Being “Amazoned” means that Amazon.com‘s (NASDAQ:AMZN) ever-expanding e-commerce ecosystem is steamrolling a company. That list is growing by the day, with sluggish brick-and-mortar traffic forcing companies to shutter stores and make dramatic strategic shifts to remain relevant.
Many “Amazoned” retailers might look like contrarian buys, with low valuations and high dividends, but investors should exercise caution with these hated stocks. Let’s examine three Amazoned retailers I’d definitely avoid — Foot Locker (NYSE:FL), Kroger (NYSE:KR), and Macy’s (NYSE:M).
Shares of Foot Locker plunged 28% on Aug. 18, after the footwear and apparel retailer reported weak second-quarter numbers that missed expectations. Revenue fell 4.5% annually to $1.7 billion, missing estimates by $100 million. Comparable-store sales dropped 6%, and its non-GAAP earnings fell 34% to $0.62 per share — which was $0.28 below expectations.
CEO Richard Johnson blamed those declines on a “limited availability of innovative new products in the market” and dismissed the notion that having companies such as Nike directly sell their products on Amazon could disrupt its business. But in addition to Amazon, other leading footwear makers, including Under Armour and Adidas, are also investing heavily in direct-to-consumer sales via their websites and apps.
Cowen & Company analyst John Kernan called those websites a “contagion” for Foot Locker and claimed that its comps and margins would continue declining as the footwear and athletic-apparel market “continues to shift to a variety of channels and emerging brands.” Therefore, Foot Locker looks cheap at seven times earnings with a forward dividend yield of 2.6% — but it could face much more pain in the coming year.
Amazon’s announcement that it would buy Whole Foods Market (NASDAQ:WFM) torpedoed Kroger’s stock in June, since Amazon could use the grocer’s nationwide network of stores to beef up its AmazonFresh and Prime Pantry services. But Kroger was already struggling before that bombshell hit, because of tough competition from rival supermarkets, dollar stores, warehouse clubs, and superstores such as Wal-Mart (NYSE:WMT).
Kroger’s revenue rose…