5 Stocks That Brokers Love Despite Changing Retail Dynamics
Zacks Investment Research | Jun 28, 2017 11:45PM ET
The retail landscape has been witnessing a sea change with the focus gradually shifting to online shopping. This transition in consumer shopping pattern is compelling retailers to fast adapt to the changes in the ecosystem. Retailers now have no option left than to keep pace with the changing retail scenario or get eliminated.
With the digital transformation in shopping and consumers splurging online, store and mall traffic has been hit hard. As a result, most retailers including big-box ones are struggling to compete with e-commerce channels. They are being forced to trim their store count to focus more on an online model. Retailers are now focusing more on enhancing their omni-channel capabilities, optimizing store fleet and restructuring activities.
We note that U.S. retail sales in May recorded the steepest drop (down 0.3%) in 16 months. But sales at non-store retailers inched up 0.8% sequentially and increased 10.2% from the prior-year period. Kiplinger’s latest forecast shows that retail sales, excluding gasoline, are expected to jump 3.5% in 2017. The report further suggests that e-commerce sales are expected to increase 15% this year compared with 13% in 2016.
Looking Beyond Brick & Mortar
Evidently, technology is playing a major role and the perfect example of the same is the news of Whole Foods Market, Inc.’s (NASDAQ:WFM) buyout by Amazon.com Inc. (NASDAQ:AMZN) . Analysts are looking at this mammoth acquisition as an amalgamation between the online marketplace and physical stores that could bring a massive change in the retail industry going forward.
Amazon has been in the spotlight for the last few years, as changing customer patterns have made the retail industry more dependent on e-commerce. It had earlier announced its plan to acquire online retail platform Souq.com to tap into the Middle East market. The company entered the Chinese market with the buyout of Joyo.com, an online retailer of music, books, videos and DVDs.
Meanwhile, Wal-Mart Stores, Inc. (NYSE:WMT) has been steadily making its way in the fast-growing online retail market. This is quite evident from the retail bellwether’s recent buyouts, which include Jet.com, a U.S.-based e-commerce company; ModCloth, an online clothing seller; Moosejaw, an outdoor apparel and gear retailer; and ShoeBuy, an e-commerce shoe retailer. The company is on track to acquire Bonobos, a men's clothing e-commerce company, for $310 million.
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