The new year started out with a bang for retail on Wall Street.
Among the most-prominent gainers on Tuesday were J.C. Penney, up 10.6 percent to $3.49; Sears Holdings Corp., 5.6 percent to $3.78; Under Armour, 5 percent to $13.98; Macy’s Inc., 4.5 percent to $26.31; Abercrombie & Fitch Co., 4.4 percent to $18.20; Kohl’s Corp., 4 percent to $56.36; Nordstrom Inc., 3.7 percent to $49.12, and Target Corp., 3.6 percent to $67.63.
But merchants of almost every stripe enjoyed a bounce after the long holiday weekend — considered one of the strongest in several years — as investors and analysts took stock and also a little leeway to dream.
On one end of that spectrum, J.P. Morgan analyst Matthew Boss upgraded the “differentiated” Nordstrom Inc., while on the other, venture capital firm Loup Ventures predicted Amazon.com would buy Target.
Indeed, the year is young enough to make anything seem possible.
Loup, led by influential tech analyst Gene Munster, acknowledged that an Amazon/Target hook-up was a bold call and one that would be tough to time correctly, but argued the two companies would jive well.
“Amazon believes the future of retail is a mix of mostly online and some off-line,” Loup said. “Target is the ideal off-line partner for Amazon for two reasons, shared demographic and manageable but comprehensive store count. As for the demographic, Target’s focus on moms is central to Amazon’s approach to win wallet share. Amazon has, over the years, aggressively pursued moms through promotions around Prime along with loading Prime Video with kid-friendly content.”
Target would also boost Amazon’s store count from roughly 470 to 2,300, putting it on a better position vis-à-vis Wal-Mart, which has 11,695 stores globally.
Loup also argued that Amazon has the money to do the deal — which he estimated would cost roughly $41 billion, or 8 percent of Amazon’s market capitalization — but Jeff Bezos and company could easily buy all but the very biggest. The question is: would they make another big retail deal having bought Whole Foods over the summer?
Amazon continues to have a lock in online shopping, shipping more than five billion items through its Prime program last year. And the web giant is prepared for more business, with or without Target, having expanded its fulfillment and shipping network by 30 percent in 2017. Shares of Amazon, which jumped 55 percent last year, kicked off 2018 with a gain of 1.7 percent to $1,189.01.
Most retail stocks seemed to be riding higher on a successful Christmas rush.
J.P. Morgan’s Boss said December had a strong finish and led to the best holiday season since 2014, although not everyone was a winner.
“December momentum was mixed by sub-sector with brick-and-mortar traffic accelerating relative to November at the discount/dollar stores (plus 480 basis points), and off-price retailers (plus 100 basis points) with department stores decelerating roughly equal to 100 basis points (most notably softening relative to November at Macy’s and Dillard’s),” Boss said.
The analyst argued that “multiyear structural sub-sector headwinds remain” for department stores, but moved Nordstrom to neutral from underweight since the stock has underperformed the market and is relatively well positioned.
“Given focused investments in service, store experience and technology, Nordstrom is becoming a distribution destination partnering with Topshop, Madewell and Bonobos for exclusive assortments, and cited as a key partner (i.e. ‘differentiated retail’) by Nike,” Boss said.
Even the embattled Sears Holding, which cut off TV advertising for the holiday season, was trending higher on Tuesday after having given up more than 61 percent of its value last year.
Regarding the marketing shift, a Sears spokesman said: “At Sears and Kmart we are always evaluating the effectiveness of our marketing channels to ensure we’re communicating most effectively, personally and authentically with our Shop Your Way members. This ongoing evaluation has meant we have made significant shifts over the past few years in where we’ve allocated our resources, including less traditional print and television, and more digital and social channels.”