Cutbacks on spending have caused stocks of many leading retail companies to suffer.
Last few weeks have been eventful for countries across the world. Markets have been highly volatile, throughout. The U.S. stock market has been especially eventful with it entering the bear territory after a successful and long bullish run in the bullish territory for over a decade.
The volatility of the U.S. market has investors worried and confused. While it may take some time for the investors to feel at ease again, multiple sectors have started to suffer as a result COVID 19 pandemic. One such area to have been badly hit this year is the retail sector.
The U.S. retail sales in February fell by the most in a year, indicating that the main driver of the U.S. economy, consumer spending, has begun to slow. Sales dropped 0.5 percent from a month earlier in February 2020, following an upwardly revised 0.6 percent increase in January and missing market expectations of a 0.2 percent rise.
Consumers have cut back spending on a range of products, including motor vehicles & parts (-0.9 percent vs 0.8 percent), furniture (-0.4 percent vs 3.2 percent), electronics & appliances (-1.4 percent vs 0.6 percent), building materials (-1.3 percent vs 3.3 percent), health & personal care products (-0.1 percent vs 0.8 percent) and clothing (-1.2 percent vs -1.4 percent).
These cutbacks on spending have caused stocks of many leading retail companies to suffer. Interestingly, as per a report on Yahoo Finance, from Zacks Investment Research, stocks of a few companies which were until a few months ago touted to perform exceptionally well after a strong 2019, too have fallen of a cliff now. Let us take a quick look at the share prices of these retail companies since the outbreak.
Hibbett Sports, Inc., (NASDAQ: HIBB), a full line sporting goods retailer, saw its stock take a massive dip. Over the course of the past 3 months alone, i.e. since the outbreak, the stocks have gone down from $28.04 to $9.85.
Arcos Dorados Holdings Inc. (NYSE: ARCO) is McDonald’s largest franchisee in the world in terms of system-wide sales and number of restaurants. The company saw its stocks doing well for a while at the start of the current year but eventually fell to less than half to $3.97 from $3.56.
RH (NYSE: RH) operates as a retailer in the home furnishings. It offers products in various categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, tableware, and child and teen furnishings. RH has seen the price of its shares crashing to touch $82.13 from $213.50 at the start of the year 2020.
Genesco Inc. (NYSE: GCO) is an American publicly owned specialty retailer of branded footwear and accessories and is a wholesaler of branded and licensed footwear. The company’s shares are priced at $11.73, a sharp fall from $47.51 at the start of the year 2020.
In the short run, the impact will be predictably grim. Long term, we still have to wait and watch because it will majorly depend on the length and severity of the outbreak. If the outbreak is contained early, we might see a rebound analogous to 9/11 which experienced a V-shaped recovery as people resumed their normal course of life. If it extends for more months though then it will be difficult for consumers and retailers to sustain a prolonged shock to the system. The government is stepping in aggressively with assistance to the consumer by slashing lending rates and what will undoubtedly be sizable bail-outs for impacted industries and further aid to citizens.