Amazon.com, Inc. (NASDAQ: AMZN) has
gotten a lot of credit for disrupting the U.S. retail space. That disruptive potential is the main reason shares of grocery store
stocks plunged after Amazon announced a buyout of Whole Foods Market, Inc. (NASDAQ: WFM) earlier this summer.
Yet despite all Amazon’s clout, there are limits to the damage even Amazon can do.
Grocery stocks initially plummeted following the Whole Foods announcement. Costco Wholesale Corporation
(NASDAQ: COST) fell from $180 to $150. Wal-Mart
Stores Inc (NYSE: WMT) dropped from $79 to $73.
Target Corporation (NYSE: TGT) sold off from
$55 to $48. Kroger Co (NYSE: KR) declined from
above $30 to below $21 during a two-day stretch that included a disappointing earnings report.
Survival Of The Fittest
Retail investors have seen this type of widespread
destruction before. Macy’s Inc (NYSE: M)
shares are down 34 percent in the past five years. Sears Holdings Corp (NASDAQ: SHLD) and J C Penney Company Inc (NYSE: JCP) shares are each down more than 75 percent in that time. Just this year, Rue21,
Payless and Bebe joined the growing
list of retailers that have succumbed to bankruptcy in the digital age.
Despite the carnage, there are survival stories as well. Best Buy Co Inc (NYSE: BBY) shares dipped to nearly $10 back in 2012 as investors assumed the worst about the
fate of the electronics retailer in the Amazon era. Best Buy shares were seen trading at $59 Tuesday.
Despite a major sell-off in recent months, makeup retailer Ulta Beauty Inc (NASDAQ: ULTA) has also tripled its market cap over the past five years.
Picking Winners
There’s no question Amazon’s entrance into a crowded grocery space is likely bad news for every other competitor. However, some
companies will be hit harder than others. Investors who want exposure to grocery stocks but are concerned about the risk Amazon
poses could consider pair trading. If
Amazon continues to drag down the entire industry, some stocks will naturally get hurt worse than others.
Related Link: Wall Street
Weighs In On Amazon's Earnings Miss
In fact, some grocery stocks have already proven to be resilient in the wake of the initial Amazon sell-off, while others have
continued to flounder. Walmart and Target are now trading back above pre-announcement levels. Costco, on the other hand, remains
below $159.
Next Catalyst
Earnings season could be a good early guide for traders attempting to find the next Best Buy and avoid the next Sears. Costco
already reported second-quarter earnings. Wal-Mart and Target are expected to report on Aug. 17 and 18, respectively. Kroger
doesn’t report until Sept. 8.
Joel Elconin contributed to this story.
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