Consumers are becoming more and more socially conscious and want the goods and services they use to measure up. In truth, it doesn't take much. A simple action that costs a company very little or nothing at all can make a real difference in the mind of the consumer.
Often, the added expenses a company incurs from paying workers a little more, monitoring resource sourcing, or going the extra ethical mile are small downsides when compared with the huge potential upside. And where there's company upside, there's investor upside.
Today, let's dive deep into Amazon.com (NAS: AMZN) and evaluate its socially conscious policies and practices while taking a hard look at the numbers. We'll analyze the company in terms of its performance as a business, an investment, and a socially conscious enterprise.
Eco-friendly and frustration-free
Amazon is, frankly, more socially conscious than I thought it would be. A visit to the company's website reveals an extensive amount of virtual space devoted to its efforts. The first section is titled "Amazon's Innovations for Our Planet" and lists several significant green initiatives, including:
"Frustration-Free Packaging" without the "clamshell" cases and twist ties we're so used to dealing with in retail packaging.
"Environmentally Friendly Packaging" that uses 43% recovered-fiber content, which is then itself 100% recyclable.
"The Kaizen Program," a companywide initiative that encourages Amazon employees to analyze their work processes to, as Amazon puts it on its website, "identify waste and design alternative solutions that are more energy efficient."
The second section is called "Amazon in the Community" and lays out the ways in which the company affects the worldwide community, including:
An extensive list of disaster-relief programs the company participates in, along with a breakout of the tens of millions of dollars contributed to them since 2001.
A list of the grants the company has made to nonprofit author and publisher groups for the purpose of supporting the writing community.
Technology tools for nonprofits that, again as Amazon puts it on its site, "offer simple and effective ways for nonprofit organizations to raise awareness, collect needed supplies, and solicit funds."
Also on the company's website is link to a study demonstrating why online shopping generates less CO2 than traditional bricks-and-mortar shopping. Amazon CEO Jeff Bezos is an undeniably progressive thinker when it comes to social responsibility; now let's see how that translates into Amazon's performance as a business.
Be it ever so humble, there's no place like Amazon
Amazon.com began rather humbly in 1994 as a place to buy books and music online. It's since grown into one of the largest retail operations in the world, selling an extensive array of items. And of late, with the company's brilliant line of Kindle readers and its video-streaming service, Amazon has moved boldly and successfully into the e-book, e-music, and e-movie world.
Since Amazon is such a one-of-a-kind company, it's tough to find direct competitors, but here's a quick look at how the company is doing against its closest peers:
1. Barnes & Noble (NYS: BKS) has a fairly robust online-retail service that has gone beyond basic books and music, but nothing close to Amazon's. And with its lineup of Nook readers, it's trying to move into the e-content space as well, but so far it's lagging Amazon there as well, and it shows:
Year-over-year quarterly revenue growth for Amazon is 34.6%, but only 5% for B&N.
YOY quarterly earnings for Amazon were down 57.5%, because the company took a loss on its Kindles to get them into people's hands. B&N was down 14.1% on this metric, but unlike Amazon, it's because the business is truly in trouble.
2. Apple (NAS: AAPL) competes with Amazon in the tablet/e-reader/e-content space. Apple's iPads are market leaders, but Amazon is coming on strong with its formidable lineup of Kindles. Amazon might also find itself competing soon with Apple on video streaming, as Apple puts more money and effort into Apple TV.
YOY quarterly revenue growth for Apple is an astonishing 73.3%, but Amazon's 34.6% is astonishing enough in its own right.
Apple's YOY quarterly earnings were up 117.6%, versus Amazon's 57.5% downturn. Again, Amazon's decision to take a loss right now to grow its Kindle business is a solid strategy. And Apple can charge more for its iPads than Amazon can for its Kindles, at least for now, hence Apple's staggering revenue and earnings growth.
3. Wal-Mart (NYS: WMT) competes with Amazon as a bricks-and-mortar behemoth retailer that's also trying to make a go of online retailing with a product spread as wide as Amazon's. But a trip out to the Wal-Mart website, and an attempt to place an order, shows that the company just isn't there yet. By the numbers:
Wal-Mart grew its YOY quarterly revenue by just 5.9%, versus Amazon's 34.6%.
Wal-Mart's YOY quarterly earnings were, like Amazon's, also down, but by 14.7%. Again, at least Amazon is executing a long-term strategy for growth. Wal-Mart isn't.
Making money and a making a difference since 1994
Bezos thinks differently while also thinking ahead -- doing what he needs to do to keep his business growing, innovative, and competitive. And while Amazon might be getting beaten here and there in different segments, overall I believe the company is marching inevitably toward market-space dominance, a market space it is essentially defining.
The stock trades for $195 per share. The P/E of 142 is high, but you're getting a lot of company for the multiple -- a one-of-a-kind, successful business with a true sense of social responsibility. Are any companies perfect in this regard? No, but, to paraphrase Voltaire, it's important to never let the quest for the perfect drive out the good.
If you're looking for similarly forward-thinking, profitable investments like Amazon, read about the stock we're calling "The Motley Fool's Top Stock for 2012." Get it while the stock is still hot -- it's free.
At the time thisarticle was published Fool contributorJohn Grgurichquotes Voltaire whenever he gets the chance, though his German shepherd prefers Nietzsche. Neither owns shares of any of the companies mentioned in this column Follow John's dispatches from the bloody front lines of capitalism on Twitter, @TMFGrgurich. The Motley Fool owns shares of Amazon.com, Apple, and Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Amazon.com, Wal-Mart Stores, and Apple, creating a diagonal call position in Wal-Mart Stores, writing puts on Barnes & Noble, and creating a bull call spread position in Apple. The Motley Fool has a scintillating disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.