Maybe Amazon’s Results Were Better Than We Thought – Barron’s
Investors sniffed at Amazon’s fourth-quarter earnings results, which showed a deceleration in North American sales. But new census data imply that Amazon continues to gain share against traditional retailers and has plenty of room to run, wrote Rob Sanderson of MKM Partners on Thursday.
Amazon.com grew its North America revenue by 22% in its latest quarter — excluding its cloud services — compared to 26% the quarter before. That had some people concerned that we may soon reach a point where people will already be using Amazon for everything they’d consider using Amazon for.
Turns out, Sanderson says, that sales slowdown was actually just indicative of a poor quarter for the industry in general. Overall U.S. retail sales fell by 2%, according to the Census Bureau. So with that in mind, a 22% rise looks pretty good. “It appears that share gains of Amazon.com against brick-and-mortar retailers are accelerating,” Sanderson wrote.
Plus, while it might seem that Amazon is making real inroads in just about every part of the retail market, Sanderson points out that the company has only scratched the surface. He estimates that Amazon has less than a 6% share of the U.S. retail business in the categories where it sells products.
All that opportunity to make headway means Amazon’s traditional e-commerce business might be the company’s big growth engine – not its very profitable cloud-computing segment. “The retail business is why we consider Amazon the best long- term growth story available to investors today,” Sanderson wrote.
Big Picture: Investors were concerned about a recent slowdown in Amazon’s North American sales growth, but the company did a lot better than the rest of the retail industry.