Overstock.com Is No Match for the King of Online Retail

Even with its smaller size, Overstock.com is struggling to keep up with its big cousin’s staggering growth rate.

May 5, 2014 at 8:15PM

Online retailer Overstock.com (NASDAQ:OSTK) and its big cousin Amazon.com (NASDAQ:AMZN) reported their earnings for the first quarter of fiscal 2014 the other week. It is clear from both online retailers' financial results that more and more consumers are choosing to shop online.

While Overstock.com reported modest growth for the first quarter with a 9% increase in net sales, Amazon.com reported much stronger growth of 18.3% over last year's first quarter despite its larger size. Although Overstock.com is experiencing impressive online sales growth which gives it an edge over traditional bricks-and-mortar retailers, it still has a long road ahead to catch up to Amazon.com.

The basic facts from the quarter
Overstock.com is off to a good start for fiscal 2014 with net sales climbing $29.2 million from the first quarter of 2012 to $341.2 million. This jump in revenue resulted partly from an increase in the average order amount from $153 to $165 as well as a 5% growth in the number of orders placed on the company's site.

Unfortunately, Overstock.com's profit fell to $4.0 million, or $0.16 per share, in the first quarter while in the year-ago quarter its net income totaled $7.7 million with earnings of $0.32 per share. A 25% increase in sales and marketing expenses for the quarter contributed to this decline in profit. For Overstock.com's sake, hopefully this increased spending will lead to higher sales volume in the future.

Just can't keep up with big brother
Overstock.com has done fairly well for itself over the past year. Despite the stiff competition from Amazon.com and the bigger company's reputation among consumers, Overstock.com has put up a good fight. However, its annual revenue is still no match for that of Amazon.com, as this online retail business continues to dominate against the rest, stealing sales left and right from all retailers. To see how Overstock.com and Amazon.com compare in terms of annual revenue over the past three years, see the chart below.

Company Name

FY 2011 Revenue Growth

FY 2012 Revenue Growth

FY 2013 Revenue Growth

Amazon.com

40.56%

27.07%

21.87%

Overstock.com

(3.3)%

4.27%

18.65%

It would be one thing if Overstock.com was much smaller than Amazon.com but growing much faster. However, this is not the case. For the past three years, Amazon.com has experienced double-digit growth in revenue, and it brought in $74.4 billion in fiscal 2013 alone. In comparison, Overstock.com just saw its first year of double-digit sales growth in 2013 on much smaller revenue than that of Amazon.com.

In fact, Overstock.com earned $73 billion less in net sales than Amazon.com did in fiscal 2013. All in all, Amazon.com is growing much faster than Overstock.com, and it's taking the next step for its long-term success by trying out its luck with video streaming. This latest move by Amazon.com will carry its business even further up the ranks from that of Overstock.com.

Foolish takeaway
Foolish investors should take note of everything Amazon.com is doing to transform its company from solely operating as a retailer to operating in the world of entertainment as well. While Overstock.com is growing its sales year after year, it's not making the kind of sales made by Amazon.com. For this reason, Amazon.com remains the king of online retail. Investors would be wise to do more research on Amazon.com to see what else it is currently working on to keep its business high above the rest.

Will this stock be your next multi-bagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers