From Seana Smith:
Earnings season is sending a massive warning for the retail sector: Big players are getting crushed, and if companies fail to change their strategies, things may go from bad to worse. A slew of weak results sent traditional retailers into a tailspin this week. Gap (GPS) and Ralph Lauren (RL), along with department stores Macy’s (M), Kohl’s (KSS), Nordstrom (JWN) and J.C. Penney (JCP), all disappointed Wall Street with their latest numbers.
Gap and Ralph Lauren both reported a drop in comparable sales, falling 7% and 5% respectively. And the results weren’t any better for department stores. Macy’s recorded its worst quarterly results since the recession, Kohl’s posted an 87% decline in its profit, Nordstrom slashed its guidance and J.C. Penney reversed five straight quarters of sales growth.
But there’s one massive retailer that’s bucking the trend — Amazon.
The e-commerce giant is gaining market share while wreaking havoc on its brick-and-mortar competitors.“Amazon is already the second largest U.S. apparel retailer (trailing only WMT), as the company has grown to ~7% of the overall U.S. apparel market. We estimate Amazon will reach 19% share of the U.S. apparel market by 2020,” Morgan Stanley wrote in a note to clients on Thursday.
Amazon (AMZN) broke through resistance at 700, offering a target of 900. Rising troughs on long-term (12-month) Money Flow reflect strong buying pressure. Retracement that respects the band of support at 680 to 700 would confirm the breakout.