How Terrorism could Help Amazon, Dollar Stores squeezed by Income Inequality

Disturbingly terrorism might drive Amazon’s (NASDAQ: AMZN) breakneck growth; and hasten America’s retail apocalypse. Events in Europe are demonstrating how terrorism can seriously damage retail sales.

European economists are worried that consumer spending will fall because shoppers will go out less after bloody ISIS attacks in France and Belgium. Business and tax revenue fell by €1 billion in Belgium after a brutal assault in Brussels in March, The New York Times reported. A major reason for the decline is that many attractions including concerts, carnivals and sporting events were cancelled out of terrorism fears.

An even greater threat was in Germany; where an ISIS gunman opened fire at a Munich mall on July 22 and killed nine people. Most of the victims were shoppers in the mall indicating that his intent was to disrupt economic activity.

Such terrorism can help Amazon by making people too scared to shop. Since they will still need to buy stuff, people will stay home and do their shopping from the safety of the couch. That benefits Amazon and hastens the demise of brick and mortar stores.

How ISIS could make the Retail Apocalypse Worse

A potential nightmare for American retailers would be an ISIS attack on Black Friday; the peak shopping day in the United States. The idea would be dampen economic activity and scare shoppers away.


A terrorist attack would wreak real havoc on US retail at a time when Macy’s (NYSE: M) is closing 100 stores and Target (NYSE: TGT) reported a $920 million decline in revenue. It would also accelerate trends that are pushing Amazon.

Sales at US department stores fell by 1.7% between May 2015 and May 2016, The Wall Street Journal reported. Internet and catalog sales grew by 10.2% during the same period.

All it would take is one major ISIS atrocity at a US mall to accelerate that trend. Just one maniac with an automatic rifle; or worse a team of killers with bombs and guns could kill several hundred people and change the direction of the US economy.

Income Inequality is Squeezing Dollar Stores

Dollar Tree Stores (NASDAQ: DLTR) and Dollar General (NYSE: DG) are being squeezed big time by income inequality and wage stagnation.

Working class consumers are spending less because of fast-rising rent and healthcare costs, Dollar General CEO Todd Vasos admitted in his last conference call. Dollar Tree CEO Bob Sasser agreed and blamed rent and healthcare costs for a decline in spending, Market Watch writer Michael Brush reported.

Dollar General recently cut prices on 450 of its bestselling items by 10% in 17% of its stores, Brush reported. The chain is also more $1 deals on national brands, meanwhile Dollar Tree subsidiary Family Dollar has been cutting a lot of prices from $1 to 87¢ in an effort to lure more customers.


The price cuts might spell big trouble at both chains because of their limited resources. Dollar General reported a free cash flow of $220.54 million, cash and short-term investments of $185.3 million and $1.586 billion in cash from operations on July 31, 2016. It also reported steadily growing revenues of $21.01 billion and a net income of $1.231 billion on the same day.

Dollar Tree reported revenues of $20.38 billion and a free cash flow of $189.3 million on the same day. It also reported more resources including $1.097 billion in cash and short-term investments and $1.486 billion in cash from operations.

The danger facing these stores is that they might have to cut prices dramatically to remain competitive. Doing so they may reach a situation in which losses from sales exceed profits leading to the death spiral.

One has to wonder how long dollar stores can survive in the face of growing income inequality. It looks as if our economy is more fragile than we thought.