News of Amazon.com Inc.’s department store plans sent a shudder through retail stocks just as some of the biggest names in the industry were reporting robust earnings, a signal that new challenges await in the beleaguered sector.
Amazon will open several physical locations that will compete with department stores, the Wall Street Journal reported Thursday, citing unidentified people familiar with the matter. The first stores are expected to be located in Ohio and California and will be about 30,000 square feet in size, which would be smaller than the typical department store, the Journal reported.
The report sent big-box retailers’ shares abruptly down on Thursday morning. Target Corp. slumped 2.1% at 8:33 a.m. in early trading in New York, while Best Buy Co. fell 1.8%, Walmart Inc. declined less than 1% and Bed Bath & Beyond slipped 1.6%.
Amazon didn’t immediately reply to a request for comment.
The news also raises questions about the partnership between Amazon and Kohl’s Corp., which has accepted returns for the e-commerce giant for several years. Kohl’s Chief Executive Officer Michelle Gass has cited the tie-up as a driver of foot traffic for the chain and said it has helped bring in younger shoppers.
Kohl’s quarterly results, released early Thursday, outpaced expectations, but the shares slumped before erasing the decline. Macy’s Inc., which raised its sales outlook and reinstated its dividend, also saw its gains ease following the report.
Amazon has a history of spooking investors when it enters a new industry, from groceries to health care. But shares often recover as Amazon’s ambitions run into reality, such as its ill-fated venture with JPMorgan Chase & Co. and Berkshire Hathaway Inc. to remake health insurance. Already, retail shares were off their lows Thursday after the initial shock of the Amazon news wore off.
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