E-commerce and teens: A dangerous mix for specialty retail


Specialty retail categories are where e-commerce has had the strongest impact on brick-and-mortar stores, concludes Re/code after scanning sales charts.

While food and healthcare categories show lower e-commerce penetration as consumers only slowly pivot away from their traditional buying habits - retailers that sell clothing (EXPR, RUE, ZUMZ, PSUN, AEO, CACH, BODY, CHS, CWTR, NWY, BEBE, ANN, CBK) , sporting goods (HIBB, CAB, BGFV), and electronics (BBY, RSH) continue to lose market share to online sellers at an astonishing pace that shows little signs of slowing down.

Demographics aren't working in the favor of the trend reversing itself either as more teens show a tendency to favor online upstarts such as Nasty Gal or Stitch Fix over former mall rat favorites like Gap (GPS), Aeropostale (ARO) or Abercrombie & Fitch (ANF). The younger set is also attuned to deal-shopping and buying used products online which are margin killers in the electronics category.

Re/code sees at least two companies that don't mind the e-commerce evolution: FedEx (FDX) and UPS (UPS) could get busier and busier.

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Comments (5)
  • Philip Marlowe
    , contributor
    Comments (1539) | Send Message
     
    The best kept secret of the e-commerce revolution is packaging materials companies. More specifically, companies that make the brown cardboard that is used for shipping - demand for this is skyrocketing and prices are going up. And the companies can be had for very reasonable P/Es. My favorite here is a little company called Kapstone Paper and Packaging (KS). They have had amazing growth the past year and they are still selling for only 12 forward P/E.

     

    I prefer KS, because it is very well run, it has a knack for making acquisitions for dirt cheap and it is very much leveraged to the growing packaging industry. It does not partake in any of the many shrinking sectors of the paper industry.

     

    So you do not have to buy into Amazon's no profit mantra to benefit from the e-commerce boom.
    14 Jan 2014, 05:35 PM Reply Like
  • Dr. Duru
    , contributor
    Comments (2105) | Send Message
     
    Great catch. I have been looking for some names in packaging. I first stumbled upon this trend after reading about some mill closures by IP last September.
    14 Jan 2014, 05:42 PM Reply Like
  • ystock15
    , contributor
    Comments (165) | Send Message
     
    Abercrombie rules! They are just so popular all over the world. Will climb to $49
    14 Jan 2014, 05:59 PM Reply Like
  • John Alford
    , contributor
    Comments (236) | Send Message
     
    Big Five Sporting Goods (BGFV) is rolling out an e-commerce site this quarter (hopefully) and is expanding their margins. I'm keeping an eye on them, both as I am long/covered calls and shop there for basic sporting goods. Thanks for the pointer on Kapstone Paper-it's now on my bottom-up evaluation list due to macro trends.
    14 Jan 2014, 07:26 PM Reply Like
  • dfilion
    , contributor
    Comment (1) | Send Message
     
    If you like packaging, you should also have look at RKT. As an ex-Investor relations officer in that industry, I think that Rock-Tenn is the best company in the containerboard industry.
    16 Jan 2014, 08:25 PM Reply Like
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