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May 18, 2020, 3:04 p.m. EDT

Off-price retailers face near-term headwinds due to coronavirus: Wells Fargo

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By Tonya Garcia

Off-price retail, which had been an analyst and consumer favorite before the coronavirus pandemic, is now facing near-term headwinds, Wells Fargo says. The off-price category includes T.J. Maxx parent TJX Cos. /zigman2/quotes/203136811/composite TJX -1.40% , Ross Stores Inc. /zigman2/quotes/202639496/composite ROST -0.86% and Burlington Stores Inc. /zigman2/quotes/203203718/composite BURL -0.24% , which announced right before the nationwide stay-at-home orders that it would shut down its e-commerce site. "[I]nvestor conversations have turned much more cautious, as bears have begun to think more about the near-term issues and how challenging the next three-to-six months could be for off-price (lack of e-commerce, stores that rely on heavy traffic)," analysts led by Ike Boruchow wrote. Still, the category has benefits, including the "massive inventory dislocations" that the past months of apparel shopping decline will create. Retail sales fell 16.4% in April with sales plunging 79% at clothing stores. "While we remain very favorable on all three names into 2021, we highlight Burlington as the best way to play the space - best positioned from an inventory/liquidity standpoint, while their larger stores and less 'peak' traffic dynamics should make it easier to mitigate near-term comp challenges," Wells Fargo wrote. Wells Fargo rates all three companies overweight/buy with a $225 price target for Burlington, $110 price target for Ross Stores and $65 price target for T.J. Maxx. Burlington stock is up nearly 6% in Monday trading and up 7.5% over the past year. Ross shares have rallied 5.5% on Monday and are down 7.4% for the last 12 months. And TJX stock has gained 5% on Monday and is down 6.5% for the past year. The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.11% is up 3.5% for the past 12 months.

/zigman2/quotes/203136811/composite
US : U.S.: NYSE
$ 53.41
-0.76 -1.40%
Volume: 1.09M
Sept. 22, 2020 11:01a
P/E Ratio
94.90
Dividend Yield
0.00%
Market Cap
$64.95 billion
Rev. per Employee
$156,518
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/zigman2/quotes/202639496/composite
US : U.S.: Nasdaq
$ 89.64
-0.78 -0.86%
Volume: 347,753
Sept. 22, 2020 11:01a
P/E Ratio
59.75
Dividend Yield
0.00%
Market Cap
$32.19 billion
Rev. per Employee
$181,179
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/zigman2/quotes/203203718/composite
US : U.S.: NYSE
$ 206.50
-0.50 -0.24%
Volume: 269,053
Sept. 22, 2020 11:01a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$13.70 billion
Rev. per Employee
$151,556
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/zigman2/quotes/210599714/realtime
US : S&P US
3,277.40
-3.66 -0.11%
Volume: 652.44M
Sept. 22, 2020 11:02a
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