Remember when the mall was the place to be? These days -- even prior to the pandemic -- the place to be is often in your armchair, at least when it comes to shopping. By 2024, 84% of the U.S. population will buy online, according to Statista. That's why, when it comes to no-brainer retail stocks, I specifically look for strong e-commerce players.
Here, I've chosen three that performed well during the worst of the coronavirus crisis. But that performance isn't over. These companies are profitable -- and growing. Let's take a closer look at each.
Image source: Getty Images.
Amazon
Amazon (AMZN 2.79%) recently held its biggest annual sales event: Prime Day. The company said members of the Prime subscription program shopped more than ever this time around. They purchased more than 250 million items globally. Sales topped $11 billion, CNBC reported, citing Adobe Analytics. That's about 6% higher than last year's event.
But Amazon's strength goes well beyond Prime Day. Revenue soared last year as people opted for e-commerce over traditional shopping. But even in the first quarter of this year, when coronavirus cases declined and vaccinations increased, Amazon posted big gains. The company's first-quarter sales climbed 44% to more than $108 billion. And profit more than tripled to $8.1 billion.
All of this is great. But Amazon has another huge profit driver. And that's Amazon Web Services (AWS). The cloud computing business's operating income makes up 47% of Amazon's total operating income. In the most recent quarter, AWS generated more than $13 billion in sales, up 32% year over year.
As a $1.8 trillion stock, we can't expect Amazon to quickly surge like a stock with a lower market value. But over time, this e-commerce and technology powerhouse has everything it takes to deliver revenue, profit, and share gains.
Etsy
The pandemic offered Etsy (ETSY 0.01%), an online marketplace for handcrafted goods, a huge lift. And momentum continued into the first quarter of this year. The company's gross merchandise sales (GMS) climbed more than 132% to $3.1 billion year over year.
However, Etsy disappointed investors when it predicted a weaker second quarter. For example, the company forecasted GMS growth of 5% to 15%. It's normal to see a slowdown after last year's tremendous gains. An important point to note is Etsy's success in keeping buyers coming back. In the first quarter, habitual buyers increased 205% year over year -- that's the biggest gain ever for those customers.
Another important point is Etsy's investment in growth. The company recently completed acquisitions that will offer it expansion in two key areas: Apparel and the Brazilian market. Fashion is the largest e-commerce segment globally, according to Statista. As for Brazil, e-commerce is forecast to grow at a 9.3% compound annual growth rate through 2023, a J.P. Morgan report shows. Etsy recently acquired Depop, a worldwide fashion resale marketplace. And the company bought Elo7, a Brazilian marketplace for handcrafted goods.
Etsy shares are little changed this year after last year's 300% increase. But the loyalty of its shoppers and expansion in key areas should drive more share gains over the long term.
Image source: Getty Images.
Chewy
It's time for bargain shopping -- and that means adding Chewy (CHWY 4.24%) to your list. Shares of the online retailer of pet supplies have slipped more than 12% this year. That means the stock is only trading at 4.2 times sales -- down from more than seven times sales earlier in the year. And Chewy recently became profitable on a quarterly basis.
CHWY Net Income (Quarterly) data by YCharts
So, why are the shares falling? Investors may be worried that shoppers will return to physical stores as the pandemic eases. And that could lead to lost sales for Chewy. But I don't expect that to happen -- at least not enough to hurt this retailer. First, as mentioned above, e-commerce is here to stay.
Now, specifically speaking of Chewy, active customers and their spending are positive signs for the future. Over the past two years, Chewy has grown its active customers by 8.4 million -- that's a 75% increase. And as customers stay with Chewy, they spend more -- from more than $400 in their second year to $900 in their ninth year. So, these new active customers are in their early stages of spending at Chewy.
The company has also expanded in a key area: E-health for pets. Chewy now offers free virtual vet visits for customers who use Autoship -- a service that allows you to schedule automatic deliveries of your favorite products. The company plans on eventually rolling out Connect with a Vet to all users and monetizing the service. Chewy has said that healthcare and services represent a $30 billion opportunity. So, the 47% revenue growth we saw last year may just be the beginning of the Chewy story.
