By Andria Cheng
Retail stocks rose Thursday, catching a lift from the broader
market while analysts digested news that online retail giant
Amazon.com Inc. (AMZN) said it agreed to buy Internet shoe and
apparel store Zappos.com in a stock deal valued at $807
million.
Amazon said in a statement late Wednesday that it will buy all
shares outstanding, warrants and options of Zappos in exchange for
roughly 10 million Amazon shares with their value based on average
closing prices in June and July. In addition, Amazon said it "will
provide Zappos employees with $40 million in cash and restricted
stock units."
With Amazon's scale and resources, its purchase of Zappos, which
has sales of about $600 million to $700 million, may be "an
incremental negative" for shoe retailers such as Foot Locker Inc.
(FL) and Jones Apparel Group Inc. (JNY), a Credit Suisse report
said. Jones operates Nine West and Easy Spirit stores.
"To the extent that Amazon.com can accelerate growth at Zappos
by leveraging its existing customer base, we believe this
acquisition will further erode market share at the undifferentiated
mall-based boxes like Foot Locker, which in our view is an
overstored concept in an overstored industry," the report said.
The report also said department stores such as Nordstrom Inc.
(JWN), J.C. Penney Co. (JCP) and Macy's Inc. (M) also may be hurt
as the purchase put Amazon on a "competitive collision course" with
them.
"All of these are seeking to carve out significant Web
presence," the report said. "The acquisition may well force all
three department stores to spend incrementally on their Web
business at a time when its profitability is generally under
pressure."
Amazon.com shares jumped 5.5% in recent trading. Jones shares
rose 5.3%. Foot Locker shares gained 2.6%. Nordstrom was up 4.6%.
J.C. Penney was up 0.3%. Macy's rose 3.7%.
The S&P Retail Index (RLX) rose 0.9% to 343.24.
Investor sentiment also was bolstered by a wave of
better-than-expected corporate earnings and better-than-forecast
June existing home sales.
-By Andria Cheng; 415-439-6400; AskNewswires@dowjones.com