Stocks: Retailers Rally on Trade Levy Reprieve -- WSJ

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08/14/2019 | 06:47 am


By Jessica Menton




Christmas came early for retailers.



Shares of department stores, discount chains and even toy makers rallied Tuesday after the U.S. said it would delay some tariffs against China until Dec. 15 on items including toys, cellphones, laptop computers that had been set to take effect Sept. 1.



After the announcement, electronics seller Best Buy Co., discount chain Dollar Tree Inc. and department store Kohl's Corp. rallied 6.5%, 4% and 2.9% respectively. The news of the tariff delay also spread to other retail stocks, with shares of two of the world's biggest toy makers by sales, Mattel Inc. and Hasbro Inc., jumping 4.6% and 2.8% respectively.



The tariff delay comes as welcome news for retailers, which have been caught in the crosshairs of the U.S.-China trade spat. Retail stocks have been punished over the past year as companies have tried to grapple with increased tariffs on goods from China. And declining foot traffic has also continued to weigh on retailers as shoppers continue to shift to online e-commerce giants such as Amazon.com Inc.



The SPDR S&P Retail exchange-traded fund, which includes companies such as L Brands Inc., Best Buy and Guess Inc., has slumped 21% over the past 12 months, compared with the S&P 500's 3.7% rise in that span. The ETF climbed 1.6% Tuesday, its best one-day percentage gain since July 24.



Still, some analysts and investors anticipate that the recent relief rally for retailers may prove tobe short-lived.



"In the short run, volatility will likely continue for retailers just because a lot of trade uncertainty still exists," said Eric Marshall, portfolio manager at Hodges Capital Management, which has $1.5 billion in assets under management. "The fear of the unknown is often times worse than the eventual reality, and companies are still unsure of how the tariffs could impact the supply chain for consumer goods."



Write to Jessica Menton at Jessica.Menton@wsj.com





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