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Old-school American retail is getting crushed by capitalism

Old-school American retail is getting crushed by capitalism

Earnings season is sending a massive warning for the retail sector: Big players are getting crushed, and if companies fail to change their strategies, things may go from bad to worse. 

A slew of weak results sent traditional retailers into a tailspin this week. Gap (GPS) and Ralph Lauren (RL), along with department stores Macy’s (M), Kohl’s (KSS), Nordstrom (JWN) and J.C. Penney (JCP), all disappointed Wall Street with their latest numbers.

Gap and Ralph Lauren both reported a drop in comparable sales, falling 7% and 5% respectively. And the results weren’t any better for department stores. Macy’s recorded its worst quarterly results since the recession, Kohl’s posted an 87% decline in its profit, Nordstrom slashed its guidance and J.C. Penney reversed five straight quarters of sales growth.

But there’s one massive retailer that’s bucking the trend — Amazon. The e-commerce giant is gaining market share while wreaking havoc on its brick-and-mortar competitors.

“Amazon is already the second largest U.S. apparel retailer (trailing only WMT), as the company has grown to ~7% of the overall U.S. apparel market. We estimate Amazon will reach 19% share of the U.S. apparel market by 2020,” Morgan Stanley wrote in a note to clients on Thursday.

The rise of Amazon (AMZN) is something to be reckoned with. Its massive effect on the retail industry was a central part in Berkshire Hathaway’s (BRK-A, BRK-B) question-and-answer session during its annual shareholder meeting on April 30. Chairman and CEO Warren Buffett, alongside vice chairman Charlie Munger, noted that Amazon’s growth is something to admire, stressing the importance for companies to evolve and stay connected with current trends.

“We’re not going to out-Bezos Bezos,” said Buffett of Amazon and its CEO Jeff Bezos. "The nature of capitalism is somebody's always, if you've got a good business, trying to figure out how to take it away from you and improve on it." He went on to point out that he thinks Amazon’s full effect on the industry is “far from having been seen."

After a strong earnings report and a price-target hike at Bernstein to $1,000 from $770, shares of Amazon soared past $700 per share to a new all-time high this week, pushing Amazon’s market value to $340.25 billion.

Click here to view a full replay of the 2016 Berkshire Hathaway annual shareholder meeting, which Yahoo Finance live-streamed exclusively. At this page you can also find our extensive coverage of the event.