Tuesday morning brought some choppiness to Wall Street, as market participants tried to weigh countervailing factors against each other. Civil unrest in many major metropolitan areas in the U.S. continued, with the White House taking an aggressive stance in dealing with protesters. At the same time, investors remain hopeful about the reopening of the economy as part of the recovery from the coronavirus pandemic. Just before 11 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was up 149 points to 25,624, and the S&P 500 (SNPINDEX:^GSPC) rose 6 points to 3,062. However, the Nasdaq Composite (NASDAQINDEX:^IXIC) dropped 35 points to 9,517.
Despite the mixed markets, some stocks posted sharp gains. Two very different winners today were RH (NYSE:RH) and Western Union (NYSE:WU), and although they serve different target demographics, they're both moving forward strategically to try to take advantage of opportunities they see in their respective markets.
RH bets on luxury
Shares of luxury retailer RH climbed more than 10% Tuesday morning. Investors were pleased to see the company double down on its efforts to dominate the luxury home furnishings space, with the release of RH's annual letter to shareholders offering a window into CEO Gary Friedman's thought process about the business and the fallout from the coronavirus crisis.
Friedman celebrated RH's results in 2019, which included a better than 5% rise in sales that sent earnings per share up by almost half from 2018 levels on an adjusted basis. Yet he also acknowledged that RH has had to respond as many retailers have during the pandemic, with store closures and deferred capital spending.
Yet the RH CEO is adamant that the retailer will emerge from the crisis stronger than ever. As he sees his competition, "There are those with taste and no scale, and those with scale and no taste. RH at its core is about taste, and we believe the idea of scaling taste is large and far-reaching." Moreover, Friedman sees the emergence from the worst of the pandemic as an opportunity "to be visionaries, destroying today's reality to create tomorrow's future."
With today's gains, RH stock has regained nearly all of its losses from the coronavirus bear market. With results due out later this week, investors will get a chance to see whether RH's customers are equally excited about the future of luxury retail.
Show me the money
Western Union enjoyed an 11% rise in its share price. The company best known for sending money across the globe has apparently entered the mergers and acquisitions arena with an ambitious move to buy one of its key industry rivals.
Western Union has been in discussions with MoneyGram International (NASDAQ:MGI), according to reports from Bloomberg News. With a market capitalization of just $225 million, MoneyGram is much smaller than the $9 billion Western Union, but the combination could help consolidate the money transfer industry and help the post-merger entity fight back more effectively against financial technology innovations like direct online payments.
At the same time, Western Union has seen its own business start to recover from the effects of the pandemic. Total transaction counts for May were down just 7% from year-ago levels, compared to a 21% year-over-year drop in April. Moreover, digital transactions using the Western Union network almost doubled in May.
Western Union will still face pressure from fintech rivals that offer more convenient ways for many customers to move money. Yet a strategic combination should help Western Union compete more effectively while looking for innovations of its own.