In recent weeks, reports of potential COVID-19 vaccines have sparked hope for many in the retail world and beyond, sending stocks up and improving consumer sentiment.
Just today, United Kingdom-based AstraZeneca PLC and the University of Oxford revealed that their vaccine was as much as 90% effective in preventing infections without serious side effects. It was the third promise of a vaccine to battle the persistent pandemic following the announcement of Moderna Inc.’s and Pfizer Inc.’s highly praised candidates.
Subsequently, markets surged at the start of the week in the hopes of an economic rebound as soon as early next year. Shares of fashion giants moved in tandem: America’s biggest department store, Macy’s Inc., saw an 18% spike in its stock in midday trading, while specialty retailer Express Inc. rose 16% and shoe chain DSW’s parent, Designer Brands Inc., advanced 12%. Fast-fashion firm Urban Outfitters Inc., multibrand business Gap Inc. and department store Nordstrom Inc. also climbed a respective 5%, 8% and 12%.
This morning, the National Retail Federation indicated that retail sales were already rebounding strongly and could continue to be boosted by positive news of potential vaccines. In an annual forecast, the group predicted a jump of 3.6% and 5.3% to $755.3 billion and $766.7 billion in holiday sales during the holiday months of November and December. The numbers — which exclude automobile dealers, gasoline stations and restaurants — compare with a 4% hike to $729.1 billion last year and an average holiday sales gain of 3.5% over the past five years.
During a call with reporters today, CEO Matthew Shay compared consumers’ supposed reaction to the possibility of a successful vaccine to their response to the Tax Cuts and Jobs Act, which was signed into law in December 2017.
“[The tax reform bill] wasn’t going to take effect until 2018, which means no one would actually receive the benefits until they filed their tax returns in 2019. Nevertheless, the mere prospect of tax reform really impacted consumer sentiment in December of 2017, when we all knew that it wasn’t going to have any effect on their ability to spend,” he explained. “It was an emotional impact.”
He added, “I think similarly … the promise of a prospect of not only widely distributed and highly effective vaccines, but also the increased progress of therapeutics to treat the coronavirus … are all having an impact on consumer psyche and confidence.”
Although there remains uncertainty about consumers’ willingness to spend, NRF chief economist Jack Kleinhenz suggested that the United States economy has improved from the earlier months of the pandemic and many Americans now have a better handle on their budgets and are feeling optimistic about a “strong” stock market, rising home values and stimulus-related savings. What’s more, jobs and wages are stabilizing, while reduced spending on travel, entertainment and personal services has freed up money for retail purchases.
“We will beat the virus. I think the psyche is impacted by the recognition that we didn’t run into an economic recession here; we ran into a medical recession,” Shay added in the call. “Once we solve the medical problem, the economy should be healthy if we can keep moving forward.”