Wall Street is questioning if Home Depot is Amazon-proof (HD, AMZN, LOW)

pulse

July 20, 2017 5:02 PM

Home Depot shares fell following news that Amazon plans to spread its reach into appliance retailing.

Home-improvement stores like Home Depot and Lowe's

Shares of home-improvement stores including Home Depot, the most valuable in the US, sank on Thursday following news that Amazon plans to spread its reach into appliance retailing.

Sears said it planned to start selling its Kenmore-branded appliances on Amazon, giving the products their broadest distribution outside of the retailer's stores. Sears is also launching a line of smart appliances that can be voice controlled with Amazon Alexa.

It's a win for Sears, which has closed more than 200 stores this year amid declining foot traffic. Its shares jumped more than 15%.

But as Amazon extends into industries from social networks to grocery delivery, the deal with Sears is raising questions about the extent to which home-improvement stores can withstand competition from the ecommerce giant.

Home Depot, the largest home-improvement store in the US, is down by more than 4% at 11:09 a.m. ET, while Lowe's is down 5%. Whirlpool and Best Buy also fell.

Home-improvement stores have largely weathered the downturn that has hit department stores which traditionally staked sales on store visits. They've also benefitted from strong demand for housing and rising prices, which can be lifted even more when renovations are done before listing.

That's not to say that Home Depot is suddenly vulnerable; Oppenheimer described the share-price reaction as "overblown," according to Bloomberg. Home Depot's online sales rose 23% year-on-year in the first quarter.

"We do not believe the availability of Kenmore products on Amazon will draw meaningful incremental traffic away from the brick & mortar retailers to Amazon given Kenmore’s declining brand and the consultative nature of a major expenditure such as appliances," he said.

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