Net sales increased 31% to $30.4 billion in the second quarter, compared with $23.2 billion in second quarter 2015. The favorable impact from year-over-year changes in foreign exchange rates throughout the quarter on net sales was $166 million.
Operating income was $1.3 billion in the second quarter, compared with $464 million in second quarter 2015.
Net income was $857 million in the second quarter, or $1.78 per diluted share, compared with $92 million, or $0.19 per diluted share, in second quarter 2015.No matter what, a great result... especially given Amazon's keen bias toward investing in the future. But before you sell all your Macy's, Walmart, and Kroger stock, recognize that a big portion of this extraordinary abundance is due to Amazon Web Services, not online retailing. According to Geekwire:
Amazon Web Services posted record revenue and operating income in the second quarter ended June 30, as the world’s largest cloud-services organization continued to buoy the broader company. AWS accounted for the largest share yet of Amazon’s net sales: 9.5 percent. It also accounted for fully 56 percent of Amazon’s operating income.Still, Amazon's domestic online retail sales improved a not-shabby 30 percent. Sales outside the US were up 28 percent for the quarter. This was before July's Prime Day.
Walmart will not report its second quarter until mid-August, but to give you a sense of Amazon oranges to Walmart apricots, here is Walmart's first quarter results:
- Total revenue was $115.9 billion. On a constant currency basis, total revenue was $119.4 billion, an increase of 4.0%.
- Walmart U.S. delivered positive comp sales for the seventh consecutive quarter, up 1.0%, driven by the sixth consecutive quarter of positive traffic, up 1.5%.
- Net sales at Walmart International reached $28.1 billion. Excluding currency, net sales were $31.6 billion, an increase of 4.3%, and operating income increased 22%. Globally, on a constant currency basis, e-commerce sales and GMV increased 7.0% and 7.5%, respectively.
- Operating cash flow was $6.2 billion and free cash flow was $4.0 billion, both higher than last year due to solid operating performance and improved working capital management.
- Consolidated operating income declined 7.1%, as planned investments in people and technology, as well as currency exchange rate fluctuations impacted results. Excluding currency, operating income decreased by 4.6%.
As a matter of retail sales, Walmart remains the much larger entity: it's non-domestic sales alone nearly equal Amazon's global aggregate. Every year since 2009 Walmart has had net sales of over $400 billion (chart above). The 2015 total was $482.2. But the smaller, newer Amazon is growing much faster... and the bright young thing often claims our attention as more mature looks and behavior does not. Hence the market value of Amazon exceeds that of Walmart.
Another leading indicator of supply chain rocking-and-rolling: UPS second-quarter results highlight the current over-capacity in freight and clamoring demand for delivery.
United Parcel Service Inc. reported lower than expected earnings in its Supply Chain and Freight segment Friday. Revenue increased by more than 13% to $2.5 billion in part from the acquisition of Coyote Logistics, but profit dropped more than 7% from $207 million to $192 million in what executives said is a soft freight shipping market...Meanwhile, on the delivery-side of the business, Reuters reports:
UPS revenue at its core U.S. domestic package business rose 2.4 percent on the year to just over $9 billion. Lower fuel costs and technology improvements helped UPS cut costs by 0.2 percent per package in the second quarter. [The UPS international package segment grew 11 percent (PJP)] Like other package delivery companies, UPS has benefited from a rapid rise in ecommerce, but has also struggled to bring down the extra costs associated with making stops at individual residential addresses rather than at businesses.Especially on the domestic side, some of the UPS good news is an echo of Amazon's good news.
According to Fortune:
Amazon spent $3.36 billion on shipping costs over the quarter, up 44% from the same quarter last year. The company has been looking to take over parts of the shipping process over the past year, leasing trucks, planes, and even considering drones to build its own shipping network. If Amazon is able to build this shipping network, it could rely less on the multinational shipping giants, such as UPS and FedEx, and potentially avoid some of the costs provided by these companies.Given the kind of growth that Amazon seeks -- even needs -- I expect shipping costs will continue to expand regardless of internal options deployed over the next three-to-five years (or more). Building up internal shipping capacity could actually magnify these costs in the near term.
Which in a potentially paradoxical manner, unveils a fundamental strength of that once sexy, still handsome player from Bentonville. The Walmart supply chain is already forward deployed. Instead of delivery, it can focus on pick-up... preserving its advantage in less expensive distribution modalities and shifting the extraordinary expense of last mile fulfillment to consumers themselves.
In the right hands with the right concepts, this is not just a cost (price) advantage, but could also become a speed, customization, and cross-selling advantage.
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