Tags: retailers | dividends | cut | virus

Morningstar: Many Retailers May Slash Dividends Except These 2 Titans

Morningstar: Many Retailers May Slash Dividends Except These 2 Titans
(Dreamstime.com)
 

By    |   Friday, 20 March 2020 09:26 AM

Investors in retail stocks should brace for aggressive dividend cuts amid the economic fallout amid the coronavirus pandemic, recent analyst research notes are warning savvy investors.

“Retail stores are closed en masse and mall traffic is down 90-100% across the U.S. after most announced two-week closures,” Barron’s recently quoted the retail analysts at Jefferies as saying.

 “Even if stores open again in early April, expect mall traffic to remain highly subdued [as] evidenced by patterns seen in China,” the analysts said.

The analysts are bracing for aggressive cuts in dividends and capital spending in an industry dominated by Kohl’s (KSS), Nordstrom (JWN), Home Depot (HD) and Target (TGT), all of which now pay dividends.

Jamie Katz, who covers retailers for Morningstar, says that for retailers such as Home Depot and Lowe’s (LOW), “with a decent cash flow cushion, we expect dividends should remain intact.”

But, “for those with more questionable sustainability to the business, the dividends are likely to be at risk,” she says. Katz puts Bed Bath & Beyond (BBBY) and L Brands (LB) in that category.

Neither company immediately responded for comment.

The Jefferies analysts observe that closed stores at the malls will depress revenue from that channel to zero over that period. The online segments of these businesses, they add, “will not experience enough of a lift (if any) to help offset store closures.”

Dividends, they add, are “the easiest cash expense to save on in the near term.”

Meanwhile, the National Retail Federation (NRF) has urged President Donald Trump to come up with national guidance for state and local governments on what constitutes an "essential" retail business as they combat the coronavirus outbreak, Reuters said.

The request followed a Reuters report on Wednesday that highlighted the confusion among retailers on who can stay open and where, depending on what government officials deem to be essential.

"Unfortunately, there remains a need for clear national guidance to resolve questions caused by a number of conflicting state and local orders that are triggering consumer, worker and business confusion, leading to cascading negative impacts on communities across the country," the NRF said in a letter to Trump.

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Investors in retail stocks should brace for aggressive dividend cuts amid the economic fallout amid the coronavirus pandemic, recent analyst research notes are warning savvy investors.
retailers, dividends, cut, virus
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2020-26-20
Friday, 20 March 2020 09:26 AM
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