It's Dec. 4, and shares of several big retailers are up strongly. As of 11:48 a.m. EST, shares of Macy's Inc. (NYSE: M), Gap Inc. (NYSE: GPS), Target Corporation (NYSE: TGT), and Kohl's Corporation (NYSE: KSS) are up between 5.6% and 7.7%. This marks a continuation of a recent streak that has all four companies' stocks up by double digits since Thanksgiving.
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A couple of things are helping drive these retail stocks higher today. To start, it's looking increasingly likely that Congress will be able to get a tax reform package to President Donald Trump and signed into law. Late Friday, the U.S. Senate passed a tax reform bill that, like the bill passed by the U.S. House of Representatives in November, would substantially lower corporate tax rates. Lower corporate income tax rates would be a substantial boost for U.S. retailers.
That's only part of the story, though. Over the past couple of months, the prospects for traditional retail have begun to look a little better, after the market had spent most of the past year predicting some sort of "retail apocalypse."
Back on Nov. 17, Gap reported a 3% jump in same-store sales during its third quarter and a 13% jump in earnings per share on $3.84 billion in sales, with all those figures beating investor expectations. This led Gap's management to raise guidance for full-year earnings, helping drive the company's stock up 16% since the release.
More recently, the CEOs of both Macy's and Kohl's have said that their companies' results over the Thanksgiving holiday weekend -- one of the most important periods in the entire retail year -- beat their expectations. This is on top of a recent trend, starting back in October, of higher traffic for many retailers.
E-commerce is taking a bite out of brick-and-mortar retail, and hundreds of retailers closed thousands of stores during 2017; it's almost certain more will close in coming years. However, it's also looking like the "retail apocalypse" has probably been overstated, something the more recent holiday traffic numbers support even further.
With that said, Macy's, Gap, Target, and Kohl's are all exposed to losses from e-commerce, but also have much to gain. If they do it the right way, these stores can leverage their large national footprints to make a better e-commerce experience. This has already started to pay off for Kohl's. And Target is making substantial investments in its own omnichannel plan.
Put it all together, and there may yet be life -- and even growth -- from these retailers, as they gain traction in e-commerce while still remaining highly relevant in brick-and-mortar. The interesting thing is that their massive retail scale could actually turn out to be a big competitive advantage for their e-commerce operations.
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