E-Commerce Threatens Retailer Stocks

August 31, 1999

E-Commerce Threatens Retailer Stocks

After watching investors grow increasingly nervous over Internet competition, Merrill Lynch & Co. last week downgraded the stocks of a slew of retailers, including Nordstrom, Wal-Mart and Dayton Hudson.

"The stage is being set this Christmas for a growing psychological fear of Internet competition that is out of all proportion to the facts, but the damage to the stocks could be real," Merrill Lynch analyst Daniel Barry told The Wall Street Journal. On-line purchases still make up only a tiny percentage of retail sales, but a great deal of publicity about e-commerce Web sites worried investors, Barry said. Analysts also wonder when retailers' incredible sales growth is due for a downturn.

Analysts are still optimistic about the 1999 holiday season because of low unemployment rates and higher wages that contribute to consumer confidence. They are also watching as major retailers develop their own Web strategies. "Bricks-and-mortar retailers are going to ultimately dominate the Internet," Barry said.

- by Stacey King