Why these three retail stocks were crushed in March – and why one fared better than the others

What happened

Retail chain actions Bed bath and beyond (NASDAQ: BBBY), Macy’s (NYSE: M), and Ulta Beauty (NASDAQ: ULTA) were all beaten in March. Companies closed many of their physical stores in mid-month to support social distancing intended to slow the spread of the COVID-19 virus.

With the stores closing, all three suffered great damage in terms of income and stock prices, according to data provided by S&P Global Market Intelligence.

  • Shares of Bed Bath & Beyond fell 61.1% in March.
  • Macy’s shares fell 62.9%.
  • Ulta Beauty’s share price fell 31.7%.

BBBY given by YCharts.

So what

Here’s how March went for each of these three retailers.

Bed bath and beyond

The company was already grappling with operational challenges earlier this month. New CEO Mark Tritton presented a credible recovery plan in January, but the disruptions of March threw several keys there. The company closed all except 175 of its 1,550 stores in the US and Canada on March 23, promising to pay store workers until April 2. (He has since put those employees on leave, cutting their wages until stores reopen while maintaining their health care benefits.)

As the company insists it has enough liquidity to weather the crisis ($ 1.4 billion at the end of January, as well as an additional $ 250 million available through its lines of credit), analysts at rating were not impressed: Standard & Poor’s reduce Bed Bath & Beyond’s credit rating at B +, a level of deep junk, on March 30.

A Macy's sign outside a store.

Image source: Macy’s.


Macy’s had also struggled before the pandemic arrived in the United States. Like Bed Bath & Beyond, it also announced a turnaround plan after a harsh holiday season, to make sure things go wrong in March. Macy’s closed all of its stores on March 17 and withdrew its entire $ 1.5 billion line of credit March 24, to lose his investment grade credit rating (and its place in the S&P 500 Index; it is now a small cap stocks) at the beginning of April.

Ulta Beauty

The beauty store chain’s stock fared better than its two peers in March, in large part because the company was in much better shape at the start of the month. His strong earnings report on March 12 probably helped mitigate the effects of what happened after: it withdrew its forecast for the year, closed its physical stores on March 19, took $ 800 million from its line of credit, delayed its expansion plans and suspended its share buyback program.

Rows of makeup testers in a beauty store.

Image source: Getty Images.

Through it all, CEO Mary Dillon impressed retail equity investors. Ulta has a strong balance in the circumstances and strives to take care of its employees and shareholders. Inactive store employees will continue to be paid until mid-April (and will retain their health care benefits thereafter), while those who continue to work in distribution centers that support online businesses are paid. ‘Ulta receive an additional $ 2 per hour.

Now what

The three companies are now hoping that online sales can help make up some of the revenue lost during the closure of their physical stores. While some evidence is emerging that consumers (at least the wealthiest) still spend online while sheltering at home, not all retailers will be able to generate a lot of income through online channels.

Of the three here, Ulta is clearly in the best shape (and has a pretty robust online storefront). But all three will remain under pressure until the post-pandemic recovery begins.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Marilyn Perkins

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