Lending Association

Walmart outpaces Amazon in record-breaking year

For another year, Walmart, the world’s biggest bricks-and-mortar retailer (though with growing online operations), has again bested Amazon in the vital US retailing sector.

Walmart not only revealed record revenue, earnings, and online sales (over US$100 billion globally in 2023), which justified its decision to split its shares into three from next week (Monday, February 26), but it also maintained its sales gap over Amazon.

The split was explained as a way of encouraging its staff (called Associates) to take up shares as part of their bonus compensation plans because at levels above $US160 each, the company found people were not interested. The shares had become too expensive because the company had become too successful.

The split will increase the retail giant’s outstanding ordinary shares from 2.7 billion to 8.1 billion. For current shareholders, on Friday (February 23rd), the stock split will be payable after the market close that day.

The last share split was back in 1999, and the latest will be the 10th since the company listed on Wall Street 52 years ago.

On Thursday, Walmart shares closed at $US175.41, down from the record peak on Tuesday of $US181.35 in the wake of the record result. Thursday’s close valued the giant at more than $US472 billion (more than $A700 billion).

(Amazon is worth a lot more – $US1.81 trillion) mostly because of the AWS cloud business.

Apple has had five share splits since listing in 1980- the most recent was a four-for-one division in 2020. It has increased the value of the shares by making them more attractive to smaller investors. Its market value at the time of the split was $US2.1 trillion; it is now almost $US3 trillion.

The split wasn’t responsible for that – sales of its products and services helped, plus there was the assistance of the tens of billions of dollars in buybacks it conducts each year.

Walmart, though not a tech favorite, has long been considered by many investors as a stranded, old-line stock.

And yet in the past year or so, it has got new life – the shares are up 14% in the past year or so – it’s not Nvidia et al., but it has cemented itself as America’s biggest retailer and beaten off Amazon with ease.

But if you had listened to the same greedy – and frankly ignorant – analysts, fund managers, economists, and other ‘experts’, Walmart was supposed to have been run over by the growth of Amazon and other online retailers – especially in the pandemic.

Then the start of the inflationary post-pandemic rise in inflation, and then the surge after the Russian assault on Ukraine, was supposed to have whacked bricks-and-mortar outlets even harder, leaving them with too much unsold stock and too few customers.

That did happen for a while – the best part of a year. But they survived, especially Walmart as it adapted to the higher inflation, cut costs, found new ways of overcoming the dislocation caused by the pandemic – both through its supply chain and its selling channels.

In fact, of all America’s myriad retailers, Walmart was the only one to have survived – all others were damaged to some degree by the combination of the pandemic and the surge in inflation and then the tightening of monetary policy by the Fed.

In its 2023-24 year to January (a month later than Amazon’s December balance), Walmart lifted its sales in its “US Walmart segment” by more than 5% to $US448 billion.

For 2023, Amazon reported a 12% rise in total sales in North America (excluding AWS) to $353 billion.

Amazon’s total sales for the year (including AWS with $US90.8 billion) were more than $US574 billion. Amazon also included $US49.9 billion in ad sales, well ahead of Walmart’s nascent business with $US3.4 billion last year.

Net out the near $US141 billion from advertising and AWS, and you get around $US433 million in comparable sales to those of Walmart – which means it still sells around 50% (or over $US215 billion a year) more than Amazon.

And in the final quarter (when the Black Friday and other sales promotions occur), Walmart’s US business sold $117 billion, and Amazon’s North American just under $106 billion. Both were record figures.

And this growth, especially by Walmart, is also why all those forecasts about how there would be a recession and a slide in employment and misery for retailers ended up being junk commentary.

US retail sales grew 3.2% over 2023, according to the data in December’s figures from the US Census Bureau released last month. Both giants did better than that.

Walmart also announced it’s opening or expanding 150 stores over the next five years, which is a move away from its big online push since the pandemic to better compete with Amazon.

Walmart already has 4,600 stores across the US and 600 Sam’s Club (a competitor for Costco) which is adding 60 new outlets over the same time.

Amazon spent much of 2022 and early 2023 slashing staff, closing warehouses and distribution centers, and reducing costs.

Walmart hunkered down but spent billions on store revamps, on its click-and-collect business in the US especially and lifting hourly and other wages (Amazon also paid staff more).
Walmart has made sure consumers (especially in the US) understand that it is still the store of the future, combining online with in-store shopping.

Amazon’s attempts at bricks-and-mortar retailing have largely failed, except for WholeFoods, the upmarket grocery and fresh food chain.

And soon, in the next couple of years, Walmart and other bricks-and-mortar retailers that have survived the Amazon years, will find themselves in an even sweeter spot.

The huge overbuild in US retailing space is over according to a recent report from Cushman & Wakefield, a global real estate services firm.

While plenty of retailers have been hurt (none more than department stores like Macy’s, which is a ghost of itself), the survivors find themselves with real estate and networks that will make themselves stronger in coming years.

Last year just 8 million square feet of new retail space was constructed in the US— that’s down from about 20 million in 2019.

But even those numbers are small compared to a decade ago. From 2008-2014, new construction averaged nearly 40.8 million square feet per year, according to the Cushman report.

Whatever the reason (the best explanation is that online and bricks and mortar have reached a rough equilibrium and as Walmart (and rivals like Target and Best Buy) are showing that having a physical store with a well-honed click-and-collect operation can get bigger than expected sales growth overall.