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Evercore: These 7 Retail Stocks May Plunge as Amazon Kills the Mall

Evercore: These 7 Retail Stocks May Plunge as Amazon Kills the Mall

(AP/Stephan Savoia)

By    |   Wednesday, 01 February 2017 01:02 PM

A top and respected Wall Street analyst had downgraded its ratings on seven retail stocks amid the real economic threat that Amazon.com Inc. will eventually inflict a fatal blow to brick-and-mortar tradition of shopping.

CNBC and Barron's reported that Evercore ISI’s Omar Saad and team cut seven of the eight retail stocks they cover to "hold" from "buy," noting that the “softline wholesale channel must evolve or die.”
 

  • Deckers Outdoor (DECK),
  • Fossil (FOSL),
  • Michael Kors Holdings (KORS),
  • PVH (PVH),
  • Ralph Lauren (RL),
  • Under Armour (UAA),
  • VFC (VFC)
     

Evercore predicts apparel and luxury-goods makers that rely on the traditional physical retail store model will suffer in the coming years.

"Many players in the wholesale-to-retail softlines paradigm [are] still drawing massive amounts of profitability from this antiquated vertical chain, and 2017 [is] shaping up to be another fundamentally challenging year (declining traffic, weak sell-through, shrinking inventories, falling reorders, weather unpredictability, etc.)," analyst Saad wrote in a note to clients Wednesday.

"We recommend reducing exposure to company's with significant profit exposure to traditional wholesale channels. … Concession/marketplace model [is] inevitable, AMZN will be catalyst for dominos to start falling."

With a current market cap of $390 billion, the Seattle-based retail giant is now worth more than the top eight traditional brick-and-mortar retailers combined, as Credit Suisse analysts led by Eugene Klerk mentioned in a recent note, Yahoo Finance reported.

For the record, that roster includes Best Buy (BBY), Macy’s (M), Target (TGT), JCPenney (JCP), Nordstrom (JWN), Walmart (WMT), Kohl’s (KSS) and Sears (SHLD).

“That’s an impressive, even astonishing feat, no doubt, given Amazon was founded in chief executive Jeff Bezos’ garage in 1994," Yahoo Finance reported.

"But it’s not exactly shocking, given the rapid transition over the last 20 years away from shopping in physical retail stores in lieu of online shopping, where retailers like Amazon can offer lower pricing on products and services because they don’t have to offset the costs of also paying for physical stores," Yahoo Finance reported.

"It also helps that Amazon has invested heavily in building out new warehouses to reduce delivery time of items from weeks and days to hours, in some cases.”

For its part, Amazon recently said it would create more than 100,000 full-time jobs in the United States over the next 18 months.

The staffing will help the e-commerce giant as it pushes into categories from groceries to hardware, online video, fashion, cloud services and multiple tiers of delivery services. Many of the jobs will be in new fulfillment centers, the company said in a statement.

Amazon said it plans to increase its full-time U.S.-based workforce to more than 280,000 by mid-2018 from 180,000 in 2016. Amazon had about 230,800 full-time and part-time employees as of Dec. 31, 2015.

“These jobs are not just in our Seattle headquarters or in Silicon Valley—they’re in our customer service network, fulfillment centers and other facilities in local communities throughout the country,” said Jeff Bezos, Amazon Founder and CEO.

Bezos said he plans to add another 100,000 new jobs "across the company over the next 18 months as we open new fulfillment centers, and continue to invent in areas like cloud technology, machine learning, and advanced logistics.”

Over the past five years, Amazon has created more than 150,000 jobs in the U.S., growing it’s workforce to 180,000 at the end of last year.

(Newsmax wire services and Reuters and Bloomberg contributed to this report).

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A top and respected Wall Street analyst had downgraded its ratings on seven retail stocks amid the real economic threat that Amazon will eventually inflict a fatal blow to brick-and-mortar tradition of shopping.
Evercore, Retail, Stocks, Amazon
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2017-02-01
Wednesday, 01 February 2017 01:02 PM
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