Amazon Effect' Leads Investors to Sour on Retail -- Update
By Riva Gold and Saabira Chaudhuri
Amazon.com Inc.'s expanding reach is prompting investors to dump shares of retailers far from the U.S.
The Seattle-based company is hastening a global move to online shopping that is plunging many overextended retailers into crisis, forcing some to eliminate physical stores, cut prices or even file for bankruptcy.
While the "Amazon effect" has been most pronounced in the U.S., investor concern overseas has been rising.
"Virtually every retailer needs to assume Amazon is coming for them," said Eddie Perkin, chief equity investment officer at Eaton Vance Investment Managers. "What companies and investors thought were immune categories have turned out not to be immune." Mr. Perkin has been avoiding shares of many brick-and-mortar retailers even as their prices have fallen.
The Stoxx Europe 600 retail sector has shed 3.7% so far in 2017, even as the wider European benchmark has gained 6.9%. Retail was Europe's least popular sector among fund managers surveyed by Bank of America Merrill Lynch in September.
Europe had been partly sheltered from Amazon's impact until recently. In 2015, the Stoxx Europe 600 retail sector had gained 8%, even as the U.S. SPDR S&P Retail ETF fell 9.9%.
U.S. retailers expanded aggressively for years and have recently been forced to reverse course, closing stores at a record pace, whereas European and Australian retailers don't have the same space glut. According to Credit Suisse, U.S. retailers have roughly seven times more retail space than ones in the U.K.
American brands are also more dependent on selling products through department stores than European ones, meaning they have been harder hit by struggles at big chains such as Macy's Inc.