Most notably those such as J.C. Penney (JCP) that are trying to hawk threads to the youth of America, suggests Morgan Stanley. Here's an excerpt from Morgan Stanley tech analyst Brian Nowak:
"Prime appears to be driving Amazon's apparel business, as Prime members are now ~2x more likely than non Prime shoppers to buy clothes on Amazon, up from 1.5 times last year according to our AlphaWise survey work. Amazon's apparel shoppers are younger too with 57% of surveyed consumers aged 18-34 likely to buy clothes on Amazon in the next 12 months. This early behavior modification is bullish for Amazon's long-term apparel share gains and bearish for store-based retailers as these shoppers age. ...purchasing casual items, but not bras or lingerie.
In terms of apparel categories purchased on Amazon, the most popular remains casual tops (with 68% of Amazon clothing shoppers buying the category), followed by shoes (48%) and casual bottoms (38%). Traction in casual tops and bottoms speaks to Amazon's success in selling everyday (relatively lower priced) apparel...and given the "Tops" and "Bottoms"apparel categories make up 56% or ~$150 billion of the ~$267 billion annual U.S.non-shoe apparel spend in 2017, continued traction here should drive faster Amazon apparel growth.
Interestingly, purchase penetration on athletic/active dropped to 34% (from 40%)...while bras and lingerie shopper penetration remain low (14%/9%) which in our view speaks to the relative insulation of those categories from Amazon disintermediation. In terms of brands, Nike (NKE) , Levi's, Hanes, and Adidas (ADDYY) lead the most frequently purchased brands on Amazon."
Morgan Stanley estimates that Action Alerts PLUS holding Amazon gained an impressive 150 basis points in U.S. apparel market share in 2017. It shouldn't be any surprise where that market share is coming from, and where it will likely continue to come from in the years ahead.
Says Morgan Stanley:
"Unsurprisingly, Amazon's 2017 share gains look to have come largely at the expense of department stores. Cumulatively, we estimate Sears (SHLD) , Macy's (M) , and J.C. Penney lost 0.8% share in 2017. Target (TGT) and Kohl's (KSS) shares remained roughly flat, while L Brands (LB) lost share due to the elimination of its swimwear and apparel categories.
We expect department store share losses to accelerate from -3.9%/- $1.8 billion annually over the past 10 years to a -7.9% CAGR/-$2.5 billion per year through 2022. We forecast department stores will comprise just ~8% of the total U.S. apparel market in 2022 vs. ~24% in 2006."