The more predictable casualties on Wall Street in the wake of the Amazon-for-Whole Foods deal may be grocers. But some big retailers, big box and otherwise, are feeling the pinch too.
Investors are wary in the wake of concerns that Amazon has enough clout and financial firepower to embark on wars of price and selection. Target shares were down Monday more than 2 percent, before recovering a bit to $52.20. The “general consensus” as noted by the site Seeking Alpha is that Target and Amazon, well, target similar customer bases, which is enough to set the stage for some rigorous competition.
But there is a “positive” that is being “overlooked” for these firms, said the site, which comes in the form of wage inflation. Amazon is looking to replace its real-live human workers with robots and automated services. That means Target and others would do the same. The read across here is that by not having workers on the front lines, any uptick in inflationary pressures would be sidestepped, which would in turn help margins.
Even as Amazon shares leapt to a new high of more $1,017, retailers reeled. CNBC.com reported that Walmart shares were down a few basis points and that Costco stock was off 2 percent. In further Wall Street reaction on Monday, Paul Trussell, a sell-side analyst with Deutsche Bank, lowered his rating for Costco from buy to hold. The note, reported the site, stated that the Whole Foods deal “represents a game changer with COST’s competitive moat in grocery under greater threat while its digital platform lags peers, putting membership renewal at risk for decline…. The pipeline of positive catalysts has played out, and the competitive backdrop is intensifying with AMZN … accelerating in-store and online efforts and innovation.”