Why JPMorgan Likes Tractor Supply, Bed Bath & Beyond And Party City

Amazon may be dominating pretty much every area of retail, but that doesn’t mean there isn’t room for investors to make some money in other retail stocks.

That’s according to JPMorgan, which reportedly said Monday (May 15) that investors don’t have to invest in Amazon only to make some money in the retail sector.

“It is increasingly clear to us that, in most categories, there will be one large specialty player, mass, and one dominant online player as retailers lap up smaller, less-capitalized and difficult-to-turn-profitable online-only players, which is happening at an increasing rate,” JPMorgan said, according to the report.

The way JPMorgan sees it, there will be survivors that emerge that may be low-growth and cyclical but will also put off a lot of cash. JPMorgan pointed to Tractor Supply, Best Buy, Dick’s Sporting Goods, Bed Bath & Beyond, Michaels and Party City. JPMorgan noted that investors may be better off getting into a broad-based ETF to play the retail market.

For months now, retail stocks have been getting hammered, coming off a slow holiday selling period and bankruptcies making headlines. The reason: Amazon and its aggressive pricing, two-day shipping and other perks that have enabled it to dominate the retail sector. And more pain is expected to come to the retail sector. While the industry saw a slew of bankruptcies in 2016, more are expected this year.

Earlier this month, The Wall Street Journal, citing data from S&P Global Market Intelligence, reported that there are a list of 10 publicly traded retailers that could be at risk of filing for bankruptcy in 2017. So far this year, 14 retailers have filed for bankruptcy, and that is coming off 18 bankruptcy filings in 2016. Some of the major retailers that have filed for bankruptcy already include Payless, RadioShack and The Limited.

“The shift to online shopping has left a lot of financial distress in its wake,” Jim Elder, director of Risk Services at S&P, wrote in a research note covered by the WSJ. “The results from the first quarter do not suggest that a quick recovery is on the horizon.”



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