Retailer Walmart (WMT, Financial) released its fourth-quarter earnings on Feb. 19, posting comparable sales growth of 4.2%. Total revenue grew by 1.9% to $138.8 billion, but the one metric that should have Amazon Inc. (AMZN) concerned is that e-commerce sales grew by 43%.
Amazon has been able to leverage Walmart’s lack of e-commerce sales over the years, turning itself into the world’s largest e-retailer. Consequently, Walmart has been working to increase its online presence and attract customers away from Amazon.
The company’s guidance predicts its internet sales will grow by 35% in 2019. Amazon’s growth slowed to 20% in the fourth quarter. Year-over-year growth, at the level that Amazon experienced in the past, will be hard to achieve due to the company’s already large market share.
Retail sales at Walmart will continue to eat away at Amazon’s retail profits, but Amazon’s profits aren’t derived from just the company’s retail segment. Its Amazon Web Services brought in $7.43 in revenue in the last quarter, rising 45%. Other revenue grew to $3.39 billion, up 95% on the quarter.
“Other” revenue consists primarily of advertising, and the segment has grown to the point where Amazon is the third-largest digital advertiser behind Google (GOOGL, Financial) and Facebook (FB, Financial). Amazon’s advertising segment is expected to claim an additional 2% of the market share in 2019, rising to 8.8%. Google’s market share is expected to drop by 1%, with Amazon taking much of the lost share.
The primary concern for Amazon is that Walmart’s grocery stores continue to grow. Amazon purchased Whole Foods and offers some foods through its online portal. However, the company is expected to continue having trouble competing with Sam’s Club, which experienced 3.3% same-store sales growth and 21% growth in e-commerce sales. Whole Foods posted a “small operating loss,” but Amazon has introduced some of the company’s products to its Amazon website and is experimenting with increasing business-to-business sales.Â
Amazon’s market share and position as the leader of online retail sales, along with a robust cloud computing segment, remain safe. However, Walmart continues to impress with high sales growth as it improves the online experience for consumers.
Disclosure: The author has no stake in the listed equities.
