Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }
Coronavirus information
Coronavirus information
The Zero Canada Project provides resources to help you make the most of staying home.
Visit the hub

A Citadel Outlet shopping mall reopens in Commerce, Calif., on May 28, 2020.

MIKE BLAKE/Reuters

Investors are taking a closer look at the market’s consumer discretionary companies as a reopening U.S. economy fuels hopes of a turnaround for some of the sector’s hardest-hit names.

Many companies in the sector have been battered by the countrywide coronavirus-fuelled lockdowns that have weighed on growth and damaged retail spending over the past several months, although the stocks of a few, such as Amazon.com Inc., have soared.

A gradual lifting of lockdowns in some states has stirred hopes for a bounce back for the retailers that make up much of the sector.

Story continues below advertisement

Some investors, however, say it may be months before consumers return to their previous shopping habits, making it unlikely that the companies will see a pickup in revenues in the near term.

Firms ranging from middle-income retailers such as Gap Inc. and American Eagle Outfitters Inc. to high-end destinations such as Tiffany & Co. and Vail Resorts Inc. are expected to report results in the week ahead.

“This particular group is full of landmines,” said Jamie Cox, managing partner for Harris Financial Group. “There is not going to be a lot of investor follow-through until we get some certainty with what future revenue prospects are going to be.”

Shares of the Gap, for instance, are down 43 per cent for the year to date. A recession that persists through the fourth quarter of this year would reduce the company’s revenue by 40 per cent, according to a note by research firm Trefis.

Next Friday’s U.S. jobs report is expected to show that the unemployment rate rose to 19.8 per cent in May, smashing April’s record 14.7 per cent, according to a Reuters poll. Non-farm payrolls are expected to drop by 7.4 million, adding to the 20.5 million jobs lost the previous month.

Mr. Cox is focusing on dominant players such as Amazon, Walmart Inc. and Target Corp., which have a mix of essential items such as groceries, as well as electronics and games that can appeal to customers who may face extended lockdowns during a potential second wave of the virus.

Over all, retail companies in the S&P 500 are up 12.9 per cent for the year to date, a gain powered largely by Amazon’s 31-per-cent rally. Apparel companies, by comparison, are down 16.2 per cent over the same time.

Story continues below advertisement

Brian Jacobsen, senior investment strategist for the Wells Fargo Asset Management Multi-Asset Solutions team, says retail companies will likely show rising expenses over the next several quarters because of things such as more frequent sanitation of stores and technology purchases aimed at increasing the productivity of employees working from home.

“It’s really going to be a challenge to get a clear read of the direction for quite a while,” he said.

Despite those headwinds, investors may still gravitate toward companies that are able either to tap the capital markets for funds or draw from their financial reserves, said Randy Frederick, vice-president of trading and derivatives with the Schwab Center for Financial Research.

Retailers such as J. Crew Group Inc. and J.C. Penney Co. Inc. have already filed for bankruptcy owing in part to the novel coronavirus pandemic, leaving more opportunity for companies that are able to survive and grab market share, Mr. Frederick said.

“You’re getting set up for potential upside surprises,” he said. “You may take a step back and look at this and say, ‘No matter how awful these numbers may be, at least they’re still in business.’”

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies