In this Market Foolery video, the cast compares recent earnings results from big box retailers. Companies on tap include Lowe's in the home improvement segment, which is much less subject to e-commerce disruption -- and its performance shows it -- while Best Buy's consumer electronics focus is only getting tougher for brick-and-mortar players, despite an improved in-store experience. But is any company truly Amazon-proof?
A full transcript follows the video.
This video was recorded on March 1, 2016.
Mac Greer: Two retailers headed in very different directions, guys. Lowe's up big on Wednesday after the home improvement retailer reported better-than-expected earnings. Matt, Best Buy down on earnings.
Matt Argersinger: Yeah, it is the tale of two retailers. We talk about all the time, what kind of big box retailers, in this era of e-commerce, can thrive? And company like Lowe's and Home Depot, as well, the home improvement space of the market has been so impressive, and held up so well. You just can't replicate that experience online. I know this for a fact because I spent a lot of time going to Home Depot and Lowe's going to do things. It makes sense. Lowe's quarterly sales were up 19%, very impressive. Comparable store sales up 5%. Contrast that with Best Buy. Revenue was down 1%, comparable store sales were down 7%, and they're guiding for comps to fall even faster in the current quarter, and that's because, again, a company like Best Buy, and with Target earlier this week, is very vulnerable to the convenience factor that customers are now placing on their time and money. And that's capital that's flowing to e-commerce, Amazon and elsewhere.
Greer: I will say that the Best Buy in store experience, I think, has gotten a lot better. And I've been skeptical about Best Buy. But the problem is --
David Kretzmann: Amazon's best showroom, right?
Greer: That's right, that's the problem, it's Amazon. Matt and I were having this discussion this morning, about which retailers are truly Amazon-proof. I think we agree that Lowe's and Home Depot are probably Amazon-proof, right?
Kretzmann: I would say so. If I had to pick one of the two, I would pick Home Depot. Since the Great Recession, when you look at metrics like profit margin, return on equity, inventory turnover, return on invested capital, Home Depot and Lowe's right before the recession and through the recession, they're about neck and neck with all those metrics. But over the past eight years or so, Home Depot has just far and away outperformed Lowe's in all those categories. The stocks really haven't performed all that differently. They have both been great performers. But I think just, long-term, given that Home Depot has generated those superior metrics, I would stick with them. But both of them have been really strong performers, as Matt mentioned.
Greer: Anyone else on your Amazon-proof list?
Kretzmann: I think you have one that you would like to share.
Greer: I do. We had a spirited debate, because I think Costco, for now, is Amazon-proof. I think you go to Costco for the treasure hunt, this idea that you're going to find something that you didn't expect to find, and also for the food. The food, I think, is incredibly underrated. If you want grilled salmon or to cook out or cook a steak, you go the day of. Now, Amazon, if they build these bricks and mortar grocery stores and that becomes more convenient, then maybe that's a game changer. But for now, I'm going to go with Costco, Lowe's, Home Depot. I think those three are Amazon-proof.
Argersinger: The one thing I'll say about Costco, I know that they announced they were going to raise the membership fee, I would say that's a dangerous game to play. It's getting more dangerous.
Greer: No. I would pay three times as much for my fee. In walnuts alone, I make up that membership fee and buy one bag of walnuts.
Argersinger: I just think the value proposition of Amazon Prime, comparatively, is so much greater if you're a person who doesn't value the food element --
Greer: It's coffee and tea. They can co-exist.
Argersinger: I just, as a person who hates to drive and park and shop anywhere, especially somewhere that's so crowded as Costco, to me, Amazon, my household, they're just winning, it's dominating. I don't think there's room for Costco, especially given a higher membership fee.
Greer: I'm sorry, I'm hung up on the statement "as a person who hates to drive, park, and shop anywhere." Do you go out? You don't like going out?
Argersinger: I do a lot of walking in my neighborhood.
Greer: Maybe you are not the target market.
Argersinger: Probably not.
Greer: "As a guy who hates to leave his house," that's what I hear.