On Monday morning, when VF Corp. announced that it will plunk down more than $2 billion to snag streetwear favorite Supreme for its portfolio, the apparel conglomerate probably thought it would count as retail's best news in a while. But it was quickly overshadowed by the report that pharmaceutical giant Pfizer is putting the finishing touches on a vaccine that it says is 90% effective against COVID-19.
The virus has surged in recent weeks, with diagnoses, hospitalizations and deaths up across the U.S. The situation is bleak in terms of both human health and the economy, which in the U.S. depends heavily on people having discretionary funds, and spending them.
Earlier in the year, when stores were forced shut in an effort to contain the pandemic, most retailers were hit hard, even as e-commerce soared; several filed for bankruptcy and more were pushed to the brink. Grocery stores and mass merchants, which were allowed to remain open or, like Amazon, sell online, have done well. While retailers of all stripes instituted or expanded BOPIS options and maintained COVID-safe protocols in their stores as they reopened, all hope for getting back to normal has been predicated on developing a vaccine. The resurgence has been demoralizing for retailers heading into the holidays, with many bracing for bargain-seeking customers and possibly even further closures.
"Until there's an effective vaccine, we're not going to be able to know how we're going to land and what businesses are going to be successful," Eric Rapkin, chair of law firm Akerman's Real Estate Practice Group, said by phone. "My sense is that once there's a vaccine that proves to be effective, we're going to see the floodgates open."
First to benefit from that will likely be restaurants, bars, hotels and conference centers, he said. And several analysts noted on Monday that could hurt retailers, which have benefited from the cache of money many consumers had at the end of a summer bereft of travel, dining out and entertainment.
In the near term, the pandemic still rules. While Pfizer's announcement was welcome news, it will be at least a few weeks before it's ready, and months before it could be widely distributed, physician Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told CNN Monday.
Broadly speaking Fauci said the impact of a vaccine depends both on efficacy and how many individuals opt to take it. "[I]f we get a reasonably effective vaccine of 70% to 75% and a substantial proportion of the population takes the vaccine, I think we will be going in the right direction of some degree of normality as we head into 2021 in the second, third and fourth quarter," Fauci said over the weekend in an interview with the American Medical Association.
That's a ways away for an industry so dependent on the fourth quarter happening now. Still, that means that hope is on the horizon, especially for those retailers, including small businesses, particularly disadvantaged by the pandemic. That includes off-pricers, whose idiosyncratic resistance to e-commerce has long seemed wise because of how their in-store treasure hunt fuels sales — except during the pandemic. The segment not only missed out on the massive switch to online shopping but also lost apparel sales, while experiencing supply chain and inventory problems, according to MKM Partners Managing Director Roxanne Meyer.
"The positive news this morning as it relates to the development of a vaccine is clearly a win for retail, but in our view, should disproportionately benefit fundamentals and stocks of the off-price space, even as near-term fundamentals will likely experience less robust improvement vs. others," Meyer said in emailed comments Monday.
There really are no winners in a pandemic, which has taken such a devastating human toll. But retailers that managed to benefit during the outbreak are set to see that advantage erode when daily life returns to normal, while those taking a hit may see some relief.
Along with off-pricers, Nordstrom and Calvin Klein owner PVH, (hard hit as consumers spent more on home than apparel), saw their stocks rise substantially on Monday, while Stitch Fix and Lululemon, (widely viewed as benefitting from stay-at-home orders and rising athleisure sales), faltered, noted analysts at BMO Capital Markets. L Brands also stumbled, perhaps because its well-performing Bath and Body Works business has been selling a lot of hand sanitizer and soap.
But the market may not be the best reflection of reality, according to BMO. "Yes, shares have grown during COVID, however, we hardly think [L Brands'] businesses (even [Bath and Body Work]'s soap business) is better off because of COVID and believe [L Brands] remains a vaccine beneficiary as much as any other specialty retailer (if not more)," BMO Managing Director Simeon Siegel said in emailed comments.
Moreover, the pandemic has ushered in an accelerated evolution in retail that overall is unlikely to slow down much even after a vaccine is available, and challenges like those faced by malls and department stores aren't going away.
"This year was hopefully a year like none we'll ever see," Akerman's Rapkin said. "But what was true before the pandemic is still true. You can't just be physical, you can't just be virtual. You have to have a full seamless application of physical and virtual that all connect so the customer can shop and buy and return at whatever platform they want to. The retailers that best figure that out are the ones that are going to succeed."