By estimating the value of third-party products bought at Amazon.Com (NASDAQ:AMZN), the Times recently claimed the Seattle Cloud Czar had taken the crown, at a sales run rate of $610 billion.
Walmart’s sales for the 12 months ending in July were $566 billion.
But Amazon didn’t take ownership of all its inventory. More than half was sold by third parties, with Amazon just handling deliveries and back-office functions.
Net product sales for the first half of 2021 were $115 billion. The real Amazon story is how service sales have nearly caught up and could surpass product revenue by 2022.
The real story of Walmart is it’s becoming increasingly like Amazon. It doesn’t have a cloud, but it has had an active third-party marketplace for years. Now Walmart has launched a delivery service, not just for those businesses, but other brick-and-mortar retailers.
WMT Stock and Amazon
There is no longer a difference between commerce and e-commerce; it’s all just retail. Whether you break bulk in a warehouse or a storefront makes no difference. Whether the customer takes their merchandise to a parking lot or picks it up from their stoop makes no difference.
Walmart CEO Doug McMillon has seen Amazon as his “great white whale” since taking the top job in Bentonville back in 2014. McMillon, now 54, is a Walmart lifer who began working at the chain part-time while still in high school.
Walmart Marketplace was launched in 2009. Walmart began integrating its online marketplace with Shopify (NASDAQ:SHOP) last year. Shopify claims sales through its marketplace came to $172 billion last year. Walmart is even going after Amazon’s lead in ad-tech, through an alliance with The Trade Desk (NYSE:TTD).
What all this means, other than that the Times was wrong, is that there is unaccounted value inside WMT stock and potentially untapped profitability.
Who’s Really Gaining?
WMT stock opened trades today at around $146. That’s a price-to-earnings ratio of nearly 42. The 55 cent-per-share quarterly dividend, generous when the stock was cheaper, now yields just 1.46%.
McMillon’s focus on Amazon has had a cost. Long-time rival Target (NYSE:TGT) has been catching up to it. Over the last two years, Target stock is up 142%, nearly four times the gain of Walmart. Costco Wholesale (NASDAQ:COST) has scored more than twice its gains. Even Kroger (NYSE:KR) has done better.
As the country opens back up, Walmart is also giving raises, bonuses, and college tuition to maintain its 1.6 million member workforce. After fighting against a $15 per-hour minimum wage for years, its reputation among workers is now behind its performance.
The Bottom Line on WMT Stock
Walmart’s results are dramatically understated. Just as with Amazon, it’s not taking inventory risk with its marketplace. Its delivery service is also being handled through third parties.
If these were recorded as sales, the way the Times does with Amazon, Walmart would still be well ahead. But that doesn’t matter.
What matters is whether McMillon can pull together his online operations into a cohesive whole. Walmart is already the second-largest online retailer. The stock’s fate depends on his ability to narrow that gap, starting with the coming Christmas season.
On the date of publication, Dana Blankenhorn held long positions in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at firstname.lastname@example.org or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.