This commentary was originally sent to Growth Seeker subscribers on Tuesday, Feb. 23.
We see Tuesday's earnings report from Macy's (M), as the latest in a series of confirming data points that consumers continue to shift their purchasing to digital platforms (online and mobile).
The retailer's fourth quarter, while somewhat better than expected, set a sour tone for 2016, including the closure of nearly 40 locations. And Macy's is not the only company shuttering locations; others doing so include Sears (SHLD) and J.C. Penney (JCP).
This raises several questions over how General Growth Properties (GGP), CBL & Associates Properties (CBL) and other shopping mall REITs will fill the vacant locations and what it means to their revenue and earnings outlooks. To us, mall REIT stocks are facing the secondary wave of creative destruction occurring from digital commerce.
We can only speculate as to what the future mall may look like -- more restaurants and entertainment perhaps? Despite some attractive dividend yields, we would avoid mall REIT stocks, at least until this store closure wave is digested.
What we do know between recent retail sales data, commentary from Macy's it will invest more in online and mobile, and other apparel companies looking to strike relationships with Growth Seeker holding Amazon (AMZN) is that change is under way.
Add in the comment from Macy's that it is facing increasing competition from online retailers like Amazon and we continue to see Amazon in the pole position for online commerce as it expands its product and geographic footprint.
We continue to rate AMZN shares a One with a $725 price target.
