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Amazon Sales Soar, Topping Earnings Expectations: Should Investors Worry?

Apr 30, 2021 by Maurie Backman
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While many businesses struggled during the coronavirus pandemic, Amazon (NASDAQ: AMZN) saw a huge surge in sales as consumers shifted to e-commerce as a safer, more convenient alternative to heading to physical stores. And now, the online retail giant has some astounding numbers to report coming off its most recent fiscal quarter.

Outstanding first-quarter earnings

The results are in for Amazon's first quarter, and they're pretty incredible. Amazon saw its sales rise 44% year over year to $108.5 billion. Earnings came in at $15.79 per share, well exceeding Wall Street analysts' $9.54-per-share prediction. Meanwhile, revenue came in at $108.52 billion, compared to the $104.47 billion analysts expected.

Not only did Amazon have a stellar first quarter, but it expects a solid second quarter to follow. It anticipates posting revenue between $110 billion and $116 billion.

The impact on real estate investors

A big part of Amazon's success stems from its fearlessness. Amazon has never shied away from trying new things. Recently, it's expanded its grocery store line, launched a new online pharmacy service, and even opened its own tech-centric hair salon.

But even outside of those ventures, Amazon has long been taking customers away from smaller businesses and retail chains alike, most of which can't compete with its ultra-low price points. Amazon's efficient, well-oiled shipping and distribution model is also something even those retailers with a strong online presence themselves can't easily compete with. And the fear on the real estate front is that as Amazon's consumer base grows, the online giant will continue to take customers away from physical stores, thereby putting countless small businesses and retail chains alike at risk of closures.

Store closures, clearly, are bad for the shopping centers and malls that rely on those businesses to pay rent. They're also not great for local property values. Home prices, for example, could sink in areas with a large number of store closings, thereby hurting regular property owners as well as investors with income properties.

On the other hand, the fact that sales are surging for Amazon also means the online giant will need more warehouse space to keep up with demand. And that's good for industrial REIT (real estate investment trust) investors.

Amazon is particularly interested in acquiring distribution center space in or near major cities, where those facilities tend to be fewer and far between. And if it continues to ramp up its grocery offerings, it may require more cold storage facilities, which have become increasingly relevant themselves in the course of the pandemic due to an uptick in online grocery purchases and the fact that coronavirus vaccines themselves need to be kept very cold.

The Millionacres bottom line

All told, Amazon's ability to dominate is a mixed bag for real estate investors, because while malls, shopping centers, and even communities could get hurt in its wake, warehouse and distribution center demand could continue to skyrocket. Investors should pay close attention to Amazon in the coming months to see what else the online giant has up its sleeve.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.