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We are watching the ‘retail apocalypse’ unfold, as the pandemic accelerates the natural evolution of our digitalizing economy. The economy is evolving with consumption patterns, which are being driven by flexibility & convenience. These consumer values have moved the retail space online.
The laws of nature rule our global economy, and only those that are able to adapt to the evolving environment will survive.
The Winners
With America stuck at home, we have been relying on e-commerce and digital omnichannel solutions more than ever for our shopping needs. Retailers that have been able to encompass flexibility & convenience are thriving.
Amazon (AMZN - Free Report) has been the driving force behind the ‘retail apocalypse’ and is an obvious winner of the evolving economy. The pandemic has given this e-commerce giant a tailwind that has propelled its share price to all-time highs. I am not recommending that you chase this rally. Considering the highly uncertain market conditions I would hold off on purchasing these shares until we see a pull back. Look for Amazon’s earnings Thursday April 30th for more clarity on outlook and performance.
Alibaba BABA, ‘the Amazon of East’, is my e-commerce pick for your portfolio of the future. This enterprise controls the e-com & cloud-computing market in the most populous country and soon to be the largest economy in the world, China. BABA is valued at roughly half the market cap of AMZN despite being more profitable, achieving wider margins, and having a stronger growth outlook. 14 out of 14 analysts are calling this stock a strong buy right now. I am bullish on BABA.
Some big-box retailers have been able to successfully transition their business model to an omnichannel solution, which embodies the flexibility & convenience that consumers value. Companies like Walmart (WMT - Free Report) , Target (TGT - Free Report) , Costco (COST - Free Report) , and Home Depot (HD - Free Report) offer digital shopping options that have continued to attract consumers. These 4 businesses have been flourishing in recent years and are positioned to be leading retailers in the post-pandemic world.
The Losers
This pandemic is cleaning house and uncovering feeble business models. The businesses that are failing, amid this pandemic, are those that had already been struggling.
Department stores, for example, have largely failed to adjust their business models to the shifting retail environment. Their lack of digital presence and the substantial overhead associated with oversized storefronts have been these businesses undoing.
J.C. Penney looks like it is going to be the first publicly traded retail casualty of the pandemic. The company is currently in a 30-day grace period after missing an interest payment to bondholders on April 15th. JCP is now in advanced talks with JP Morgan (JPM - Free Report) , Wells Fargo (WFC - Free Report) , and Bank of America (BAC - Free Report) , to keep its operations funded while it goes through bankruptcy court.
Macy’s (M - Free Report) and Kohl’s (KSS - Free Report) credit ratings have been sinking deeper into junk bond territory as their risk of default grows the longer their doors are shut. Department stores are not the only victims of the retail apocalypse, as the once-bustling malls turn into ghost towns.
Businesses that relied on malls for retail space and foot-traffic have been suffering. Gap (GPS - Free Report) & its subsidiaries (Old Navy, Banana Republic, and Athleta) has stopped paying rent and warns investors it may not have enough liquidity to cover its operational expenses this year.
L Brands LB, operator of Victoria Secret and Bath & Body Works, has also been hit by the mall fallout. The business has been experiencing declining profits for the past 4 years. L Brands has been forced to overleverage itself to stay afloat, with a ballooning amount of debt. Its current debt-to-capital ratio is 120%, which means that its book value of shareholders equity is negative. This is a big red flag, and I will continue to avoid these shares.
Take Away
The retail space is shrinking as the biggest and most innovative companies drive ineffective businesses out of the marketplace. Advancing technology is the primary catalyst for the evolving retail space, and as technology continues to progress, so will consumers. The retailers that will thrive in the post-pandemic world are those that are able to quickly adapt and stay one step ahead of consumer demands.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
The Pandemic Fans The Retail Apocalypse Flame
We are watching the ‘retail apocalypse’ unfold, as the pandemic accelerates the natural evolution of our digitalizing economy. The economy is evolving with consumption patterns, which are being driven by flexibility & convenience. These consumer values have moved the retail space online.
The laws of nature rule our global economy, and only those that are able to adapt to the evolving environment will survive.
The Winners
With America stuck at home, we have been relying on e-commerce and digital omnichannel solutions more than ever for our shopping needs. Retailers that have been able to encompass flexibility & convenience are thriving.
Amazon (AMZN - Free Report) has been the driving force behind the ‘retail apocalypse’ and is an obvious winner of the evolving economy. The pandemic has given this e-commerce giant a tailwind that has propelled its share price to all-time highs. I am not recommending that you chase this rally. Considering the highly uncertain market conditions I would hold off on purchasing these shares until we see a pull back. Look for Amazon’s earnings Thursday April 30th for more clarity on outlook and performance.
Alibaba BABA, ‘the Amazon of East’, is my e-commerce pick for your portfolio of the future. This enterprise controls the e-com & cloud-computing market in the most populous country and soon to be the largest economy in the world, China. BABA is valued at roughly half the market cap of AMZN despite being more profitable, achieving wider margins, and having a stronger growth outlook. 14 out of 14 analysts are calling this stock a strong buy right now. I am bullish on BABA.
Some big-box retailers have been able to successfully transition their business model to an omnichannel solution, which embodies the flexibility & convenience that consumers value. Companies like Walmart (WMT - Free Report) , Target (TGT - Free Report) , Costco (COST - Free Report) , and Home Depot (HD - Free Report) offer digital shopping options that have continued to attract consumers. These 4 businesses have been flourishing in recent years and are positioned to be leading retailers in the post-pandemic world.
The Losers
This pandemic is cleaning house and uncovering feeble business models. The businesses that are failing, amid this pandemic, are those that had already been struggling.
Department stores, for example, have largely failed to adjust their business models to the shifting retail environment. Their lack of digital presence and the substantial overhead associated with oversized storefronts have been these businesses undoing.
J.C. Penney looks like it is going to be the first publicly traded retail casualty of the pandemic. The company is currently in a 30-day grace period after missing an interest payment to bondholders on April 15th. JCP is now in advanced talks with JP Morgan (JPM - Free Report) , Wells Fargo (WFC - Free Report) , and Bank of America (BAC - Free Report) , to keep its operations funded while it goes through bankruptcy court.
Macy’s (M - Free Report) and Kohl’s (KSS - Free Report) credit ratings have been sinking deeper into junk bond territory as their risk of default grows the longer their doors are shut. Department stores are not the only victims of the retail apocalypse, as the once-bustling malls turn into ghost towns.
Businesses that relied on malls for retail space and foot-traffic have been suffering. Gap (GPS - Free Report) & its subsidiaries (Old Navy, Banana Republic, and Athleta) has stopped paying rent and warns investors it may not have enough liquidity to cover its operational expenses this year.
L Brands LB, operator of Victoria Secret and Bath & Body Works, has also been hit by the mall fallout. The business has been experiencing declining profits for the past 4 years. L Brands has been forced to overleverage itself to stay afloat, with a ballooning amount of debt. Its current debt-to-capital ratio is 120%, which means that its book value of shareholders equity is negative. This is a big red flag, and I will continue to avoid these shares.
Take Away
The retail space is shrinking as the biggest and most innovative companies drive ineffective businesses out of the marketplace. Advancing technology is the primary catalyst for the evolving retail space, and as technology continues to progress, so will consumers. The retailers that will thrive in the post-pandemic world are those that are able to quickly adapt and stay one step ahead of consumer demands.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>