U.S. Retail Stocks Take A Beating Over The Amazon Effect

U.S. retail stocks took a beating in trading Tuesday (November 20), with the group losing around $50 billion in value as a lackluster earnings season raised more concerns about the impact Amazon is having on traditional retailers.

According to a report in the Financial Times, concerns are emerging that strong consumer spending could be hiding more structural challenges facing the traditional retailers as we head into the holiday shopping season. The Financial Times noted the S&P Retail Index was down 3.4 percent Tuesday (November 20). The bloodletting of a day ended with Gap announcing it could engage in hundreds of store closures. Lowering its earnings guidance for the year, Gap chief executive Art Peck said about half of Gap’s 775 specialty stores are hurting the brand. The Financial Times quoted him as saying there are “hundreds” of stores that “likely don’t fit our vision for the future.” The executive wouldn’t say which stores would be closed but that action will be taken quickly, noted the report.

At the same time that Gap is struggling, Target has been able to hold its own in the face of Amazon — but there are concerns about pressure on its profits because of eCommerce increasing logistics and shipping costs and driving in-store prices lower. The decline in shares of retail stocks also underscores the fact that investors remain concerned about retailers’ prospects, even if the holiday shopping season is predicted to be a strong one. The Financial Times pointed to the National Retail Federation, which expects consumers in the U.S. to spend 4 percent more than last year on holiday purchases. Consumers appear to be spending ahead of Black Friday, with executives from Target and Kohl’s expressing optimism about how holiday shopping will fare. Nevertheless, Target’s stock closed down 11 percent while Kohl’s was off 9 percent Tuesday (November 20).  Best Buy was among one of the few exceptions, with the stock gaining 2.1 percent as investors expressed confidence that it can successfully take on Amazon in electronics.