10 retailers make more money than Amazon
Amazon.com's (AMZN) stock might be one of the hottest things going on Wall Street. The company is also worth more than any other retailer, and is the fifth most valuable U.S. company. But Amazon's bottom line is far less impressive.
Despite all the attention Amazon gets from investors, ten retailers including Walmart (WMT), Home Depot (HD), even fellow online retailer Priceline Group (PCLN) and apparel discounter TJX (TJX) are more profitable than the feared retailer hailing from the Pacific Northwest, according to a USA TODAY analysis of data from S&P Global Market Intelligence.
Amazon.com's retail dominance will be on full display this week and next as a wide variety of retailers report their quarterly results. The rapid growth of Amazon has already caused tectonic shifts in the retail business, made clear this week by Walmart's gutsy $3 billion buyout of small e-commerce player Jet. Amazon's influence is so widely watched that retailers attempt to steer clear of it and Bespoke Investment Group maintains a "Death By Amazon" index that tracks how retail stocks perform relative to Amazon (hint: Amazon is crushing them).
"Three major trends affect business: globalization, demographic and technology," says Erich Joachimsthaler, CEO of brand consulting firm Vivaldi Partners Group. "These tectonic trio of shifts favor Amazon and its business model."
Bullishness for Amazon certainly isn't overlooked by investors. Thanks in part to the stock's 48% rise over the past 12 months, shares of the online retailer are trading for 191 times adjusted earnings over the past 12 months. That's five times higher than the average 36 times trailing price-earnings ratios of the other retailers in the S&P 500.
But what's less known is that despite Amazon's larger-than-life image to consumers, the company's profits don't even come close to many of its retail peers. While Amazon has put Walmart on the defensive and is worth 59% more on the stock market, the nation's No. 1 retailer is actually 647% more profitable than its online rival. Walmart reported net income of $14.4 billion over the past 12 months, dwarfing the $1.9 billion reported by Amazon.
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While Amazon is proud of selling just about any product imaginable, even a specialty retailer like Home Depot earns more. Home Depot's net income of $7.2 billion over the past twelve months outstrips Amazon's, even though Amazon's revenue of $120.6 billion is 33% higher than Home Depot's. Similarly, TJX, the company that operates discount apparel stores, hauled in $2.3 billion in net income over the past 12 months -- nearly 20% greater than Amazon.com's bottom line.
It might be tempting to think Amazon's lower net income is a result of its online model that requires heavy tech investments. But name-your-own price online retailer Priceline.com earned $2.7 billion, 38% more than Amazon.
Amazon, which started up in 1994, is far younger than its brick-and-mortar peers and famously lost billions of dollars in its early years. Still, the company generally has been profitable since 2001 despite heavy investments to expand its distribution network, and so it may be surprising how badly its earnings lag its rivals'.
Make no mistake: Amazon.com's growth and momentum make it a darling with investors. The company's revenue soared 26% in the past 12 months, blowing away the average 8.8% growth of other big retailers. Walmart's top line shrunk 0.5% over the past 12 months by comparison. Eventually, retailers might get their mojo online and give Amazon.com some competition. But until then, the company's valuation continues to be larger than life even ias its profits play catch-up.
"We believe the size of the market represents an opportunity for Amazon," says Tuna Amobi, analyst at S&P Global, in a report to clients.
