Is the virtual realm really going reduce brick and mortars, as we once knew them, to rubble and ash?
If you look closely, the process began a few years ago, but there seems to have been a rapid acceleration over the last year or so. Companies like Amazon, Apple and Netflix seem hyper-focused on destroying any and all that stands between their respective market-segment dominance.
Barnes and Noble v. Amazon 12 Month Trailing Income Data
Revenue | 7.01B | Revenue | 43.59B |
Revenue Per Share | 122.81 | Revenue Per Share | 96.55 |
Qtrly Revenue Growth (yoy) | -0.60% | Qtrly Revenue Growth (yoy) | 43.90% |
Gross Profit | 1.79B | Gross Profit | 7.64B |
EBITDA | 183.13M | EBITDA | 1.75B |
Net Income Avl to Common | -65.38M | Net Income Avl to Common | 870.00M |
Diluted EPS | -1.14 | Diluted EPS | 1.90 |
Qtrly Earnings Growth (yoy) | N/A | Qtrly Earnings Growth (yoy) | -72.70% |
Amazon is clearly sacrificing near-term earnings growth for the long-term purposes of bringing its competition to its knees. Even though I've never visited a physical Amazon store, my Barnes and Noble down the street never really stood a chance.
Research in Motion v. Apple 12 Month Trailing Income Data
Revenue | 19.80B | Revenue | 108.25B |
Revenue Per Share | 37.81 | Revenue Per Share | 117.12 |
Qtrly Revenue Growth (yoy) | -5.90% | Qtrly Revenue Growth (yoy) | 39.00% |
Gross Profit | 8.82B | Gross Profit | 43.82B |
EBITDA | 4.45B | EBITDA | 35.57B |
Net Income Avl to Common | 2.22B | Net Income Avl to Common | 25.92B |
Diluted EPS | 4.25 | Diluted EPS | 27.68 |
Qtrly Earnings Growth (yoy) | -70.90% | Qtrly Earnings Growth (yoy) | 53.70% |
The most recent quarterly earnings growth pretty much sums it all up. RIM was simply another victim of Apple's carnivorous ways. While RIM had no true brick and mortars, per se, its technology has lined the shelves of many retail mobile device shops that don't carry/sell the iPhone or the iPad, most of which have suffered along with RIM.
Blockbuster v. Netflix 12 Month Trailing Income Data
Revenue | Revenue | 2.92B | |
Revenue Per Share | Revenue Per Share | 55.61 | |
Qtrly Revenue Growth (yoy) | Qtrly Revenue Growth (yoy) | 48.60% | |
Gross Profit | Gross Profit | 805.27M | |
EBITDA | EBITDA | 433.82M | |
Net Income Avl to Common | Net Income Avl to Common | 238.00M | |
Diluted EPS | Diluted EPS | 4.40 | |
Qtrly Earnings Growth (yoy) | Qtrly Earnings Growth (yoy) | 64.50% |
The Blockbuster table is intentionally devoid of data and about as empty as most of the company's brick and mortar locations, as the company's remaining assets were recently bought on the cheap at auction after a bankruptcy filing. Netflix and a handful of online video streamers and mail-order video companies saw to that. Meanwhile, Netflix keeps on trucking. Though its potential for growth was seemingly slowed by its own missteps in the second half of 2012, at least it still exists to have growth potential. I've never been to a Netflix store, again, because they don't exist and don't need to.
Out of curiosity, I wanted to compare the two big general merchandise companies, Target and Wal-Mart, as they both seem to be capable of withstanding the onslaught of online retailers.
Target v. Walmart 12 Month Trailing Income Data
Revenue | 69.24B | Revenue | 440.14B |
Revenue Per Share | 100.54 | Revenue Per Share | 126.05 |
Qtrly Revenue Growth (yoy) | 5.10% | Qtrly Revenue Growth (yoy) | 8.10% |
Gross Profit | 21.66B | Gross Profit | 106.56B |
EBITDA | 7.51B | EBITDA | 34.23B |
Net Income Avl to Common | 2.98B | Net Income Avl to Common | 15.59B |
Diluted EPS | 4.30 | Diluted EPS | 4.72 |
Qtrly Earnings Growth (yoy) | 3.70% | Qtrly Earnings Growth (yoy) | -2.90% |
This is an interesting comparison, as shares of Target are down about 17% since 01/05/11, while shares of Wal-Mart are up about 9% over the same time period, despite their many similarities. Looks like investors are banking on the larger and more cost effective (for shoppers) Wal-Mart to maintain its competitive edge for some time to come.
JC Penney, Sears, Best Buy (BBY) and a handful of other long-time mid-end department store staples are suffering and lowering guidance, in part, due to the ever-growing online shopping community, while high-end department stores like Macy's are reporting good numbers and guiding upwards.
While I don't suspect Mall of America to fall anytime soon, the trend is clear, and it doesn't appear to bode well for the brick and mortars that are left standing. They will be around for years to come, but you can expect the empty storefronts left by the Blockbuster Videos out there to be filled with Starbucks (SBUX), McDonalds (MCD), or Yum! Brands (YUM) customers in no time at all.
