Payments Stocks Plummet While Retail Remains A Bright Spot

Bloodbath. Buying opportunity.

Call it what you will, but Monday’s rout left pretty much no one unscathed. The headline numbers show a 7.6 percent drop for the Standard and Poor’s 500 Stock Index, where a broad swath of industries is represented.

For the tech-heavy Nasdaq, the percentage slide was only a bit better, at 7.3 percent.

Brick and Mortar a Bright Spot?

A bit more granular dive shows that at least some of the names in our PYMNTS coverage universe fared a bit better than the overall markets – among them, several brick-and-mortar giants that have a sizable presence in everything from groceries to toiletries to the coveted hand sanitizers.

The fact that Kroger was down 2.4 percent on the day and Dollar General was up on a worldwide rout speaks to the reality that investors are looking for a safe haven amid the turmoil. But it also illustrates that stockpiling has been a key driver of consumer activity, and is not likely to be a “pull forward” of demand.

Canned goods, dry bulk items and cleaning supplies are likely to be in demand against a backdrop of virus-related activity that will go beyond the current quarter. (Toilet paper, we note, does not magically reappear on the roll, no matter how much your bathroom mates might assume so.)

For Monday, at least, those retail stalwarts shone, while online platforms proved to be down, but less so than general markets. If one looks toward “general” eCommerce platforms such as eBay and Etsy, where the range of goods on offer is deep and wide, those companies were down in the low single digits. An increasing number of companies are mandating that workers stay home to get the job done – might that mean there’s extra time to shop, point and click?

By way of contrast, Groupon slid more than 10 percent (albeit, every penny has an outsized impact when you’re a stock trading at around $1). The idea of connecting consumers with local merchants via virtual coupons may have relatively less appeal against a backdrop where any number of events – especially mass gatherings – could be shuttered.

Similarly, and also across the platform space, Uber plummeted by 11 percent, as the ride-hailing business also requires face-to-face interaction. The company said over the weekend that it would give sick leave to drivers diagnosed with the virus.

Payments Performance

Payments-related firms – those that rely on transaction volumes to underpin growth – were off more than the general markets, down an average of more than 8 percent. Visa and Mastercard were off 8.7 percent and 9.1 percent, respectively, perhaps reflecting concerns about tourism and slight cuts to guidance for growth rates.

But as we noted in this space on Monday (March 9), trimming guidance is a long way from a decline, and there is a structural shift afoot in how people pay that seems to signal a tailwind moving forward. Discover Financial Services was down by more than 12 percent on the session, and we note that loan loss provisions have crept up amid general market worries about how long the market, and economic expansion, might last.

To be fair, the same pressures that come to bear on Discover also affect financial services brethren, as income generated on loan portfolios shrinks with lower rates. Bank of America and Citi were down in the mid-teen percentage rates as bonds rallied (shrinking rates) and stocks plunged.

Banks, of course, have traditionally been significant lenders to the energy sector, and with the price wars now in place within that vertical, on Monday, at least, it seemed there was nowhere to hide.