June 1 2017

Save

Wesfarmers could be most exposed to Amazon, says Morgan Stanley

Amazon poses a bigger threat to Wesfarmers' discount department stores, Kmart and Target, than to specialty retailers such as JB Hi-Fi, investment bank Morgan Stanley has warned.

A report by Morgan Stanley analysts said Wesfarmers could lose $400 million in earnings to the e-commerce giant by the 2026 financial year.

Why investors are excited about Amazon

Amazon shares reach a milestone by briefly rising above $US1000 for the first time on Tuesday.

ASX winners and losers - a snapshot

The stand out listings traded on the ASX captured at key moments through the day, as indicated by the time stamp in the video.

The unknown recession

Australia may have enjoyed more than 25 years without a recession, but as Peter Martin explains, it's been a close run thing.

Richard Branson: US abandoning duty

Virgin Group founder Richard Branson urges the importance of countries working together to tackle climate change.

Wall Street signals bond yields to remain lower

Traders James Riley, left, and Mark Muller work on the floor of the New York Stock Exchange, Friday, May 26, 2017. ...

Wall Street signals bond yields to remain ...

Wall Street signals bond yields to remain lower

The Australian dollar was around US50 cents the last time the yield advantage was this small.

Scaremongering season

The old rule applies: if an economist makes a dire prediction of doom and gloom, he or she gets plenty of media attention. Michael Pascoe comments.

What to expect from retail sales

AMP Chief Economist Shane Oliver predicts the risk of another RBA rate cut this year.

Weak consumer sentiment weighs on retailers

Weak consumer sentiment weighs on ...

Weak consumer sentiment weighs on retailers

Consumers are the most unhappy since the financial crisis and with many shoppers struggling with record household debt, it's hard to see if that's going to improve.

Why investors are excited about Amazon

Amazon shares reach a milestone by briefly rising above $US1000 for the first time on Tuesday.

"We see Wesfarmers as the most impacted by Amazon's arrival in Australia," the Morgan Stanley report said.

"We believe that Wesfarmers' department store businesses are particularly susceptible as Amazon rolls out its first-party product and its Prime offer [membership program]."

The report said while the market had been selling off speciality retailers ahead of Amazon's arrival, investors had underestimated Wesfarmers' exposure.

"We think the market is mispricing the impact of Amazon's entry in Australia, by selling the category killers rather than Wesfarmers, which we view as most exposed via its department store businesses."

Wesfarmers was "over-owned" and had benefited from the housing boom and a weak Woolworths - two tailwinds that were fading, it said.

Shares in Wesfarmers fell on the report, slipping 3.23 per cent, or $1.38, to $41.32 on Thursday.

Amazon, which has been selling books, e-readers and digital content in Australia since 2015, confirmed in April that it would roll out its full offering Down Under but failed to say when.

However, Morgan Stanley analysts said they expected Amazon's expansion in Australia to begin later this year and that the e-commerce retailer would set up a large local distribution centre during 2018.

They expected the company to take a similar path to the one it followed in the US and UK, starting with televisions, electronics and apparel, followed by dry goods, fresh food and auto parts.

They estimated Amazon would generate $12 billion in sales in Australia by the 2026 financial year.

AAP