Amazon’s effect on retail is an amazing story, but despite its disruptive nature, the company hasn’t been generating profits or managing risk nearly as well as its retail competitors. Now Charlie O’Shea, an analyst from Moody’s is attempting to deflate the Amazon bubble by poking holes in the myths surrounding the company’s performance.
MarketWatch reports that O’Shea believes Amazon’s stock performance potential is overshadowing the on the ground operating performance advantages of its competitors.
Amazon’s stock AMZN, +0.29% has outperformed rivals, but it’s mostly based on the company’s growth story, and particularly the success of its cloud business, Amazon Web Services, O’Shea wrote in a new report.
“That potential is overshadowing the superior real-
time operating performance of Amazon’s key retail competitors,” O’Shea wrote. “The emphasis on stock performance is, in our view, forcing brick-and-mortar competitors toward managing more irrationally for short-term performance just when they’re confronting secular change.”
He cited as an example Staples Inc.’s SPLS, -0.05% decision to sell itself to private-equity firm Sycamore Partners as a way to boost shareholder value.
The perception that Amazon is poised to take over the grocery business via its acquisition of Whole Foods, which closed this week, is another myth, said O’Shea.
“Online sales still account for only about 10% of overall U.S. retail sales, with a much lower percentage in the grocery segment, leaving the big brick-and-mortar retailers, led by Walmart, still really formidable competitors in the industry,” he wrote.
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