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Published: October 6, 2009
Forecasts for holiday retail sales my not
exactly be glowing but there’s a good chance that Amazon.com
Inc. (Nasdaq: AMZN) -- the world’s largest online retailer
-- will again buck the negative trend that has gripped the
retail industry for the past year.
Estimates for holiday retail sales this year range from a +1%
gain to a -1% decline, the latter of which would make for the
industry’s first back-to-back dip on record, according to The
Wall Street Journal.
Online sales excluding travel this year are expected to be
$156.1 billion, up +10% from 2008’s take, according market
research firm Forrester Research Inc. (Nasdaq: FORR).
Despite last year being the worst retail environment since at
least 1970, Amazon said the 2008 holiday season was its “best
ever.” The company reported fourth quarter earnings 33% higher
than Wall Street estimates. And its sales gain of +4% would have
been +20% higher if it weren’t for a negative impact from
exchange rates.
“Online [shopping] has definitely been impacted by the economy,
but remains one of the biggest bright spots in retail,”
BIGresearch LLC senior analyst Pam Goodfellow told members of
the press in a conference call Tuesday.
E-commerce sites, often used as a research tool for purchases,
may draw consumers in with lower prices.
“If consumers can find a better deal online, they’re going to
purchase online,” Goodfellow said.
FBR Capital Markets Corp. (Nasdaq: FCBM) yesterday raised its
price target and earnings estimates for Amazon. FBR anticipates
another solid holiday quarter for the e-commerce giant, setting
its new price target at $95 a share, up from $85 previously.
FBR now expects Amazon revenue
for its fiscal year ending December
31 to be $22.75 billion, up slightly
from a previous estimate of $22.72
billion. The firm cited Amazon’s
strength in the media business, an
improving outlook for the book and
video game business, and less severe
headwinds from declining DVD and
music sales.
Earnings are now expected to be
$1.73 per share, up from an estimate
of $1.67.
“We continue to look for an
attractive entry point to upgrade
AMZN and feel that any material
weakness in the stock, improvement
in fundamentals, or a combination
thereof could create that
opportunity,” FRB said.
Amazon’s growing scale and
sophisticated inventory management
system, which was used to leverage
lower prices on some products,
helped the company defy the sector’s
sagging sales last year, analysts
said. While most retailers were
ordering products early in the fall,
the online-only Amazon could wait as
late as November to place its
orders.
“Amazon was able to restock when
nobody else was restocking,”
Majestic Research analyst John Aiken
told The Journal. “As demand was
falling off a cliff, they could get
better rates.”
With those better rates, Amazon was
able to pass the savings on to
consumers, who today are still
looking for bargains amid rising
unemployment and the looming
prospect of a jobless recovery. The
recession has been a boon to
discounters like Dollar Tree Inc.
(Nasdaq: DLTR) and Family
Dollar Stores Inc. (NYSE: FDO).
Money Morning Contributing
Editor Horacio Marquez, an
investment banker with more than 20
years experience, is bullish on
Amazon for the long term.
“Amazon continues not only to
maintain a commanding lead in online
retailing, but it keeps building on
that lead,” Marquez wrote last
summer in his weekly "Buy, Sell or
Hold" column. “The basis of such
expansion resides in price,
convenience and innovation. Price
has become a much more important
variable to consumers in the
recession and will continue to be
important in the years ahead, as the
battered consumer struggles to
rebuild wealth lost in the housing
and stock market blow-ups.”
Since Marquez’s column, Amazon stock
has enjoyed an +8% gain despite
missing analysts’ forecasts in the
second quarter. -- Bob Blandeburgo
Associate Editor
Money
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