Breakingviews: Amazon is Getting Bigger, but also Heavier

Amazon said on Thursday that revenue hit $51 billion thanks to online-sales growth in North America and its fast-growing cloud-services division. Earnings of $1.6 billion caught Wall Street analysts, who expected less than half that, by surprise.

But rapid sales growth comes with baggage, of the balance-sheet variety. While revenue increased more than 40 percent, the company’s property and equipment grew by 60 percent. Five years ago, Amazon got nearly $7 of revenue for each $1 of those fixed assets. By the end of 2017, that had fallen to around $3.60.

The $14 billion acquisition of Whole Foods is one factor. The upscale grocery chain operates more than 470 stores. But the trend started before that. As well as getting deeper into logistics, the e-commerce firm is opening more retail outlets – a book store in Manhattan’s Columbus Circle for example.

Compare that with old-school superstore operator Walmart. It got around $4.40 of revenue for each $1 of property and equipment it held on its books at the end of 2017 – up from roughly $4 back in 2013. The retailer has about 11,700 stores worldwide but it’s attempting to shrink its footprint while better managing its brick and mortar to serve its e-commerce efforts. In January, Walmart planned to close more than 60 Sam’s Club stores and turn 10 of them into distribution centers.

Investors are mostly focused on Amazon’s rapid growth, and its potential to destroy every industry in its path. The shares rose some 6 percent in after-hours trading on Thursday, taking its theoretical market capitalization past $780 billion. Bezos’s empire is getting bigger, but it’s getting heavier too.

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