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Why Skechers, Foot Locker, and TJX Stocks Are Jumping Monday

By Daniel Miller - Updated May 18, 2020 at 2:20PM

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Comments from the Fed and updates on a potential COVID-19 vaccine are pushing markets higher.

What happened

Shares of Skechers (SKX 0.53%), Foot Locker (FL 2.21%), and The TJX Companies (TJX 1.65%) jumped 8% or more Monday as a wave of optimism pushed markets higher thanks to comments from Federal Reserve Chairman Jerome Powell and a positive vaccine development.

So what

One source of investor optimism was provided by biotech Moderna, which announced that its vaccine mRNA-1273 was found to be safe and well tolerated in an early-stage study and that it produced antibodies in patients that could "neutralize" the coronavirus. Not only did that send its stock soaring 25% higher, it sparked optimism across the markets, with late-stage trials possibly beginning as soon as July.

A second source of optimism was provided by Powell, who said the Fed had plenty of ammunition left if needed, adding, "There's a lot more we can do." It's not an unusual comment from Powell, but any reassurance that the Fed can continue to support the economy and aid it throughout a recovery is a boost to the markets. Investors should note, however, that the second quarter is going to bring abysmal economic data and metrics, but the economy is expected to gradually rebound throughout the back half of the year.

Now what

Retailers face a series of questions as we move toward reopening parts of the economy. How will retailers sell through dated inventory that has been stuck in stores, and how much discounting will it require? Do retailers have the liquidity to weather the COVID-19 storm? How much brick-and-mortar sales can be offset by promoting online sales?

A row of shoes

Image source: Getty Images.

Wedbush analyst Sam Poser believes Skechers to be in an excellent position: "SKX is well positioned to emerge from the crisis in a position of strength. The company has ample liquidity, brand momentum, and geographic and channel diversity, which should help SKX weather the current crisis better than many peers."

On the flip side, some analysts believe Foot Locker will be slower to emerge from the pandemic as Nike's direct-to-consumer and e-commerce prowess is gaining momentum and mall traffic may not immediately (or ever) return to pre-pandemic levels. TJX Companies is also uniquely positioned as a discount retailer. COVID-19 could provide an incredible buying environment for off-price products, and demand could soar as more consumers return to shopping but want to save money.

Ultimately, the coronavirus is changing the environment and path forward for all retailers. While some stocks might be trading at a discount, not all companies are prepared to weather the pandemic. Investors need to thoroughly research and understand companies' long-term growth stories and near-term liquidity before investing.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skechers. The Motley Fool recommends The TJX Companies. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Skechers U.S.A., Inc. Stock Quote
Skechers U.S.A., Inc.
$40.21 (0.53%) $0.21
Foot Locker, Inc. Stock Quote
Foot Locker, Inc.
$31.52 (2.21%) $0.68
The TJX Companies, Inc. Stock Quote
The TJX Companies, Inc.
$65.47 (1.65%) $1.06
Moderna, Inc. Stock Quote
Moderna, Inc.
$171.18 (-0.37%) $0.63

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

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