Can it be Amazon'd? Can it be destroyed by one company's online dominance? That's what's driving a lot of today's action and it's disconcerting for several reasons.
First, when I see that Amazon (AMZN) might be increasing its sales by as much as double digits year over year, I regard the trend as discouraging. That's because there's simply no way that one retailer could have that big an increase without it being zero-sum, meaning it comes out of the hide of other retailers.
Second, when I see Amazon doing well, I also recognize that Amazon can be worse than Wal-Mart (WMT) in its demands of those who use its Web services, let alone the prices it offers. It has spent billions building out its Web infrastructure and makes days like today seem like child's play. Meanwhile, Target (TGT), which advertised so heavily this weekend during every football game, saw its site crash today. Crash! The off-line guys just still don't have it down.
Third, Amazon's strength is the mall's weakness. I was heartened by an interview that Macy's (M) CEO Terry Lundgren gave TheStreet about how business had picked up. But you can tell the market's in no mood to listen because the stock got hammered anyway. After their disappointing earnings, the broad line mall-based retailers seem to have been written off for the duration.
Fourth, the mall sightseer effect is just crushed by Amazon. One of the original reasons for the enclosed mall was the synergy. You had to walk through Nordstrom (JWN) to get to J. Crew. You had to pass Neiman to get to Coach (COH). It worked. You did all your shopping at the mall simply by going by a bunch of stores and alighting in one after another.
That can't happen if everyone's shopping at home. Speaking of home, many of the guilty pleasures of Americans now revolve around staying at home. Grand Theft Auto is the single-biggest entertainment release of all time; video games are the hottest segment of the retail economy and Netflix (NFLX) causes you to binge on a weekend when you should be shopping, as we did over Jessica Jones this weekend on my brand new iPad Pro.
Fifth,you just don't have the hours to dwell at the mall. Notice, it doesn't even seem to matter that gasoline has fallen to levels once dreamed unimaginable -- I paid literally 50% less at a gas station this weekend than I had the year before -- you can't dislodge a cellphone shopper watching Narcos on Netflix.
Sixth, you are just too tempted to buy everything online if you are constantly spending time on Alphabet's Google (GOOG, GOOGL) or checking Facebook (FB). We used to send wish lists to each other in my family. I just send my Amazon gift list. Hey kids, I want Amazon's new hit The Man in the High Castle for the holidays, will you watch it with me over the Christmas break?
Finally, Amazon acts like a price check for everything. We at one point thought that Best Buy (BBY) could be the showroom for Amazon. These days, though, with the easy returns and more consumer savvy about their own sizes and the desire to be frugal, the prices just can't be beat. You don't pay the salesperson's commission at Amazon.
The retailers have to take in more and more inventory to please the mall sightseers and if the weather is bad on any of the key days leading up to the holidays, they are crushed along with the suppliers. It's no secret that the stocks of Deckers (DECK) and Under Armour (UA) and VF Corp. (VFC) are going down because they are perceived as providing lots of winter weather clothing.
Trust me, you need that psychological spark of warm weather to get sales going. I made enough sales calls with my late father to small retailers during the holiday season to know that warm weather meant unpaid bills for my father's boxes and bags and a real lean holiday season given that retailers operate on such thin margins.
So with all of these concerns, you have to ask yourself who can't be Amazon'd. Who offers a proposition that makes it so on days like today, when every retailer is down you can actually do some picking? Before I give you some names, understand that other than the oils and the semiconductor stocks almost everything fared poorly.
It felt to me like a genuine sell program over multiple sectors and I don't know if it was related to the end of the month or not. Either way, respect that we have had a red hot market and even though I believe that we could be in for a decent December, even the winners, a.k.a. Amazon, gave it up after a stronger opening.
First, I think Costco (COST) can do well in this environment. We own this stock for my charitable trust, which you can follow with Action Alerts PLUS, because it makes its real money on your membership card. People are willing to pay much more for that card because when the company raised the price not that long ago, almost no one balked.
The company offers incredibly compelling prices and some bargains that still make it fun and exciting to shop at. Remember when I said you would go to the mall for one thing and come back with many?
When we went to Costco recently to get decorations and utensils for our Thanksgiving dinner that we hosted in Summit, N.J., we ended up departing with two carts worth of "I can't believe how inexpensive this is" material. The items included everything from razor blades to cool winter jackets, to Kirkland socks and ties and a stud finder!
Second is Ulta Salon (ULTA). Here's a company with a stock that got a major push from J.P. Morgan this morning, with a price target going to $215 from $180. Why not? Amazon -- even with all of the drone ideas -- which shrewdly landed in the news today on Cyber Monday for max effect -- is not going to do your hair. It's not going to have beauty parlors in those distribution centers. I think the numbers are way too low here.
Third is TJX Cos. (TJX). Here's a company that's a huge beneficiary of the excess inventory of the major department stores. It comes in with cash and buys the excess inventory that must be cleared by the dinosaurs and sells the goods at terrific prices. It benefits, also, by having Homegoods, which is the only broad inexpensive houseware chain in a business dominated by companies with much higher price points.
Fourth is Home Depot (HD). People aren't spending on their homes. They are investing and you invest at Home Depot where the goods literally are flying off the shelves. Lowe's (LOW) is second best of breed. I like best of breed.
Fifth is Dollar Tree (DLTR). Many people have been worried that Dollar Tree swallowed an operation with too much toxin, Family Dollar. But when we got the report last week we found out otherwise. It was an incredibly strong quarter. Now, there are going to be other winners. And you could argue that maybe some of these, like Macy's, have gotten ridiculously low and, like fantasy football players who aren't hot right now, you just have to stash them for a better time. Or you could say that Apple (AAPL), which I think is having a very fine holiday season, should be included in the mix, as Brian Sozzi suggested in his excellent Black Friday wrap-up.
I like a market with wide breadth. You can make much more money, of course, if more stocks are going higher. The retail sector is a huge -- and visible -- cohort. So far I can only say that if it's an Amazon Christmas that the retail Grinch is stealing it from others with no sweet Dr. Seuss ending coming your way to bring a smile to your face, or your portfolio.