Amazon Could Benefit from Circuit City's Demise

J.P. Morgan’s Imran Khan theorized in a research note Friday afternoon that Amazon.com (AMZN) could eventually be a beneficiary from the demise of Circuit City, which earlier Friday said it would close all of its remaining stores and liquidate.

In the short-run, it’s not likely to help, as the inventory from the company’s 567 remaining stores is sold off in a giant going-out-of-business sale that could pressure pricing in the already soft consumer electronics sector. But Khan also estimates that the company did $1.2 billion to $1.4 billion in online sales in its most recent fiscal year; he notes that according to ComScore, CircuitCity.com was the 11th largest Internet retailer by unique users through November. The company will stop operating the site as of January 18, it said Friday. Khan thinks Amazon could inherit as much as half of Circuit City’s online business.

Khan also notes that Circuit City had about $7 billion in sales overall in 2008 - sales which are now up for grabs. Some of that will be soaked up by Best Buy (BBY), Costco (COST) and Wal-Mart (WMT). And some will likely go online.

Amazon Friday was down a penny at $51.45.

Comments

[usblues]

Its not surprising to see this happen. When i go into Circuit City, Best Buy, etc.. prices are always way higher than if you buy the same thing online. Often i'll go into the store, check out a product, and then buy it from Amazon and save 25-50% .. I've been using this site to find some good deals online:

www.zingsale.com

It's a free service that tracks prices of products from online stores (like amazon) and sends you an email when the price drops.

2009 Jan 18 11:49 AM

[DWest]

Aren't you the same guy who said a few months back nothing could happen to affect GOOG and we should buy at 430?

2009 Jan 18 11:53 AM

[nostatistics]

What nonsense from Khan and what a fluff press release - Its good to see that Wall Street is still as Arrogant as always and what a great way to deflect the fact that earnings are pushed back a week - need those exits - The Circuit City news was issued pre-christmas - so I assume Amazon already picked up a few wins.
The reality is that Amazon is vastly overvalued at its current price. Why are analysts theorizing and issuing upgrades based on speculation and potential while ignoring demand-side realities now. If Amazon makes it lowered forecast the stock price is still too high. The issue with Amazon is its position in the S&P and Nasdaq - when Amazon breaks down and it will in February 2009 - expect the market to be at a new low. When sales drop 25% you don't need analysts - their models simply don't work. I note that Barnes and Nobles on-line sales were relatively flat for the Christmas period when at the same time their store sales are down 17% - so, it's going to be interesting results time for Amazon in their core market - If you are going to take the speculative approach there is more upside potential in many other stocks in the market and they provide dividends.

2009 Jan 18 05:02 PM

[Lou Sauer]

a bit off topic however I think Circuit City has made a good amount in the past few days; they are selling at the holiday heightened prices ( i think about 15% or so) with about a 10% discount so really they are banking +5% (for now at least) and the checkout line wrapped to the back wall...

2009 Jan 18 10:38 PM

[Buffett follower]

It is sad so many people get home jobless. Back to reality, I think buy.com will become a big player over best buy.

2009 Jan 20 07:01 PM