Dead Malls of America: The Retail Apocalypse Deepens

We’re kicking off the trading week with another brutal day for the retail sector.

There’s nothing worse than a group of stocks trending lower during a roaring bull market.

These poisonous retail stocks emit a radioactive glow. Even a novice investor can’t miss these losing positions draining the gains from his brokerage account.

Traditional retailers and the “mall stocks” are having a downright terrible year. The S&P Retail Index ETF (NYSE:XRT) is down more than 11% so far this year after pushing to new lows on Monday. For comparison, the S&P 500 is up more than 8%.

Investors flipped the switch in 2017. No one wants anything to do with the traditional retailers. The divergence couldn’t be more clear…

Yesterday’s retail failures are a laundry list of household names. Macy’s Inc. (NYSE:M) plummeted 7% on the day. Gap Inc. (NYSE:GPS) dropped 6%. And poor Abercrombie & Fitch Co. (NYSE:ANF) tanked more than 21% on news that the chain ended talks of a potential sale. The stocks of an entire wing of your local mall are plummeting into the abyss right before your very eyes…

Meanwhile, Amazon Prime Day is upon us!

Coincidence?

I think not…

As a group, the retail sector is quickly approaching its winter 2016 lows (that was the trough of the 18-month broad market chop that ripped through vulnerable sectors like biotech and small-caps). Heck, the retail sector can’t even get its act together on the market’s good days in the middle of summer break. No one wants to own these old-fashioned stocks as Amazon fires up its bulldozers.

Even the formerly untouchable Costco Wholesale Corp. (NASDAQ:COST) is feeling the full weight of the Amazon juggernaut. Costco shares had enjoyed a powerful rally to new all-time highs, rising 18% year-to-date by early June. These gains have vanished less than a month later. After cratering another 2% yesterday, COST is now in the red for the year.

What’s to blame for this lightning-fast fall from grace? Amazon Prime, of course! Even MarketWatch ran an extensive report detailing how a Costco membership’s value is quickly deteriorating thanks to the exponentially increasing offerings from Amazon Prime. After all, venturing to a packed Costco superstore on a Sunday afternoon is a chore. But clicking a button on your phone to order whatever your heart desires is dead simple…

“I’d rather pay a little more for paper towels right to my door than have to deal with the Costco parking lot,” a Prime member told MarketWatch.

The slow-motion collapse of the traditional retailers is starting to pick up steam. As this story continues to unfold, the retail sector is becoming a wasteland. Jeff Bezos and his army of same-day Amazon delivery drivers have gutted every brick and mortar store in their path. Derelict shopping malls dot the country. It’s not a pretty picture.

Luckily, there’s not a buyable bounce in sight to temp the big risk-takers. Even a dead cat bounce in the retail sector could pose serious hazards to your portfolio. The pain could last a very long time as the sector struggles to adapt to a world where digital retail reigns supreme.

Be sure to log onto your Amazon account today and buy a cheap TV, slow cooker or Kindle Fire. You’ll be doing your part to help shutter another useless store at your local mall, while creating a much more convenient retail universe.

Sincerely,

Greg Guenthner
for The Daily Reckoning

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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