Moody’s: Amazon Could Be Weakest of All Big Retailers, Profits Not Key Focus
A recently released report from Moody’s Investors Service has revealed that Amazon may be the weakest of all big retailers.
Whilst Amazon’s shares continue to jump – rising nearly 28% since the beginning of 2017 – the new Moody’s report has pointed out Amazon may, in fact, be lagging behind in other fundamental ways:
Report authors, Charles O’Shea, Janice Hofferber, and Oliver Alcantara affirm:
“Although Amazon’s share price is outperforming retailers, conventional methods of evaluating operating performance, such as operating margin or any profitability measure, suggest that Amazon is actually the weakest of the large retailers, excluding sales growth”.
The authors state that profits have not been a primary goal for the retailer:
“And even based on that measure, one could argue that Amazon has been ‘buying’ sales for the past 15 years, considering profits have not been its primary focus — unlike other retailers”.
Interestingly, Amazon witnessed a nearly 77& fall in quarterly income last month, despite its second-quarter revenue being 25% higher compared to last year.
Moody’s state despite the jump in sales, Amazon will likely not beat the international footprint of rival Walmart – their US revenue of $308 billion far surpasses Amazon’s US gross merchandise volume of $145 billion.
“In terms of total revenues, Amazon continues to grow product sales in the mid-teens, which we note is lower than many brick & mortar retailers’ online growth. But again, that growth is nowhere near the retailers’ overall profit levels”.
The Moody’s report also states that the estimate of a number of Amazon Prime users has been “seriously overstated”. Interestingly, Amazon has reportedly never disclosed an exact figure.
“Given the company’s incessant push into new markets and products, it’s easy to understand temptations to overestimate. However, when estimates start hitting 85 million, we think it’s time to pause”, states the Moody’s report.
The report calculates Prime numbers are being closer to 50 million, which it revealed is significantly less that rival Costco’s offering which boasts about 85 million members.
It seems Amazon Prime – the discount membership system – may not be as infatuating to investors as it formerly was.