Traditional retail stocks are kicking Amazon's butt

Whether consumers are going back to brick-and-mortar shopping out of necessity or a return to normalcy, traditional retail stocks are making a comeback on Wall Street — outperforming the likes of online retailers Amazon, Overstock and eBay.

Conventional retailers like Macy’s, Ralph Lauren and American Eagle have skyrocketed to at least 18% above the redline the last three months, while Amazon and Overstock plummeted roughly 28.02% and 21.94%, respectively.

Meanwhile, eBay remains in the green over the same period, clinging to an approximate 3.05% gain after falling about 34% year-to-date.

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Coming back from the dead

In an interview with FOX Business, David Russell, VP of market intelligence at TradeStation, said, "Traditional retailers were already facing a crisis long before the coronavirus pandemic in 2015 when online retailers began flooding the market."

"Today, Americans are striving for normalcy after three years of lockdowns as Amazon tumbles, and traditional retail stocks outperform the tech giant," he continued. "Even smaller retailers like Foot Locker, Abercrombie and Dillard’s have outperformed, and because most of these companies were left for dead, they have now become interesting, and investors are buying."

"By simply coming back from the dead, the traditional retail stock is in its own universe," Russell added.

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On Tuesday, the Bureau of Labor Statistics reported a 0.1% monthly increase in inflation in November, beating analysts’ expectations of a 0.3% spike in consumer prices as U.S. stocks rebounded on Wall Street. On an annual basis, prices rose 7.1%.

Derek Horstmeyer, a finance professor from George Mason University, told FOX Business that a return to traditional retail is driving ecommerce stocks down "but layoffs and a recession might be even bigger."

"We have already seen a lot of layoffs for middle class and upper middle-class workers at places like Facebook and Twitter," he said. "These employees are the most likely to use Amazon and other ecommerce services, so I think the huge drop in online shopping is due primarily to this issue."

In October, the U.S. Census Bureau reported that retail trade sales were up 1.2% over the month, a 0.5% improvement from the month before and a 7.5% leap from 2021.

‘Only the strong have survived’

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Russell said that after so many bankruptcies and store closings, "The retail landscape became Darwinian where only the strong have survived."

"Today, there is less competition within a flourishing ecosystem as Americans spend money and flood the shopping centers," he continued. "The most recent economic data has been positive, retail sales have been strong, and gasoline prices are going down, which provides a tailwind for these companies to cut prices and save consumers through better shipping costs."

As traditional retailers experience a boost in revenue, Horstmeyer credits the increasing margins to the impacts of inflation and a looming economic recession.

"There could be a small 'want' to return to physical brick-and-mortar stores, but I think the move away from Amazon might be more about necessity," he said. "And if we move into a recession, shoppers will continue to opt for cheaper alternatives to Amazon, which happen to be in-person stores."

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