The top 25 publicly traded retailers, with a combined market valuation of $3.77 trillion, experienced a significant market value drop of approximately $80 billion in the third quarter (Q3) of 2023. This decline was primarily triggered by a varied earnings outlook for FY2023, which raised concerns among investors, observed GlobalData, a leading data and analytics company.
Gracio Benher, Business Fundamentals Analyst at GlobalData, said the hesitation stems from the contrasting performance of leading retailers during the third quarter, where China-based PDD Holdings saw substantial gains driven by robust earnings and favourable market conditions, while Amazon and Nike experienced market value losses due to factors like weak consumer spending and increased delivery costs.
“This divergence in performance raises questions about the sector's stability and the challenges it faces,” said Benher.
On a quarter-on-quarter (QoQ) basis, PDD Holdings, the owner of top retailer platforms such as Pinduoduo, gained the most, with its market value increasing by $34 billion to reach $126 billion at the end of Q3. On the other hand, Amazon.com lost almost $38 billion during the same period.
PDD stock received a boost from robust second-quarter earnings, underpinned by its robust business model focused on offering discounted and private label products in China's tier-2 and three cities. Additionally, the company's online agricultural platform, which delivers fresh farm produce to consumers, further contributed to its success.
The crackdown by the Chinese antitrust regulators on Alibaba led to the e-commerce giant terminating the longstanding merchant agreements and cutting down on its aggressive promotional activities, creating additional growth opportunities for PDD Holdings.
Amazon’s stock shed 2.8 percent in its market value during the third quarter due to weak consumer spending and an expected hike in delivery cost fueled by increasing fuel prices.
Nike’s market value tanked by 19.2 percent, losing over $32 billion in market value during the third quarter, impacted by weak Q3 earnings and a gloomy Q4 outlook, and slow recovering Chinese footwear segment, its second primary market. The footwear retailer has lost over $45 billion in market value since 2023 beginning.
Another top retailer, The Home Depot, also saw its stock value tumbling by about $9 billion during Q3 2023, as the home-improvement retailer revised its full-year earnings outlook following consumers tightening their home improvement spending.
Benher concluded that the short-term outlook for the retail sector remains positive, with retailers expected to benefit from a revival in consumer spending during the upcoming holiday season, which is expected to touch and go beyond the pre-pandemic levels for the first time. However, companies might still need to navigate headwinds such as rising inflation and price-sensitive customers, who may seek competitive alternatives.
