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Virus Knocks Macy’s Off S&P 500—And Other Retailers Could Be Next

Macy’s market cap has been shriveling up, and the COVID-19 outbreak is pushing its backwards slide into overdrive.

Come Monday, shares of Macy’s Inc. will no longer be part of the S&P 500 large-cap index.

Macy’s shares will last trade as part of the S&P 500 index on Friday and then reset on April 6 as the newest name on the S&P SmallCap 600 GICS Department Stores Sub-Industry index.

“Macy’s has a market capitalization more representative of the small-cap market space,” S&P Dow Jones Indices said.

For inclusion in the S&P 500, companies must have a market cap of at least $8.2 billion. The S&P SmallCap 600 requires a market cap range of $300 million to $1.4 billion. Companies with market caps in the middle comprise the S&P MidCap 400.

As of the close of trading on Wednesday, Macy’s market capitalization was just $1.37 billion. That’s a substantial drop–about 75 percent–from around $6 billion in mid-February, before the  coronavirus outbreak in New York’s New Rochelle suburb and after the first case was reported in Washington state.

Volatility in the U.S. equity markets last month triggered a roller-coaster ride for Macy’s shares, which hit a 52-week high of $26.33 only to plummet to a low of $4.38, as of the close on Wednesday.

Market capitalization is determined by the total number of outstanding shares multiplied by the current market price of one share. And the S&P 500, a measurement of the stock performance of 500 large-cap U.S. firms, is a commonly followed equity index by investors taking the pulse of the U.S. stock market.

Macy’s has been hard hit by COVID-19. Last month, the retailer accessed its entire $1.5 billion revolving credit line to bolster its cash balances and build up liquidity. Macy’s also began furloughing the majority of its nearly 130,000 employees. That’s because all stores have gone temporarily dark since mid-March in response to governmental mandates limiting the number of people gathering in public places to help stop the spread of COVID-19. And in the age of social distancing, as the virus still hasn’t reached its expected peak, those stores are likely to remain closed for at least another month, and possibly longer.

And Macy’s isn’t the only retailer that could be facing a similar move. Kohl’s Corp.’s market cap stands at roughly $2 billion, while Nordstrom Inc. is at $2.1 billion, both as of the end of trading Wednesday. These retailers have also tapped their credit lines to raise cash and temporarily shed most of their workforce as well.

In comparison, retailers outside of the department store channel are faring far better. Off-price retailer The TJX Cos. Inc. has a market cap of $53.4 billion. And discounters Walmart Inc. and Target Corp., “essential” retailers doing bustling business and hiring thousands, are at $323.3 billion and $47.7 billion, respectively.

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Walmart and Target doors remain open, mostly because their grocery components remain a draw for consumers on the hunt for much-needed food and household necessities. Target said last month that while sales of consumables have risen, apparel sales have also seen a significant 20 percent decline as consumes hunker down for an extended shelter-in-place mandate.

And while The TJX Cos. has temporarily closed its stores and furloughed its staff, the off-price sector has been viewed by investors as a steady investment haven within retail. That’s because discounters, dollar stores and off-price stores tend to be where consumers gravitate during the much anticipated recession. Furthermore, after months of apparel retail doors staying dark, off-price retailers are expected to benefit from the excess inventory department store retailers will likely be dumping as they make way for new merchandise when they are able to reopen again.