Market Overview

Morgan Stanley: Why Retailers Should Continue To Worry About 'The Amazon Effect'

Morgan Stanley: Why Retailers Should Continue To Worry About 'The Amazon Effect', Inc. (NASDAQ: AMZN) — with its unique business model and financial might — is invariably blamed for the demise of several retailers. With the third-quarter retail reporting season in the rearview mirror, one Morgan Stanley analyst delved into how the e-commerce giant continues to pose a threat to the surviving members of the retail sector. 

The Analyst

Morgan Stanley analyst Simeon Gutman made the following price target changes for retailers in the firm's coverage universe:

  • Target Corporation (NYSE: TGT): maintain Underweight/price target reduced from $70 to $60.
  • Best Buy Co Inc (NYSE: BBY): maintain Equal-weight/price target reduced from $80 to $75.
  • BJs Wholesale Club Holdings Inc (NYSE: BJ): maintain Equal-weight/price target reduced from $30 to $28.
  • Williams-Sonoma, Inc. (NYSE: WSM): Equal-weight/price target reduced from $60 to $55.
  • Lowe's Companies, Inc. (NYSE: LOW): maitain Overweight and $110 price target. 

The Thesis

Amazon's impact on retail margins has yet to level off and could take a few more years, Gutman said in a Wednesday note. (See the analyst's track record here.) 

The dominant theme across Q3 retail earnings reports was "profitless" growth, with EBIT dollars declining for four of the above five retailers, he said. 

Although retailers have made some headway in e-commerce, most hardline and broadline retailers are experiencing a highly dilutive margin structure, Gutman said.

Notwithstanding retailers reporting their best comps in years in Q2, the flow-through — or margin performance — was very poor, the analyst said. 

The Q3 flow-through was no better, and sales have decelerated modestly, even as the "intensely promotional Q4" gets underway, Gutman said. 

Morgan Stanley expects the cost of doing business to rise further in 2019 for retailers. 

The Price Action

The SPDR S&P Retail (NYSE: XRT) is little changed year-to-date. 

At the close Friday: 

  • Target shares were down 2.83 percent at $67.35. 
  • Best Buy was up 0.74 percent at $62.55. 
  • BJs stock was down 0.73 percent at $21.89. 
  • Williams-Sonoma was up 1.63 percent at $53.48. 
  • Lowe's shares were down 0.63 percent at $87.81. 

Related Links:

Cowen: Kohl's, Target, Tiffany Are Top Holiday Retail Picks

Time To Go Shopping With This Retail ETF

Latest Ratings for AMZN

Sep 2019MaintainsOverweight
Sep 2019MaintainsOutperform
Aug 2019AssumesBuy

View More Analyst Ratings for AMZN
View the Latest Analyst Ratings

Posted-In: Black Friday e-commerce Morgan Stanley retailAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


Related Articles (AMZN + BBY)

View Comments and Join the Discussion!

Latest Ratings

YEXTMorgan StanleyMaintains15.0
WKMorgan StanleyMaintains42.0
RAMPMorgan StanleyMaintains58.0
PDMorgan StanleyMaintains34.0
HTHTDaiwa CapitalDowngrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at

This Week In Cryptocurrency: DoJ Investigates Tether, Crypto Hacker Steals $1M

35 Stocks Moving In Friday's Mid-Day Session