Retail

Evidence Grows That Amazon Thrives as Weak Retailers J.C. Penney and Sears Falter

Again and again, retail experts and research firms that cover the retail industry offer evidence that Amazon.com Inc. (NASDAQ: AMZN) will continue to suck the marrow from the bones of weak department store chains. More evidence of that has been offered through the holiday season, and this evidence continues to mount. Amazon will, without question, post a record quarter when it reports next. Several of the weakest bricks-and-mortar companies will report their worst — at least their worst for a holiday season.

New Gallup data on online holiday shopping show:

As the Christmas shopping season gets underway in earnest this Friday, for the first time, a majority of Americans, 53%, say they are very or somewhat likely to do their Christmas shopping online this year. This is the highest percentage since Gallup first asked the question in 1998. Meanwhile, the percentages of Americans shopping for gifts in department stores and discount stores have been slowly declining, but these still beat the Internet as the places Americans will shop for the holidays.

That “beat” is relative, based on the department store decline.

While J.C. Penney Co. Inc. (NYSE: JCP) and the Kmart and Sears divisions of Sears Holdings Corp. (NASDAQ: SHLD) simply hope their losses will not further prove their lack of viability, Amazon reported how strong it expects its current quarter to be when it posted quarterly results the last time:

Net sales are expected to be between $23.5 billion and $26.5 billion, or to grow between 10% and 25% compared with fourth quarter 2012.

Wall Street can expect year-over-year declines at Sears and Kmart, and a modest improvement at J.C. Penney. However, J.C. Penney is coming off nearly two years of declines that have averaged more than 20%. An improvement only tells that J.C. Penney’s situation is “less bad.”

One of the sorry parts about the old-line retailers is that they have been unable to make a transition to e-commerce sales at all. Each of the weakest retailers is fortunate if 1% or 2% of its total revenue comes from online sales. That is not nearly enough to offset the disintegration of store sales.

The conventional wisdom is that Amazon has won in the battle of holiday sales, and that its lead over department stores only gets better as each holiday passes. That wisdom is right.

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