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Amazon is an 'opportunistic infection' that culled the retail herd: Scott Galloway


Several retail chains reported disappointing first quarter earnings. Sales at Kohl’s (KSS), J.C. Penney (JCP) and Nordstrom (JWN) fell as the companies had a slow start to the year.

“Well, there's been a culling of the herd, because the old and the weak have been taken out by this opportunistic infection called Amazon,” NYU Professor Scott Galloway, told Yahoo Finance’s On the Move. “Amazon is an algorithmically-based retailer, so one way to fight against it is through voice and curation and merchandising.”

One retailer that doesn’t stand a chance, according to Galloway, is J.C. Penney.

J.C. Penney delivered yet another round of underwhelming results. The company reported a net loss of 46 cents per share on sales of $2.56 million. Its same-store sales dropped 5.5%, worse than an expected drop of 4.2%.

“J.C. Penney — this company's out of business. It's done,” Galloway said.” We’re talking about it's near-death. It is over for J.C. Penney’s.”

As for Target, Galloway said it made a mistake by partnering with Amazon (AMZN).

“What do Target, Borders, and Toys R Us all have in common? They outsourced their e-commerce to Amazon in the early days, and as a result never developed those competences internally,” he said.

Kohl’s teams up with Amazon

Last month, Kohl’s announced that it would start accepting Amazon returns across its 1,150 stores in the country. During its first earnings call since the announcement, the company said the program, which is currently being piloted in select cities was driving foot traffic to stores. Kohl’s CEO Michelle Gass also said Tuesday on the call that “it is the single biggest initiative of the year.”

Kohl’s reported adjusted first quarter earnings of $0.61 cents per share, missing estimates by 7 cents. Same-store sales also slid 3.4% But Galloway said Kohl’s performance has improved over time. “Kohl's is up substantially over the last two or three years,” he said.

Kohl’s move to partner with Amazon might bring up Galloway’s original point. If retailers want to survive partnering up with Amazon might be the only way.

Valentina Caval is a producer for Yahoo Finance On the Move.