Retail stocks rise as Florida and New York announce plans to lift Covid restrictions

A Gap store in New York, August 2, 2020.

Scott Mlyn | CNBC

A number of retail stocks rose sharply on Monday as investors looked for ways to buy into the reopening of the economy as several large states further eased Covid restrictions or halted measures altogether.

The S&P Retail ETF closed Monday 2% up as a number of retail stocks rallied.

Clothing retailers saw some of the biggest gains as investors bet these companies would see sales surge as people quickly buy new clothes to wear to the office and go to restaurants and other social events.

The shares of the department store chain Dillard’s closed 9.7%. Gap stocks hit a 52-week high of $ 37.00 but traded at $ 35.47, a 7% gain for the day. Macy’s closed 8% while American Eagle and Kohl’s gained 5%. Nordstrom and Urban Outfitters stocks were up 6%.

Florida Governor Ron DeSantis signed an executive order on Monday that immediately lifts remaining state health restrictions on Covid-19. New York, New Jersey, and Connecticut will begin lifting most of the state’s capacity restrictions on May 19. This means that businesses like restaurants and gyms can fully reopen their doors.

New York Governor Andrew Cuomo’s plan is speeding up the schedule that New York Mayor Bill de Blasio set on Thursday, which set July 1 for a full reopening.

Jefferies analyst Stephanie Wissink told customers in a Sunday note that apparel spending could benefit from pent-up demand and new fashion trends from the health crisis. Citing data from the NPD Group, Wissink found that 47.5% of consumers in the US plan to buy clothes in the next 60 to 90 days.

Gap also saw a lot of activity on its $ 35 call options due to expire in May. Call options give investors the right, but no obligation, to buy shares at a specific price at a specific time. The company is expected to post a profit for the first quarter on May 20th.

Gap stocks are up more than 75% since the start of the year as the company makes a turnaround. The retailer has closed stores from its slower growing brands Gap and Banana Republic and expanded its faster ones like Athleta. It recently partnered with famous rapper Kanye West.

– CNBC’s Tom Franck contributed to this coverage.

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