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Vulnerable Bricks-And-Mortar Retailer? Surprise

Jeff Bailey

Warehouses aren’t storefronts, but it’s all fixed costs in the end. And while Amazon (AMZN) may connect with you via the Internet, it is increasingly a physical-asset-intensive business, building warehouses in urban areas so it can deliver items the day they’re ordered and building a lavish Seattle headquarters to house much of its growing employee population.

AMZN Total Assets Chart

AMZN Total Assets data by YCharts

We’ve long questioned the sky-high valuation Amazon shares receive, given its lack of profits and the fact that it produces revenue growth via price-cutting more than anything. And as Bloomberg Businessweek reports, supporting that revenue growth requires a huge and rapidly-expanding asset base.

Economies of scale, or dis-economies? Assets, measured over five and ten years, have grown more rapidly than sales.

AMZN Total Assets Chart

AMZN Total Assets data by YCharts

AMZN Total Assets Chart

AMZN Total Assets data by YCharts

The investment in flesh-and-bones assets has been substantial, too, with revenue-per-employee dropping over time. That’s the opposite of scale.

AMZN Total Employees Chart

AMZN Total Employees data by YCharts

The hope – and the argument all those Amazon bulls buy into (and you’d be nuts to short the stock when it has so many true believers) – is that this latest building boom will set the company up for big growth and profitability.

AMZN Chart

NASDAQ:AMZN data by YCharts

From here, Amazon looks like a fabulous service, but hasn’t het proven it’s a profitable business.

Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

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