Please ensure Javascript is enabled for purposes of website accessibility

Why Under Armour, Hanesbrands, and Capri Holdings Jumped Today

By Jeremy Bowman – May 26, 2020 at 7:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the apparel companies jumped Tuesday on bullish macroeconomic news.

What happened

Shares of Under Armour (UAA -3.97%) (UAA -3.97%) (UAA -3.97%) (UAA -3.97%)Hanesbrands (HBI -4.29%), and Capri Holdings (CPRI -4.11%) were among the big winners Tuesday as the broad market rallied on economic reopenings continuing and signs that more companies were entering the vaccine race.

Apparel retailers have been hit hard by the COVID-19 pandemic as they were forced to close stores, being non-essential retailers. Meanwhile, demand for apparel has declined in general as people no longer have the usual occasions, like work or social gatherings, to purchase new clothes for. Given the sector's weakness, the stocks have responded very favorably to positive macroeconomic news, which lifted shares on the first available trading day of the holiday-shortened week.

Under Armour closed up 6.5%, while Hanesbrands finished up 11.5%, and Capri Holdings gained 13.1%. The S&P 500 finished the day up 1.2%.

A shopper examines a rack of clothes in a clothing store.

Image source: Getty Images.

So what

There was no specific news out on these companies Tuesday, but several different macroeconomic items pushed stocks up. First, Novavax said it had begun combined phase one and phase two clinical trials for its human coronavirus vaccine, which investors have highly anticipated as the stock has rallied in recent weeks. Novavax expects to have phase one results by July. Separately, Merck took a number of steps in developing treatments for the vaccine. The pharma giant acquired Themis Bioscience, a company focused on developing vaccines and treatments for infectious diseases, including COVID-19. It's partnering with IAVI, a non-profit scientific research organization, to develop a COVID-19 vaccine, and it's collaborating with Ridgeback Bio to develop an antiviral treatment for the virus. 

Additionally, economies internationally and in the U.S. took steps to reopen. The U.K. said all non-essential stores would open by June 15, a positive sign for clothing retailers in the country, while Japan said it would move to phase two of its reopening.

In the U.S., the long Memorial Day weekend saw Americans thronging to beaches and other outdoor spaces as they tried to return to their normal lives. All 50 states are in some stage of reopening, and California said parts of the state would now move into phase three, allowing businesses like hair salons to reopen.  

In another encouraging sign, the Conference Board's consumer confidence for May showed a slight uptick from 85.7 in April to 86.6, which was ahead of expectations at 82.3. That indicates that consumers may be more interested in spending on clothing and other discretionary items  than investors had thought.

Shares of Under Armour, Capri Holdings, and Hanesbrands all fell sharply during the beginning of the pandemic, and their stocks have mostly stayed down. Still, stores are beginning to reopen, and some retailers like TJ Maxx-parent TJX Companies have said that customer traffic has been higher than expected and above year-ago levels, pointing toward pent-up demand from customers.

Now what

Results at all three of these companies will be dismal through the first half of the year as they have all taken emergency measures like drawing down credit facility and cutting costs through layoffs, furloughs, or salary reductions in order to make it through the crisis.

The big question at this point is how consumers respond once these stores reopen. Though social distancing and other safety protocols are likely to present some obstacles, some of the recent news items are favorable for these companies' reopenings. Under Armour and Hanesbrands are likely in a stronger position than Capri Holdings as they sell exercise clothes and basics, which consumers will need regardless of cultural shifts from work-from-home policies and a lack of social gatherings. Capri, on the other hand, which owns brands like Michael Kors, Jimmy Choo, and Versace may find consumers less interested in purchasing handbags, shoes, and other fashion items.

The recovery is likely to be a slow one, but it looks like the worst has passed for these apparel retailers. 


Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Under Armour (A Shares) and Under Armour (C Shares). The Motley Fool recommends The TJX Companies. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Capri Holdings Stock Quote
Capri Holdings
$41.81 (-4.11%) $-1.79
Under Armour, Inc. Stock Quote
Under Armour, Inc.
$7.01 (-3.97%) $0.29
Hanesbrands Stock Quote
$7.36 (-4.29%) $0.33
Under Armour, Inc. Stock Quote
Under Armour, Inc.
$6.28 (-3.68%) $0.24

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.