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TheStreet Open House

Sunday Delivery May Be Amazon's Knockout Blow

Stock quotes in this article: AMZN

NEW YORK (TheStreet) -- For a company that is barely profitable, Amazon (AMZN) has resulted in a great many retailers losing money. That will surely be reflected when Wal-Mart (WMT), Kohl's (KSS), Nordstrom (JWN), and JCPenney's (JCP) report earnings this week. As Sonny Liston said about Muhammad Ali (then Cassius Clay) before their first fight, "He can run but he can't hide."

Amazon recently announced that it has reached an agreement with the United States Postal Service to start delivering packages on Sundays.

That could be the proverbial "knockout blow" for some retailers. There will no longer be any need for weekend trips to the shopping mall. While that will be harmful for Wal-Mart, Nordstrom, Kohl's and others, it could be potentially fatal for JC Penney.

Although the stock market is reaching record levels, the feeling on Main Street is hardly bullish.

Last month, the Conference Board announced that consumer confidence index plunged to 71.2 in October from 80.2 in September. The Thomson Reuters/University of Michigan data reported a plunge from September's 77.5 to 73.2 in October. The government shutdown, the impact of ObamaCare, and the concerns of the average American about their own personal financial situation has resulted in the loss of consumer confidence.

Since consumer spending accounts for about 70% of the American gross domestic product, that is very troubling, particularly for the traditional retail sector.

As a result, Americans are looking to save wherever possible and to also protect the environment. While gasoline prices have been slipping, fuel still accounts for a significant part of the budget for the average family in the U.S. In addition to being pressed for money, Americans do not have much free time, either.

During the peak holiday shopping season, there are high school and college football games on Saturday and National Football League games on Sunday. Given the choice between attending the local game on Saturday and staying home and watching a professional football on Sunday or some other leisure activity, it is likely that more families will choose to forgo a trip to the mall. That will save both time and money, while protecting the atmosphere from exhaust fumes now that Amazon can deliver on both weekend days.

Like any contest between seasoned competitors, there has not been just one blow from Amazon that has finished off many in the retail sector such as Borders and Circuit City.

It has been a combination of relentless, scoring attacks that have degraded the ability of so many retailers to compete. Amazon has expanded from primarily selling books to increasing its turf in consumer electronics to now going after the grocery market in affluent areas. The new Sunday delivery service will enhance the appeal of many of the items sold by Amazon.

Retailers live and die by the sales numbers and that is certainly evinced in comparisons with Amazon.

For the online retailer from Seattle, sales growth is up 32.7% over the last five years. Wal-Mart, the biggest retailer in the world, has recorded sales growth of just 4.7% for the previous half decade. Nordstrom topped that with a 6% rise. There has been a 3.2% increase in sales for Kohl's. JCPenney, and its shareholders, have suffered from a plunge in the sales growth of 8.10%.

But investing is the act for buying the future income stream of an asset.

Over the next five years, the analyst community projects that earnings-per-share growth for Amazon will be 35.94%. For Nordstrom, it is expected to be 11.94%.Wall Street is looking for Wal-Mart to register 8.82%. The shareholders of Kohl's can expect earnings-per-share to rise by 6.30% over the next half-decade

For others in the retail sector, even if Sunday service by Amazon isn't a knockout blow, it will further weaken defenses. The trend in American society is toward maintaining flexibility and complete mobility, according to legendary investor Sam Zell in a recent speech. There is much greater flexibility and a far higher level of mobility when goods are delivered, rather than having to exhaust finite amounts of time and money traveling to the mall, fighting for a parking spot, and then having to hoof it to the store to find the item. A few clicks of a mouse or touches on a smart phone panel are more in tune with that trend.

Amazon is playing to that outlook with the new Sunday delivery, and its income statement and balance sheet will reflect that advantage.

Jonathan Yates does not have a position in any of the stocks mentioned in this article.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Yates is a financial writer who has had thousands of articles appear in periodicals and Web sites such as TheStreet, Newsweek, The Washington Post and many others. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University. He does not have a position in any of the stocks mentioned in this article.

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