Amazon climbs as beneficiary of ‘retail apocalypse’

An analyst upgrade helped propel Amazon more than 1 per cent higher on Monday with the company seen as one of the main beneficiaries of a renewed focus on the demise of US malls.

The online retailer is up more than 20 per cent year-to-date. Its success has helped drag the S&P 500’s retail index up 8.5 per cent since the start of the year in spite of carmaking companies’ and bricks-and-mortar retailers’ poor performance. Amazon is the largest member by weighting, making up 30 per cent of the index.

It came as weak sales and the announcements of store closures from companies like Sears and Macy’s have heightened investor nerves over the sector.

“The retail apocalypse in the US has reached a tipping point where consumers are largely going online and Amazon is probably the biggest recipient of more ecommerce transactions and a move away from bricks and mortar,” said Kerry Rice, an analyst at Needham & Company, who upgraded the company on Monday morning.

And the trend shows no sign of abating. Mr Rice cited figures from eMarketer in his report that predicted ecommerce as a total of retail sales in the US will expand from 8 per cent in 2016 to 13.5 per cent by 2021.

The US is still Amazon’s biggest market, contributing roughly 70 per cent of its total ecommerce revenue. Outside the US, Amazon still has further disruptive potential, added Mr Rice.

“Internationally there is a long way to go when you think of ecommerce adoption,” he said. “There is a lot of opportunity for Amazon to grab market share.”

Amazon’s gain coincided with Netflix, a rival in the online streaming of television, falling more than 1.3 per cent in early morning trading before recovering to trade just 0.2 per cent lower at $142.79 by early-afternoon.

The dip came alongside the departure of Neil Hunt, Netflix’s chief product officer, who will step down in July after 18 years at the company.

Analysts said Netflix and Amazon were less rivals to each other and more united in changing the way consumers interact with television.

A Morgan Stanley survey released on Monday put Netflix as the leading online video service in the US but also noted that about 45 per cent of Netflix users also use Amazon Prime Video, and about 60 per cent of Prime members also use Netflix.

“Both Netflix and Amazon can have good growth,” said Laura Champine, an analyst with ROE Equity Research.

Elsewhere, the S&P 500 index fell 0.1 per cent to 2,352 by midday in New York. Energy stocks led the index, benefiting from a rise in oil prices, while financials trailed. The Dow Jones Industrial Average dropped 0.1 per cent to 20,633 and the Nasdaq Composite dipped 0.1 per cent to 5,869.