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Why Gap, Kohl's, and Other Retail Stocks Were Up Today

By John Rosevear – May 26, 2020 at 4:34PM

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Stores are reopening and investors are optimistic.

What happened

Shares of several apparel and home-goods chains rose on Tuesday afternoon, as continued store reopenings and recovering economic activity gave retail-focused investors reasons for optimism. 

Here's where things stood at the close on Tuesday for these four companies' stocks, relative to their closing prices on Friday.

  • Bed Bath & Beyond (BBBY 1.21%) was up 11.8%.
  • Designer Brands (DBI 1.61%) was up 13.5%.
  • Gap (GPS 0.36%) was up 8.8%.
  • Kohl's (KSS 0.93%) was up 11.3%.

So what

There was no big news moving these companies' stocks higher on Tuesday. Rather, they were rising amid a broad-based market rally that seemed to be driven by signs that economic activity is resuming faster than expected, as regions around the world continue to reopen following COVID-19-related shutdowns. 

A Gap sign outside a store.

Image source: Gap.

For the companies here, the implications are clear: If consumers are now more willing (and able) to go out into the world and spend discretionary income, that's great news for these four consumer-discretionary retail chains, all of which are working to reopen stores that were closed in mid-March.

While there was no news to report on Tuesday, here's the latest on each of these four companies: 

  • Bed Bath & Beyond said last week that it plans to have 500 of its stores (about half of its total locations) reopened by June 13. The company has had strong online sales through the shutdown, with demand so high that it repurposed some of its shuttered retail stores as temporary fulfillment centers. Its online revenue rose 85% in April from a year ago. 
  • Designer Brands' most recent update for investors was on May 4, when it said that it began reopening its stores on April 30. It expected to open another 200 by the end of that week. Earlier, on May 1, Designer Brands announced that it had amended the terms of its $400 million line of credit, and that under the new terms, it was obliged to suspend dividend payments and share repurchases for the time being.
  • Gap most recently updated its investors on May 7, when it announced a series of moves made to bolster its balance sheet. It said that it had completed a $2.25 billion bond offering, agreed to a new $1.868 billion revolving-credit line, and paid off $500 million outstanding on its earlier line of credit. A day earlier, the company said that it expected to have 800 stores reopened by the end of May.
  • Kohl's said on May 19 that it lost $541 million in its fiscal first quarter, or $3.20 per share on an adjusted basis, on revenue of $2.43 billion. That loss was wider than Wall Street had expected, but there was a sliver of a silver lining in the news. While its net sales fell 43% in the quarter that ended on May 2, its online sales were up 24%, and up 60% in April. 

Now what

Investors in Designer Brands and Gap can look forward to earnings reports in the near future. Gap has confirmed that it will report its fiscal first-quarter results after the market closes on June 4. Designer Brands hasn't yet announced a date for its fiscal first-quarter results, but it will likely do so soon: It reported in late May in both 2018 and 2019. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends Designer Brands Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Kohl's Corporation Stock Quote
Kohl's Corporation
KSS
$25.57 (0.93%) $0.23
The Gap, Inc. Stock Quote
The Gap, Inc.
GPS
$8.42 (0.36%) $0.03
Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
BBBY
$6.26 (1.21%) $0.07
Designer Brands Inc. Stock Quote
Designer Brands Inc.
DBI
$15.48 (1.61%) $0.24

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

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