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'Death by Amazon': 20 once-thriving companies that find themselves in the e-commerce giant's crosshairs
'Death by Amazon': 20 once-thriving companies that find themselves in the e-commerce giant's crosshairs
Rebecca UngarinoMay 14, 2019, 18:26 IST
Amy Harris/AP Photos
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A new "Death by Amazon" index released by the investment-research firm CFRA tracks the stocks its analysts believe could be short-seller targets given their vulnerabilities to competition from Amazon.
The index is full of home goods and electronics retailers like Party City and Bed Bath & Beyond - some of which have seen their entire market value wiped out in recent years.
Investors are familiar with the "Amazon effect" by now.
The e-commerce juggernaut announces it's preparing to enter into an industry - be it medication, brick-and-mortar grocery, entertainment, or others - and the stocks of companies in the new target market fall as jittery investors are struck with the fear that irreversible disruption is coming.
So the investment-research firm CFRA created a new index, called "Death By Amazon," that tracks the stocks its analysts think are particularly vulnerable to Amazon's expansion and offerings.
"The equally-weighted index serves as a retail performance benchmark and short-selling idea generation tool for our clients," CFRA analysts Camilla Yanushevsky and Todd Rosenbluth wrote in a report to clients earlier this month.
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To pinpoint the 20 constituents the analysts believe are poorly positioned to compete against Amazon's efforts in various industries, they evaluated the companies' "Share of Voice" data that comes from web-traffic analytics company Alexa Internet (which is owned by Amazon as their other Alexa-named product).
That measure shows the percentage of searches for a keyword across major search engines in the last six months "that sent organic traffic to the respective site."
For example, the analysts compared how much traffic was going to a national jewelry retailer's website when consumers search for the term "jewelry" versus how much traffic was going to Amazon for the same search term.
With this kind of analysis, you get an index full of brick-and-mortar retailers whose products are available on Amazon - and apparently less popular through online searches - from floor tiles to party supplies.
To be fair, it's not the first "Death by Amazon" index. Bespoke Investment Group had already created its "Death by Amazon" index, tracking the same theme.
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Here are all the stocks listed, in alphabetical order, with how their "Share of Voice" scores for various products stack up against Amazon:
Amazon's Share of Voice score for "cookware": 23.3%
"Our negative investment view reflects our belief that BBBY's shares (up 50% year-to-date) have raced far ahead of purported turnaround narrative and a compelling Sell opportunity exists," the analysts wrote.
Amazon's Share of Voice score for "cookware": 23.3%
"Beyond the first quarter, we're wary BIG can achieve gross margin expansion in FY 20," the analysts wrote.
"BIG said the expansion rests on the assumption that Furniture, Seasonal, and Soft Home will outperform; however, we see intensifying pressures in these categories not only from Amazon, but also from Walmart's recent launch of a digital home brand, moDRN."
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Amazon's Share of Voice score for "sports deals": 24.5%
"Our Hold rating reflects headwinds we see for DKS in FY 20 from the phasing out of hunt and electronics segments," the pair of analysts wrote. "That said, we expect them to meaningfully abate and be a long-term positive for margins in FY 21."
Share of Voice score for "jewelry": 3.8% for kay.com, 2.9% for jared.com, and 0.12% for zales.com
Amazon's Share of Voice score for "jewelry": 10.7%
"Our negative investment view reflects SIG's over-reliance on store closings (150 announced for FY 20 after 262 in FY 19) and increased promotions to clear excess inventory (up 4.7% in Jan-Q), which, we forecast, will result in further brand erosion," the analysts wrote.
Amazon's Share of Voice score for "jewelry": 10.7%
"Our Hold rating reflects our wariness on TIF's decision to lower prices in China, forex headwinds in 1H FY 20 (from a stronger U.S. dollar), offset by rich brand heritage and strong partnerships with key influencers," the analysts said.
