uploads///top retailers

Why These 7 US Retailers Top the Charts?


Jan. 12 2020, Updated 4:39 p.m. ET

The US retail industry is transforming at a rapid rate. Online retail has fundamentally changed the way people shop. It has forced many traditional retailers to close stores. Others have gone bankrupt. So, it is interesting to see that retailers have not only survived but also thrived in these transformational times. Let’s take a look at the top seven retailers in the US by market cap (capitalization).

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Amazon: the top online retailer

With a market cap of $857 billion, Amazon (AMZN) is not only the biggest retailer but also one of the largest US companies. Amazon contributed significantly to the growth of online retail in the US. The company’s 2018 revenue stood at $233 billion, which was 31% higher than its 2017 revenue.

Amazon primarily sells online, which makes up 53% of its sales. Physical stores account for just 7% of the company’s sales. Third-party seller services, subscription services, web services, and others account for the remaining 40% of its sales.

Amazon’s revenue grew at an average rate of 27% in the last four years. The company made 61% of its sales from North America and 28% from international sales. Amazon had 647,500 employees at the end of 2018.

Walmart: The world’s largest retailer

Walmart’s (WMT) 2018 revenue was more than double that of Amazon’s revenue. However, its market cap is less than half of that of Amazon’s. Amazon’s rising stock price, compared to that of Walmart, added to its larger market cap.

Walmart’s revenue grew at an average rate of 1.5% in the last four fiscal years. This is compared to an average growth of 27% for Amazon. So, Walmart is the world’s largest retailer based on revenues.

Walmart saw $8.4 billion in losses for fiscal 2019. This included $3.5 billion to a change in the value of the company’s investment in JD.com (JD). Additionally, Walmart saw a loss of $4.8 billion on the sale of Walmart Brazil.

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With a shift in consumer preference towards e-shopping, it is vital for Walmart to fully develop its e-commerce infrastructure. The company understands this and has been making rigorous efforts to grow its online retail operations in the last few years. Walmart has closed more than 200 stores in the US in the last five years with most closures in 2016. Overall, online sales accounted for roughly 5% of Walmart’s 2018 sales.

Home improvement retail: Home Depot

Home improvement retailer Home Depot (HD) offers a range of building materials and home improvement products. Also, it offers lawn, garden, and decor products. The company also provides home improvement installation services and tool and equipment rental. It is the world’s largest home improvement retailer based on 2018 sales. In the last three years, Home Depot’s revenues grew at an average rate of 7%.

Like other segments, the home improvement segment of retail hasn’t been untouched with e-commerce. However, it being a specialty segment, major online retailers currently don’t offer as wide a range of products as Home Depot does. Thus, the company has an edge over others.

However, Home Depot understands the changing consumer preferences and is developing online platforms to cater to them. The company is focusing on an interconnected shopping experience that allows customers to blend their digital and physical shopping seamlessly.

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Home improvement products also generally tend to be high-value and varied. This is opposed to products like electronics, apparel, or grocery, which buyers can easily order online. Buyers generally compare home improvement products online and then go to the store to make the final purchase decision. Additionally, the company notes that roughly half of its online orders in the US are picked up from its stores.

Costco Wholesale

Costco Wholesale (COST) sells merchandise through warehouses typically at lower prices than other retailers. The company does this through several strategies. First, it limits brands and items to fast-selling ones. Second, it makes volume purchases directly from manufacturers and sells them through self-service warehouses, greatly reducing the costs. Last, the company offers a wide range of merchandise, including food and sundries, appliances, health and beauty products, hardware, apparel, gasoline, medicines, etc.

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Costco’s membership program reinforces customer loyalty and is key to its profitability. The company seeks to maintain its image as an authority in pricing for quality goods. In 2018, Costco’s member renewal rate was 90% in the US and Canada. It was 88% worldwide. Additionally, e-commerce sales represented around 4% of Costco’s 2018 sales. Also, Costco’s revenues grew at an average rate of 6% over the last four years.

Lowe’s: home improvement retailer

Lowe’s (LOW) is the world’s second-largest home improvement retailer based on revenues. The company’s revenue grew at an average rate of 6% over the last four years. The company primarily operates in the US, which accounts for more than 90% of its total sales.

Like other retailers, Lowe’s is also developing its online platform. The company’s online comparable sales grew 4% in the quarter ending on August 2, 2019. However, sales grew 16% for the quarter ending on May 3, 2019.

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The TJX Companies

The TJX Companies (TJX) offers apparel and home fashion at prices lower than other retailers. TJX claims to offer products at prices that are generally 20% to 60% below full-price retailers’ regular prices. The prices are lower than those offered by the department, specialty, and major online retailers. The company achieves this by opportunistic buying strategies and leveraging its global vendor relationships. TJX has four main segments:

  • J. Maxx and Marshalls chains in the US sell apparel, including footwear and accessories, home fashions, and other merchandise.
  • HomeGoods offers home fashions, including furniture, rugs, lighting, decorative accessories, tabletop, and cookware in the US.
  • TJX Canada operates the Winners, HomeSense, and Marshalls chains in Canada.
  • TJX International operates T.K. Maxx and HomeSense chains in Europe and T.K. Maxx chain in Australia.

TJX’s revenue grew at an average rate of 8% in the last four years. Its net income grew at an average rate of 9% during this period. Net sales from e-commerce businesses were around 2% of the company’s total sales in fiscal 2019. It didn’t have a material impact on the company’s sales growth for the year.

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Discount retailer: Target Corp.

Discount retailer Target Corp. (TGT) offers a broad range of general merchandise at discounted prices. The company’s product range is mostly everyday essentials and food, including perishables, grocery, dairy, and frozen food items.

Target’s revenue grew at an average rate of 1% over the last four years. The above table shows the company’s revenue and profit growth over four years. The decline in 2016 revenues was due to the sale of the company’s pharmacy and clinic businesses.

However, Target’s comparable digital sales grew by 36% in 2018. It marked the fifth straight year of more than 25% growth in the company’s comparable digital sales. Digital sales account for more than 5% of Target’s annual sales.

Top retailers: a comparison

The retail industry is highly competitive. The above table shows selected metrics for the top seven retailers by market capitalization. Each of the selected retailers attempts to offer something unique to stay at the top. While Amazon leads in online sales, Walmart has a strong network of stores and distribution centers. Not to mention, Walmart also has deep pockets and rich industry expertise.

Home Depot and Lowe’s specialize in the home improvement segment. The specialty offerings give them an edge over the others in that segment. Interestingly, the other three retailers—Costco, TJX, and Target—are discount or wholesale retailers. In addition to the quality of products offered, their core strength lies in their ability to compete on the price front.

All the traditional retailers are investing in developing digital sales platforms and infrastructure. This is a necessity to grow in the long run. If successful, an omnichannel retail experience should help them retain and grow customers.


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