Amazon.com’s operating margin rose to 11.2% in its most recent fiscal year, up from 5.3% five years prior, according to a review of margin trends across major U.S. retailers. The company’s gross margin expanded from 42.0% to 50.3% over the same period, with operating margin gains accelerating by 0.4 percentage points last year compared with 4.4 points the prior year. Analysts estimate Amazon’s operating margin ceiling at roughly 13–15%, implying an additional 2–4 points of potential expansion from current levels.
Off-price retailers TJX Companies and Ross Stores continue to show room for margin improvement. TJX’s gross margin increased from 28.5% to 31.0%, while its operating margin rose from 9.8% to 11.9%. Ross Stores reported a 32.6% gross margin and an 11.9% operating margin. Industry benchmarks for off-price models suggest a historical ceiling of about 14%, leaving both chains with roughly 2–3 points of additional operating margin expansion possible.
In contrast, some retailers have already approached or passed peak profitability. O’Reilly Automotive and AutoZone, both operating in the auto parts sector, saw operating margins compress to 19.3% and 19.1% respectively, despite gross margins of 51.6% and 52.6%. Analysts cite rising selling, general and administrative expenses, labor costs and distribution pressures as key constraints. Home Depot and Lowe’s similarly peaked in fiscal 2022–2023, with operating margins now stabilized around 12.3% and 11.0%, down from prior peaks of 15.2% and 14.0%. The new normal for both is expected to settle between 11% and 13%, representing a permanent reduction of 2–3 points from earlier highs.
Costco’s operating model remains tightly controlled, with gross margins at 12.8% and operating margins at 3.8%, both largely unchanged over five years. Management has indicated a ceiling of 4–4.5% for operating margins, enforced through membership fee adjustments rather than margin expansion. Kroger’s operating margin currently stands at 3.2%, with a projected ceiling near 4%, leaving limited upside. Ulta Beauty’s operating margin has declined to 12.4%, below its previously estimated ceiling of 15%, suggesting it has passed its peak profitability phase.
