My column a week ago on Walmart and Amazon by the Numbers 2023 once again proved very popular. I am very pleased to be back this week with part 2, as we dig into the data from the world's two most important retailers.
Gilmore Says.... |
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| Importantly, Walmart also has to pay a dividend from its cash flow- $6.1 billion worth last year - while Amazon does not. |
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I will note that not planned but timely, Walmart released its quarterly earnings this week, and it was something of a blow out.
Revenue was up 5.7% to $161.6 billion, as Walmart benefits two ways from inflation: higher prices for what it sells (especially food), and customers spending more of their dollars on the basics given rising costs.
Ecommerce sales were up 24%, though the actual sales number was not included as usual. Amazon's on-line saled were up just 4% in Q2.
To first put the numbers from both of my columns in perspective, let's first look at the rise of US ecommerce. According to the Commerce Dept., ecommerce sales were about 15% of total retail sales last year, up from about 9.9% in 2018 - but those total retail numbers include sales of cars, gas stations, restaurants and a few other categories that are not really relevant for comparison.
So, we run the numbers based on the same formula we used in part 1 of this series to analyze Walmart's share of US retail, for which we take total retail and subtract out those non-relevant categories . Using that formula, ecommerce sales were a much higher 21.1% of total US retail sales in 2022, up almost two percentage point from 19.3% in 2021, as shown in the graphic below. Of course, that share is much higher in some product categories, such as electronics and apparel.
The pandemic was very good for ecommerce, as seen in the big jump in 2020.
One quick note on Walmart. Last year it grew its US store sales by $27 billion - the size of a major retailer on its own.
Switching gears, Amazon for years received much criticism for its consistent failure to really make any money despite the rapid revenue growth, but that started to change in 2016 and really jumped in 2018, as can be seen in the chart below. Net income for 2021 was 32.1 billion, but somehow last year Amazon lost $5.8 billion.
Walmart, by comparison, had profits of $11.6 billion last fiscal year, down 14.6% versus fiscal 2021 even with the big jump in US sales. Walmart's net income was only 1.9% of sales, while Amazon had a loss, as our two great retailers can't make any money.
During all the years of no profits, some observers said to look at Amazon's cash flow from operations instead of profits, a view which certainly painted a more favorable picture.
Operating cash flow as a percent of revenue has generally been much higher at Amazon than at Walmart for many years - and was more than two times so in 2022, as shown in the chart below.
But there is operating cash flow and then what is called "free cash flow," or operating cash flow minus capital expenditures, and here the story is also interesting.
Amazon had an $46.7 billion operating cash flow in 2022 and had CapEx of about $63.6 billion, up from $61.0 billion in 2021. So that means CapEx was almost $17 billion more than operating cash flow. Lots of fulfillment centers still being built.
Walmart, on the other hand, had CapEx of about $16.9 billion - up from from $13.1 billion in 2021. With $29.1 billion in operating cash flow, that means CapEx of about 58% of OCF, though with Walmart now generating far less OCF than its rival. (Note: as a proxy for official CapEx, I am using spending on real estate, equipment and technology by Amazon).
Importantly, Walmart also has to pay a dividend from its cash flow- $6.1 billion worth last year - while Amazon does not. So Amazon had negative free cash flow last year. With Walmart if you subtract the dividend after also subtracting CapEx from OCF leaves $6.1 billion of cash flow, way down from $19 billion in 2020.
The dividend factor is huge and a giant advantage for Amazon while it lasts.
I have lots more, but I am out of space. Hope you have enjoyed this look at the numbers.
Any reaction to these numbers from Amazon and Walmart? Any other data you would like to see? Let us know your thoughts at the Feedback button or section below.
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