Camilla Yanushevksy, CFRA Equity Research Analyst, joined Yahoo Finance's Myles Udand, Dan Roberts, and Melody Hahm to discuss how coronavirus is impacting big name retailers.

Video Transcript

MYLES UDLAND: All right. Welcome back to Yahoo Finance live. Myles Udland here in New York. We're joined now by Camilla Yanushevsky-- she is a equity research analyst at CFRA-- to talk a little bit about the state of the retail business and the consumer right now.

So Camilla, let's start with a note here that really stands out to me, which is that prior to the outbreak of the coronavirus and this slowdown, you guys have been telling clients that they couldn't rely on the strength of the US consumer. But for the last eight, nine years, that's really been the main thesis underpinning this expansion, or what was the expansion. So what were you guys seeing in the beginning of 2020 that led you to have that view? And then we'll kind of get into how this could impact things over the next couple of months.

CAMILLA YANUSHEVSKY: Yeah, well first of all, thanks for having me. We're truly navigating through unprecedented times right now. But as you mentioned, we actually told our clients before we even heard of the word "coronavirus" that we thought the US consumer is losing steam and can't be relied upon to be the hero of the economy in 2020.

And the crux of that really began to show in the holiday season, when we saw that consumers were dialing back on discretionary categories, primarily in the month of November. But that dragged on to this year when, in January, core retail sales were unchanged. And then in February, they dropped 0.5%. And that's really before the coronavirus really struck in the US.

So what we believe is that the coronavirus is exacerbating retail woes that were already evident. And the figures that we're going to see in March are going to be pretty dismal.

MELODY HAHM: Hey, Camilla, when you think about retail-- and I think a guest on "The Final Round" yesterday aptly pointed out that not all retail is created equally, so you have to get a little bit specific here. We know that big box stores like the Walmarts, like the Costcos, of course Amazon have really fared relatively well. And if anything, it's a crisis to the upside, where they're hiring more workers, they're getting a lot of positive press.

How do you anticipate as we end up on the other side of this crisis? Do you think there will be extreme consolidation? Do you anticipate that there really will only be a couple of retailers left and perhaps a lot of these other discretionary spending locales will end up getting wiped out?

CAMILLA YANUSHEVSKY: Yeah, so there's going to be a pretty big divide between the winners and the losers. The winners are definitely going to be your general merchandisers-- your Walmart, your Target, your Dollar General. The people are clearly stockpiling household items right now. And then also e-commerce is getting a boost, so your e-retailers.

On the flip side, though, the coronavirus could be a tipping point for some retailers into bankruptcy. So those are going to be the retailers that were already dealing with archaic business models, with eroding margins, with slumping sales. So some specialty retailers I'm happy to call out would be your GameStop, your Office Depot, your Bed Bath Beyond. Could definitely be a tipping point for them.

And then also department stores. We saw that Kohl's credit rating got downgraded a few days ago, and then Macy's and Nordstrom had to cut their dividend. So it can definitely be a dent to their turnaround plans.

MELODY HAHM: But just a quick follow on that-- when you think about those that you just mentioned, are they potential acquisition targets from the likes of the winners on the other side, or you don't think there's anything kind of essential or part of the core business that's worth keeping?

CAMILLA YANUSHEVSKY: For acquisition targets, I look at companies that have generally healthy balance sheets. A lot of these companies are pretty overly leveraged, and they're more tipping towards the path of bankruptcy, we think.

DAN ROBERTS: Hey, Camilla. Dan Roberts here. Let me just ask you. When we look around right now at the chains that have closed all their US stores, obviously we don't know how much longer this is going to last, and there are some things that it's very obvious why they're essential during this time-- you know, CVS and pharmacies and grocery stores.

And then it's obvious on the other side which ones are non-essential. You know, sports retailers have, for the most part, closed all their US stores. But then it looks like there are a few exceptions in kind of a gray area where they've dragged their heels and refused to close all stores and have taken some criticism for that.

One example, Dick's Sporting Goods. You know, they have closed the inside of their stores to customers, but they're still offering at almost all their stores in the country curbside pickup of products. So you know, I've seen some chatter and heard from some employees who aren't happy about that, because store employees still have to go in.

I'm just curious if you've seen other examples of chains that still have stores open and if that has surprised you. And obviously, it's understandable why some of these chains are hesitant to just go ahead and shut down all their stores, even though that seems to be health-wise the prudent thing to do.

CAMILLA YANUSHEVSKY: It's really a case by case basis and also what the company sells. Big Lots is an example where they do sell a lot of nondiscretionary items, so their decision to have some stores to stay open makes sense. For more discretionary categories, where you're looking at 90% or 100% are mixed discretionary, definitely safer just for the consumer to have those doors close.

MELODY HAHM: And Camilla, one of the arguments as we think about this--

MYLES UDLAND: Go ahead, Melody.

MELODY HAHM: --yeah, when you think about the stimulus package, one of the arguments against those quote-unquote "free handouts" is perhaps that money won't actually be fueling the economy, won't be igniting these restaurants and stores that are not open for business, right? As you think about it from your analyst's perspective, how do you anticipate that potentially trickling back into the economy, if at all.

CAMILLA YANUSHEVSKY: Yeah, it also comes down to retirement savings and how fast can this recovery be, especially for people who are looking just to retire. I think when it comes to recovery, because that's a question that we get a lot, I like how Nike actually broke it up in their earnings call yesterday. They thought recovery is going to come in four phases, which is really how we see it.

The first phase is going to be containment when these stores close. The second phase will be recovery when the stores start to reopen. The third phase being normalization, where we start to see supply and demand balance. And then the fourth phase would be return to growth. The containment phase is going to be about five to six weeks, if we're going to kind of model what we saw in China in the US.

And Nike said that China's started moving to normalization. We think that we can see that in the US in about a month and a half.

MYLES UDLAND: All right. Camilla Yanushevsky is an equity research analyst with CFRA. Thanks so much for the time today.

CAMILLA YANUSHEVSKY: Thanks for having me.