Amazon is growing at a great rate, but Walmart is still three times as big, and its online sales are growing even faster than Amazon's. Surely the larger retailer will be able to catch up, right?
Alas, that's not what my back of the envelope calculations suggest.
But first, today's news. According to today's press release, Amazon had a great first quarter:
Net sales increased 43% to $51.0 billion in the first quarter, compared with $35.7 billion in first quarter 2017. Excluding the $1.6 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 39% compared with first quarter 2017.
Operating income increased 92% to $1.9 billion in the first quarter, compared with operating income of $1.0 billion in first quarter 2017.
Net income was $1.6 billion in the first quarter, or $3.27 per diluted share, compared with net income of $724 million, or $1.48 per diluted share, in first quarter 2017.
It is hard to tell what that means in the absence of context, so let's take a moment and compare Amazon's growth to Walmart's.
Walmart has not reported their revenue for the first quarter, so in order to compare the two we have to go back to their end of year financial reports (both companies have fiscal years that follow the calendar year).
Net sales increased 31% to $177.9 billion, compared with $136.0 billion in 2016. Excluding the $210 million favorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales increased 31% compared with 2016.
Operating income decreased 2% to $4.1 billion, compared with operating income of $4.2 billion in 2016.
Net income was $3.0 billion, or $6.15 per diluted share, compared with net income of $2.4 billion, or $4.90 per diluted share, in 2016.
And here's Walmart:
Total revenue was $500.3 billion, an increase of $14.5 billion, or 3.0%. Excluding currency, total revenue was $500.9 billion, an increase of $15.1 billion, or 3.1%.
eCommerce sales and GMV at Walmart U.S. increased 44% and 47%, respectively.
Consolidated operating income was $20.4 billion, a decrease of 10.2%. Excluding the impact of discrete charges detailed in this press release, operating income would have been relatively flat.
The company generated $28.3 billion in operating cash flow and returned $14.4 billion to shareholders through dividends and share repurchases.
So while Amazon is growing at three times the rate of Walmart (as measured in dollars, not percentages), the latter is still three times as big.
And more importantly, Walmart is showing signs it is starting to catch up to Amazon in the one area that matters most - online sales. Walmart's ecommerce revenues increased 44% to Amazon's 31%.
Of course, Walmart's ecommerce sales year totaled $11.5 billion. That is chump change compared to Amazon, and the growth rate is not even close to being enough to letting Walmart match Amazon's growth.
The thing is, if Amazon can grow 31% each year for the next 4 years, Amazon will be about the same size as Walmart. Walmart will also be about the same size it is now, only with an additional $50 billion a year in ecommerce sales.
To be completely honest I was hoping for another result when I started writing this post. I want to show Walmart was going to catch up in the near future. The figures do not support that hypothesis, however.
Walmart took way to long to figure out online sales, and it's going to hurt them in the not too distant future. Just about the only way that Walmart can hold of Amazon now is to hope for one or more hail Mary passes, including:
- Jeff Bezos dropping dead, and being replaced by a doofus
- people suddenly deciding they don't want to shop online any more
- regulatory action against Amazon
The second possibility is more likely than the others, but let's not kid ourselves: it's incredibly unlikely, at best.
image by JeepersMedia