in debt; sales are flat, and it has lost money on a GAAP basis in each of the last three years. 

Now what

Though the shoppers Stichter surveyed expressed optimism about returning to stores within three months, there's still a lot of uncertainty between now and then, and that positive response seems to assume that it will be safe to return to stores then.

The lifting of the stay-at-home orders and push to reopen the economy are clearly good things for these companies. But the economy is in a much weaker position than it was before the crisis hit, so investors shouldn't expect a return to prior sales levels anytime soon. 

Retail earnings reports are just around the corner, starting in May, and investors should be on the lookout for insight on what executives think the recovery in the sector will look like, since the next few weeks will be pivotal.