(FinancialPress)—Instinet analysts view Amazon.com Inc.‘s (AMZN) apparel retail business as a huge blockbuster – it could potentially already be positioned as the largest company in the sector, and could still reach sales between $45 billion and $85 billion by the end of the 2020 fiscal year.
A team of said firms‘ analysts led by Simeon Siegel estimate sales for apparel and accessories overall at a $1 trillion mark, with above average online penetration and a “leading gross margin“ when compared to other categories.
In a note to investors, Instinet wrote: “We believe Amazon AMZN, -0.36% has the largest [total available market] TAM (ever), doesn’t carry socio-economic retailing stigmas, can stock a limitless number of goods on its virtual shelf and knows customers better than they do.“ It continued: “Amazon’s path to book dominance provides a potential road map for apparel success, with its fiscal 2007 media progress sharing similarities to its fiscal 2017 apparel achievements.“
The firm observes that Wal-Mart Stores Inc.‘s (WMT) apparel sales amount to approximately 8% of total U.S. sales, and about 10.5% of the country‘s non-grocery sales. Rival Target Corp.‘s (TGT) apparel sales add up to close to 20% of their net sales. Meanwhile, Amazon‘s fiscal 2016 closed with gross apparel merchandise sales to the tune of $18 to $36 billion – a 10% to 20% range of their net sales – , thus “enveloping Walmart US and Macy’s apparel sales of $25 billion and $22 billion.”
The online retail giant is also becoming more prevalent as a resource to well-established brands, with the likes of Nike Inc. (NKE) beginning to partner up with it.
On the topic, the note stated that “the fact that Nike, one of the most valuable brands in the world, was the most recent to announce a partnership, shows the want, need or somewhere in between to see through Amazon, as the sneaker behemoth implicitly acknowledges they’d be better off being a part of the Amazon machine than simply watching others sell their goods for them in an uncontrolled manner.“
Amazon shares got a buy rating from Instinet, with a price target of $1,360 each.