The war for retail will be won in groceries AMZN, WMT, KR, COST

8/26/17 I read that the war for retail will be won in groceries on a CNN blog so it must be true! But please forgive my twisted mind for diving deeper. The article is centered around Amazon and Whole Foods which is < 2% of the grocery market. This blog post will consider other retail than groceries, but they are a sector that begs watching.

The problem with the CNN Thesis is that groceries tend to be a defensive stock. As the Investopedia article points out, they do better in harder times, have slower growth in good times. It claims: "Despite this eat, drink or smoke perception and despite modern-day developments, tobacco shares have miraculously never disappeared or been wiped out. Not all food companies are actually defensive stocks, but a good rule is that if the bulk of the sales comes from grocery stores, the stock is probably a defensive one." 

Perhaps, but WMT, AMZN, COST, KR all did fairly well post great recession. Our family benefited from their performance. But only KR has a weak footprint in non-grocery, but they certainly have feet in that camp, (Fred Meyer is a major local presence in Washington State). So perhaps the thesis is better stated:

9/9/17 The war for retail will be won by vendors that balance consumer goods and groceries well. I think that is a more accurate thesis. It helps explain why a number of retailers and such are struggling. 

AMZN

9/25/17 Seeking Alpha, "The company may well be fully valued for essentially all future growth." Grated this thesis is a bit brash, but it does help with perspective.

Here are some more stories, I am guessing this is more about Monday being the day the acquisition is complete instead of actual news, NPR, Fortune, Bloomberg, and a story about beauty supplier Ulta, (keep in mind Wal-Mart is not out of position here either). Then for desert, I saw a story that should be considered seriously about how Amazon is the most overhyped company in the world.

I understand and agree that Amazon disrupted a lot of retail. Their total retail is 5% according to CNBC. And we all know and agree the classic big box stores are struggling with more growth going to online.

A really big statement in the CNBC article is: "But this is coupled with big names in the retail space — Wal-Mart, Costco, Home Depot, Target — seen as losing market share as their margins shrink and dollars shift back to Jeff Bezos' company, the analyst added." Hmmm, maybe, maybe not. 8/31/17 A bit of sanity, AMZN might be the weakest of the major retailers.

Those are four companies that I am following closely, the only one that I am not ready to open a position on tomorrow, if prices drop and the time is right, is Target.
One thing that will be interesting to watch are the brands themselves. Whole Foods has many "house" brands, (as do the rest). One of the Consumer Packaged Goods, (CPG) brands is Campbell Soup and they have the increasing problem that demand is decreasing for what they are peddling.

COST

Bias alert! Kathy and I spend winters on Kauai, Costco and Wal-Mart are the best grocery buys on the island by a far piece.

8/27/17 There is an article that is better than most about why COST might be in for more of a dip in prices, naturally the AMZN Whole Foods is mentioned, but they point out poor eCommerce performance and lower membership rate than AMZN Prime, plus much higher PE than Wal-Mart.

WMT

The recent 2% drop in WMT yesterday was not enough to tempt, it is still really close to 80 and in my dreams I buy in below 70. However, the 8% drop in KR, was enough to get me to set a limit buy in case it dropped again today, (it rose).

I don't want to be a Blockbuster or Circuit City dinosaur and blindly bet against AMZN. We held the stock until June 26, 2017 and sold it for 1009.14. Today AMZN is trading for 945.26. It just isn't clear to me why WMT which is slightly up for the same 3 month time period is the next Blockbuster.

Nobody died and left me smart, but if we are in fact riding an 8 year old bull market, change could be in the air. The magic of the growth companies may be coming to an end. We didn't just sell AMZN in June, we sold:
COST @ 158.19 now 152.45
GOOGL @ 990.00 now 930.50
TSLA @ 386.69 now 348.05

And thank them all from the bottom of our hearts for their hard work that made profit taking possible. Now, with bull market ending, the thought of value coming back into style conceivable, we want to get back in the game. Leaving a lot of money on the sidelines does not make sense.

I am leaning towards larger companies right now. We have managed to get a position in IBM, I want to add more, but the pesky stock keeps going up. I did establish a position in XOM and may add just a little more if it drops enough. WMT and KR are on the shopping list.

KR

Kroger is big enough that they should be able to compete, but they may be out of step, sort of like Chili's, Applebees, Radio Shack and so forth, if their model doesn't work they will get creamed. We still have a limit order in for KR.

9/8/17 250 limit@ 18.02

I may drop it further. Between 2008 and 2012 going into 2013 they spent a long time in the $12 - 15 dollar range.