What happened
Shares of Ross Stores (ROST 0.40%), Macy's (M 1.51%), The TJX Companies (TJX 0.47%), and Kohl's (KSS -1.10%), all well-known apparel retailers, jumped between 16% and 33% higher today after Pfizer delivered great news regarding its leading COVID-19 vaccine candidate.
So what
It was a great Monday morning for the markets as both the S&P 500 and the Dow Jones Industrial Average topped their previous intraday record highs driven by positive vaccine news from Pfizer. Pfizer announced its vaccine candidate was found to be more than 90% effective in preventing COVID-19 in participants who had not previously been infected. Furthermore, with a study that enrolled over 43,500 participants across diverse backgrounds, no serious safety concerns were observed.
"With today's news, we are a significant step closer to providing people around the world with a much-needed breakthrough to help bring an end to this global health crisis," said Albert Bourla, Pfizer chairman and CEO, in a press release. "We look forward to sharing additional efficacy and safety data generated from thousands of participants in the coming weeks."
News that Pfizer has a promising and effective vaccine is hugely positive news for many beaten-down industries, especially brick-and-mortar retailers. As you can see in the graphic above, these apparel retailers have all lagged the broader S&P 500 recovery since COVID-19 first knocked the wind out of the economy. But today's pop is a sign investors can see the light at the end of the tunnel and can hope the pandemic will be under control sooner, rather than later, with upcoming vaccines.
Now what
As you can also easily see in the above graphic, there was a clear difference during the pandemic with discount retailer stocks, such as TJX and Ross Stores, compared to Kohl's and Macy's. Consumers seemed to offset the economic uncertainty from COVID-19 by identifying value and opting for discount retailers. TJX and Ross Stores both release highly anticipated third-quarter data later in November, but both have focused on e-commerce as well as safely reopening a long list of stores during the second quarter. In fact, Ross is even refocusing on growth with the recent announcement that it opened 30 Ross Dress for Less and nine dd's Discounts stores across 17 different states in October.
Image source: Getty Images.
Kohl's and Macy's, two retailers that also deliver third-quarter results later in November, both acknowledged their primary strategy to get through this unprecedented crisis was to keep consumers as safe as possible while reopening stores, boost liquidity to survive the downturn, and focus on driving e-commerce business to offset brick-and-mortar sales. Kohl's, for example, suffered an overall 23% decline in second-quarter sales, but managed to soften the blow thanks to a 58% spike in digital sales.
The pandemic has caused hardships for a number of businesses and industries: Hertz had to file bankruptcy as rental vehicle demand disappeared, airlines canceled flights and stopped selling seats, and restaurants were forced to improvise outdoor areas and create delivery and pickup meal options. But the worst might soon be over. Investors looking to buy shares of beaten-down companies should make sure the companies have a strong balance sheet, ample liquidity, and a proven capability of offsetting some of the negative impacts from COVID-19.
