Is Amazon the Retail Apocalypse?

Do you remember where you were on June 12, 2017? I certainly do; I was riding a very delayed 1 train on the New York City Subway Red Line to the 59th Street stop just two blocks from my office. With the fear of being late to work driving my actions, I omitted my morning coffee from Starbucks and ran to the 9th floor of my building. I was greeted by a too-quiet office in which each one of my co-workers’ eyes were glued to the television screens playing CNBC. The bold chyron stating, “Amazon to Acquire Whole Foods” at the bottom of the screen silenced me faster than I could regain my breath.

 

The implied monopoly of Amazon’s takeover of Whole Foods provides a tremendous threat to brick-and-mortar retailers. Following the announcement that Amazon was buying the mega health food chain, stock prices of top grocery stores all declined. Shares of Kroger, the parent company of Ralphs and Food4Less supermarket chains, were down 14.41% to $21.02. Target and Costco shares fell 9.7% to $50.08 and 6.83% to $167.77 respectively.

 

Meanwhile, thousands of Whole Foods employees began to ponder whether Amazon’s inclination for automation would result in their jobs being replaced by robots.  Amazon’s ability to cause such a resounding effect on the stock market after the announcement of a proposed acquisition, while simultaneously intimidating suppliers and competitors, highlight’s their dominance in the economy.

 

Wall Street Investors are placing large wagers that Amazon and the new fast fashion trend will knock out numerous stores in the next months and years to come.

 

Traditionally, the retail industry has been admonished by the stock market. This assertion is supported by Bespoke Investment Group’s stats on the average percentage of shares that investors are shorting, or essentially betting against. Fortunately for investors and unfortunately for retail companies and employees, this retail short sale has been a winning trade.

 

Insipid sales stemming from low investor confidence has resulted in hundreds of store closures, bankruptcies, and countless layoffs. On average, 15.6% of shares among retailers are being shorted, which, by the Street’s standards, is very high.

 

The investors of Wall Street are not the only demographic to blame, as many Americans favor the ease and hassle-free experience of online shopping as opposed to taking trips to local malls. Meanwhile, the brick-and-mortar stores that have survived are struggling to compete with fast fashion-modeled stores like H&M and Zara. Due to this blatant shift in consumer behavior, Wall Street experts have grown exceptionally bearish when it comes to investing in multiline retailers, including general merchandise chains like Kohls and department stores like Macy’s.

 

The impending apocalypse for the brick-and-mortar stores isn’t here just yet, though. Some retail giants have maintained their dominance in the industry; take Best Buy, for example. Many consumers and investors alike feared the Technology and Electronics chain would be quickly overpowered by Amazon; however, Best Buy’s stock is up 37% and is actually outperforming the online shopping megastore.

A Speculated Economic Silver Lining Brightens the Shadow of a Natural Disaster: How the U.S. Economy could benefit from Hurricane Harvey

The ruthless storm battering Houston, Texas is said to rank as one of the nation’s costliest disasters, with speculated loss of tens of billions of dollars in economic activity and property damage in an area critical to chemical, energy, and shipping industries.

 

Despite the widespread devastation and predicted losses of up to $100 billion, economists vocalized optimism that the Texas city is likely to recover quickly and may experience economic growth from rebuilding efforts.

 

Historically, the U.S. economy has rebounded following natural disasters, most easily associated with the financial resurgence following the $40 billion loss from Hurricane Katrina in 2005 and the $25 billion loss from Hurricane Ike in 2008. Dan Laufenberg, chief economist at Ameriprise Financial, stated, “the U.S. economy rebounded from Katrina, although the region hit by the storm has not, demonstrating once again how amazingly resilient our economy can be.”

 

The Houston metropolitan area, the U.S.’s fifth largest based on population, accounts for approximately 3 percent of the nation’s gross domestic product (GDP). Texas is often attributed as a center for oil production and refined products like diesel fuel, gasoline, heating oil, and other distillates.

 

In anticipation of increased demand due to the hurricane, wholesale trading prices for gasoline increased 6 cents to $1.75 per gallon on the benchmark contract set to settle next month. Ellen Zentner, chief United States economist at Morgan Stanley, suggested the lagged effects of rebuilding homes and replacing motor vehicles will outlast the anticipated neutral impact on national gross domestic product in the third quarter, providing a lift to GDP in the fourth quarter and beyond.