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    Retailers Stumble Adjusting to More Selective Shoppers

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    In earnings reports this week, companies showed it has been a struggle to adapt to a consumer mind-set that is vastly different from what it was during much of the pandemic.This hasn’t been the year retailers planned for.After two years of navigating the pandemic — which brought record online sales and shoppers willing to buy all manners of items, to the point that the global supply chain became strained — executives knew a new normal would take shape.Sales might slow, the thinking went, but people would still want TVs, fashionable dresses and throw pillows. So, with supply chain issues in mind, companies stocked up. But this spring it became clear that those items weren’t selling quickly enough. As people watched the prices of food and gas rise, their spending became more selective, leaving retailers with shelves of inventory they couldn’t get rid of.The magnitude of the miscalculation was crystallized this week in a batch of quarterly earnings from major retailers like Walmart and Target, which showed a mix of declining sales of discretionary goods and lower profits. A number revised their guidance, lowering expectations for both sales and profits for the rest of the year. A glut of inventory weighed on companies’ balance sheets: Inventory at Walmart rose 25 percent from this time last year. At Target, it increased 36 percent. And Kohl’s said inventory was up 48 percent. “Since our last earnings call in May, a weakening environment, high inflation and dampened consumer spending are having broad implications across much of retail, especially in discretionary categories like apparel,” Michelle Gass, the chief executive of Kohl’s, said on a call with analysts. “Given our penetration in these categories, this is disproportionately impacting Kohl’s.”Taken together, the results show that the robust sales retailers grew accustomed to during the course of the pandemic have ceased — and the consumer landscape that awaits may be more austere than what they prepared for. (There were exceptions. Home Depot, for instance, said sales were still strong, driven by home improvement projects.) On earnings calls, executives said lower- to middle-income consumers were the most hesitant to spend. Stores are responding by pushing more discounts and highlighting private-label brand to shoppers, and, in some cases, canceling billions of dollars’ worth of orders with vendors. It remains to be seen which strategies will be most effective.Inflation F.A.Q.Card 1 of 5Inflation F.A.Q.What is inflation? More

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    GM Quarterly Sales Fall Amid Shortage in Computer Chips and Other Parts

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    The auto industry is facing worrying signs all across its horizon, including rising interest rates and fears of a recession.But the biggest problem still seems to be making enough cars.General Motors said Friday that its U.S. deliveries of new vehicles in the second quarter declined 15 percent from a year earlier, while Toyota Motor reported a drop of 23 percent in U.S. sales. The obstacle continues to be an inability to get enough computer chips to finish vehicles.For now, at least, consumers are still eager to buy. Manufacturers are selling practically every car or truck they make and have seen no sign that inventory is building up on dealer lots, even as new-vehicle prices have climbed to record highs.“That tells me that the vehicles are still moving, and that’s probably the No. 1 thing that I’m looking at,” Paul Jacobson, the chief financial officer of General Motors, told financial analysts at a conference last month.G.M. sold 582,401 cars and light trucks from April to June, down from 688,236 a year earlier. Toyota sold 531,105, down from 688,813. Honda said its U.S. sales fell 51 percent to 239,789 vehicles.G.M. noted that its factories were holding 95,000 vehicles manufactured without certain electric components that were in short supply because of the chip shortage.At times automakers have dropped some features from vehicles because they or their suppliers didn’t have the chips they require. Honda has shipped vehicles without advanced parking sensors, and Volkswagen has produced models that don’t have blind-spot monitors that the vehicles would normally include.G.M. plans to install the missing parts in its vehicles when they become available and then make deliveries to dealers.If those vehicles had been shipped, its second-quarter sales would probably have been nearly level with its year-ago total.“We will work with our suppliers and manufacturing and logistics teams to deliver all the units held at our plants as quickly as possible,” said Steve Carlisle, executive vice president and president, North America.Understand Inflation and How It Impacts YouInflation 101: What’s driving inflation in the United States? What can slow the rapid price gains? Here’s what to know.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Greedflation: Some experts say that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Changing Behaviors: From driving fewer miles to downgrading vacations, Americans are making changes to their spending because of inflation. Here’s how five households are coping.In a filing with the Securities and Exchange Commission, G.M. said the backlog would affect second-quarter net income, which it projected to be $1.6 billion to $1.9 billion. A consensus of analysts’ forecasts compiled by Bloomberg had pointed to earnings of $2.4 billion.Because the company expects to ship most or all of the 95,000 partly completed vehicles by the end of the year, it reaffirmed its full-year outlook for net income of $9.6 billion to $11.2 billion.That may be why G.M.’s stock rose on Friday despite the lowered forecast. Its shares ended the day 1.3 percent higher, outpacing the overall market.But that outlook also assumes that demand will hold up as threats to the U.S. economy mount. Consumers are being squeezed by rising prices for gasoline and groceries. The average price paid for new vehicles in May was $47,148, up more than $5,000 from a year earlier, and the average monthly car payment was over $700, more than $100 higher than a year earlier, according to data from Cox Automotive, a market researcher. Since new models are in short supply, consumers are often paying $3,000 or more above sticker prices.And last month, the Federal Reserve increased its benchmark interest rate by three-quarters of a point, in a bid to slow the economy and tamp down inflation, and has indicated that further increases may be necessary. Higher interest rates make home and auto loans more expensive, and the Fed’s move has already resulted in a slight slowdown in housing.Some economists believe the risk of a recession is moderated by the increased savings that most consumers have built up since the coronavirus pandemic started in 2020. Eighty percent of consumers have more money in their checking accounts now than two years ago, Jonathan Smoke, the chief economist of Cox Automotive, told reporters this week on a conference call.“These consumers are able to withstand inflation because they’ve got quite a bit of cushion and their wage growth is strong enough to deal with pricing increases,” he said.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Toyota Topped G.M. in U.S. Car Sales in 2021

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    After struggling to produce cars because of a global computer chip shortage, automakers are trying to move quickly to making electric vehicles.Toyota Motor unseated General Motors as the top-selling automaker in the United States last year, becoming the first manufacturer based outside the country to achieve that feat in the industry’s nearly 120-year history.That milestone underlines the changes shaking automakers, which face strong competition and external forces as they move into electric vehicles. And it came in a tumultuous and strange year in which automakers contended with an accelerating shift to electric vehicles and struggled with profound manufacturing challenges. New car sales have been damped by a severe shortage of computer chips that forced automakers to idle plants even though demand for cars has been incredibly robust.G.M., Ford Motor and Stellantis, the automaker created by the merger of Fiat Chrysler and Peugeot, produced and sold fewer cars than they had hoped to in 2021 because they were hit hard by the chip shortage. Toyota was not hurt as much.In addition to that shortage, the coronavirus pandemic and related supply-chain problems depressed sales while driving up the prices of new and used cars, sometimes to dizzying heights. Auto manufacturers sold just under 15 million new vehicles in 2021, according to estimates by Cox Automotive, which tracks the industry. That is 2.5 percent more than in 2020 but well short of the 17 million vehicles the industry usually sold in a year before the pandemic took hold.G.M. said on Tuesday that its U.S. sales slumped 13 percent in 2021, to 2.2 million trucks and cars. Toyota had access to more chips because it set aside larger stockpiles of parts after an earthquake and tsunami in Japan knocked out production of several key components in 2011. Its 2021 sales rose more than 10 percent, to 2.3 million.“The dominance of the U.S. automakers of the U.S. market is just over,” said Erik Gordon, a business professor at the University of Michigan who follows the auto industry. “Toyota might not beat G.M. again this year, but the fact that they did it is symbolic of how the industry changed. No U.S. automaker can think of themselves as entitled to market share just because they’re American.”Ford is expected to finish third when the company releases sales data on Wednesday.The shortage of chips stems from the beginning of the pandemic, when auto plants around the world closed to prevent the spread of the coronavirus. At the same time, sales of computers and other consumer electronics took off. When automakers resumed production, they found fewer chips available to them.Despite weak new-vehicle sales, automakers and dealers alike have been ringing up hefty profits because they have been able to raise prices.“Sales volumes are down but our margins are up and expenses are down,” said Rick Ricart, whose family owns Ford, Hyundai, Kia and other dealerships around Columbus, Ohio. “We barely had any inventory cost now. Cars arrive on the truck and they’re already sold. They’re gone within 24 to 48 hours.”Automakers are also contending with the transition to electric cars and trucks. Many companies are spending tens of billions of dollars designing battery-powered models and building plants to produce them. They are racing to catch up to Tesla, which sells a large majority of electric vehicles now.But most established automakers are unlikely to gain ground in U.S. electric vehicle sales this year because they are not in a position to produce many tens of thousands of such cars for at least another year or two.And Tesla, which was founded in 2003, is not standing still. After reporting a nearly 90 percent jump in global sales last year, to just shy of one million, the company plans to start mass production at two new factories this year, near Austin, Texas, and Berlin. It has been less affected by the chip shortage because it was able to switch to types of chips that are more readily available.The electric-car maker does not break out sales by country, but Cox Automotive estimated that it sold more than 330,000 in the United States, or roughly as many vehicles as Mercedes-Benz and BMW each sold here.Ford is perhaps the only major automaker that could pose a serious competitive threat to Tesla this year. This spring, Ford plans to start selling an electric version of its F-150 pickup truck, the top-selling vehicle in the United States. The company has taken more than 200,000 reservations for that truck, the F-150 Lightning, and hopes to produce more than 50,000 this year. It is increasing production at a plant near Detroit to build 80,000 in 2023 and up to 150,000 in 2024.“The F-150 is the most important franchise in our company,” Kumar Galhotra, president of Ford’s Americas and international markets group, said in an interview. “The F-150 Lightning shows how serious our commitment is to the E.V. market.”Ford has been selling a popular electric sport-utility vehicle, the Mustang Mach E, for nearly a year. It said Tuesday that it aimed to increase production of the Mach E to 200,000 vehicles a year by 2023.Other automakers are planning to produce relatively modest numbers of electric cars this year because they and their suppliers are still gearing up to build factories and produce batteries and other components. G.M. has set a goal of producing only electric vehicles by 2035, and on Wednesday it will unveil a battery-powered Chevrolet Silverado pickup truck at the Consumer Electronics Show. But the electric Silverado isn’t expected to go into production until 2023.The Coronavirus Pandemic: Key Things to KnowCard 1 of 3The global surge. More

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    Economic and Earnings Concerns Begin to Weigh on Stocks

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    After having few cares about the markets all year, investors are getting nervous as the Fed signals that harsher policies are on the way.Wall Street’s imperviousness to bad news, which enabled stocks to double in value from their pandemic panic lows, may be starting to crack.When the Federal Reserve signaled in September that it would soon tighten monetary policy by curtailing asset purchases, the stock market took it well, but not for long. The S&P 500 rose modestly for a few days before reversing course, pushing the index more than 5 percent below the high it set earlier in the month, which amounted to its biggest drop for the year.Despite that setback, the market managed to eke out a 0.2 percent gain for the third quarter.A stingier Fed is not the market’s only concern. Inflation, dismissed until recently by the Fed as a transitory artifact of the pandemic, is coming to be seen as more persistent as the prices of goods, services and labor increase. What is being acknowledged as transitory, though, is the jolt to economic growth and corporate profits provided by several trillion dollars of added spending by Congress.With a number of threats to prosperity becoming harder to ignore, many investment advisers have become less enthusiastic about stocks. They are revising return expectations down and recommending exposure only to narrow niches.“We’re not bullish today at all,” said David Giroux, head of investment strategy at T. Rowe Price. “What really drives the market is earnings growth,” he said. “We can’t repeat some of the things we’ve done this year. Earnings growth may slow in ’22, maybe dramatically.”After being a colossal boon for the economy, fiscal stimulus — in the form of enormous federal spending — may now prove to be three problems for the stock market in one. Government expenditure focused on the pandemic that boosted growth is ebbing. There is a broad consensus that taxes will rise soon to help pay for that spending. And, because many people took direct stimulus payments and invested them in the stock market, stocks ran up faster than they would otherwise.The positive effects of so much stimulus may have run their course, as domestic stock funds tracked by Morningstar lost 0.6 percent in the third quarter, with portfolios that focus on financial services among the few clear winners.The SPDR S&P 500 E.T.F. Trust, which tracks the index and is the largest exchange-traded fund, returned 0.6 percent in the quarter, beating the average actively managed mutual fund.The very fact that many investors until lately have seemed untroubled by the perils facing the economy is what some find troubling.“There is complacency in a lot of things,” said Luca Paolini, chief strategist at Pictet Asset Management. He enumerated some of his worries: “‘Inflation is temporary.’ Maybe. Maybe not. Six months ago, consumption was booming. People had money and time. Now they have less money and less time. Earnings momentum has peaked, clearly, relative to six months ago. I’m concerned the market isn’t pricing in deterioration in the economic outlook.”By some measures, stocks are as expensive as at almost any time in history. The S&P 500 trades at about 34 times the last 12 months of earnings. Sarah Ketterer, chief executive of Causeway Capital Management, worries that corporate profits face numerous headwinds and that their impact on stocks could be especially high with valuations so rich.“Inflation is up, economic growth is down,” she said. “The supply chain disruption phenomenon is global, creating cost increases and margin pressure.” Companies in many industries have reported trouble sourcing some commodities and important components of manufactured goods, such as semiconductors, hindering production and making what they do produce more expensive.Rising prices have sent interest rates in the bond market higher, driving down bond prices and keeping a lid on bond funds in the third quarter. The average one rose 0.2 percent, dragged down by a 2.9 percent decline in emerging-market portfolios.“I’m hard pressed to find an area of costs that haven’t gone up, and this may continue for some time,” Ms. Ketterer said. “No one knows how long it will take to unravel the tangled supply chain situation.”The situation seems most tangled in Asia, where many raw and intermediate materials originate. China has been the source of several worrying recent events, including power cuts that have impeded manufacturing, and financial instability at the China Evergrande Group, a giant, heavily indebted developer.Some specialists in Asian markets see little chance of Evergrande’s woes spilling over to the wider Chinese financial system, let alone beyond. Matthews Asia, a mutual fund manager, said in a note to investors that mortgage lending standards in China are fairly tight, with large down payments required and the packaging of loans into securities sold to investors minimal.“Evergrande’s problems are unlikely to cause systemic problems and the likelihood of this devolving into a global financial problem is minuscule,” Matthews’s analysts said. But they added that restrictions could be placed on the property sector in coming quarters.Saira Malik, head of equities at Nuveen, an asset manager, likewise does not expect Evergrande to become a global problem, but she cautions that it is not China’s only problem.“The government is focusing on social issues, and some of that is leading to moderation in the growth rate” of China’s economy, she said. While more expansive central bank policies would be helpful, she added, “we think China could get worse before it gets better.”Funds that focus on Chinese stocks got worse in the third quarter, sinking 13.8 percent. International stock funds in general lost 2.9 percent.As prices and risks in stock markets at home and abroad rise, the opportunities for strong, relatively safe gains shrink.Mr. Giroux said he is “buying what the market is concerned about in the short term,” such as stocks in managed care providers, which are trading at a discount to the market because earnings growth has been subdued.He said he would avoid smaller companies, as well as companies that have benefited from fiscal stimulus programs, including automakers, heavy industrial companies and semiconductor manufacturers.Ms. Malik, who said she is “moderately bullish” overall, prefers smaller companies and European stock markets. She also likes makers of office software, such as Salesforce and HubSpot, and high-quality consumer cyclicals like Nike.Mr. Paolini also favors European stocks.“The case for Europe is quite solid,” he said. “Vaccination rates are high; the Covid story is over,” yet government stimulus continues across the region, so “they don’t have the same fiscal cliff as in the U.S. and U.K.”His other recommendations include financial stocks, which tend to benefit from higher interest rates, and drug makers.Ms. Ketterer thinks there is more potential for pandemic recovery stocks to appreciate. In particular, she expects Rolls-Royce, which makes jet engines, to benefit from an operational restructuring, and Air Canada, which cut costs during the pandemic and has a strong balance sheet and little competition, to do well as travel picks up.Ms. Ketterer remains resolute about trying to pick winners when there may not be many winners to pick.“What do we do?” she said. “We’re not going to hide. We don’t want to be in cash, and we don’t want to be in bonds if rates are rising.”Mr. Giroux said he doesn’t care much for bonds or cash — money-market funds — right now, either. He favors bank loans, floating-rate securities created by bundling loans that banks have made to corporate customers. They yield close to 4 percent, and that could increase if market interest rates rise. Default risk is mitigated because bank loans have a high place in corporate capital structures.The troubles in the stock market lately are barely a blip when viewed on a chart of the phenomenal last 18 months, so a single-digit percent return may seem meager. But it may start to look generous if the time has arrived for investors to learn to live with less.“The risk profile for equities over the next three to five years is not as good as it was a year ago because valuations are high, sentiment is good and earnings growth is likely to slow,” Mr. Giroux said. “We pull back on risk assets when things feel pretty good, and right now things feel pretty good.” More

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    Chip Shortage Makes Big Dent in Automakers’ U.S. Sales

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    General Motors, Toyota, Honda, Stellantis and Nissan reported recent declines as problems in the global supply chain held down output and inventories.Four of the biggest sellers of cars and trucks in the United States said Friday that their sales had plunged recently, reflecting the intense squeeze that a global semiconductor shortage has put on auto production.General Motors, Honda, Nissan and Stellantis reported significant declines in sales in the three months that ended in September — in G.M.’s case, a drop of one-third from a year earlier — as chip shortages forced them to idle plants, leaving dealers with few vehicles to offer customers.Toyota had a slight increase for the quarter, but its sales in September fell sharply after it was forced to slash global production because of the chip shortage and other disruptions to its parts supplies stemming from the coronavirus pandemic.“We are in uncharted waters,” said Alan Haig, president of Haig Partners, an automotive consultant. “We’ve never seen a vehicle shortage like this. There are just not enough cars to sell.”The shortage of semiconductors stems from the beginning of the pandemic, when automakers around the world closed factories for weeks and suddenly cut their orders for computer chips. At the same time, manufacturers of laptops, game consoles and other electronics were demanding more chips as sales of their products took off among homebound consumers.When automakers resumed production, chip makers had much less production capacity to allocate for automotive chips.Strong auto sales, spurred in part by government stimulus checks, helped prop up consumer spending during the first year of the pandemic. But now production delays and depleted inventories are hurting sales when waning government support and the rise of the Delta variant of the coronavirus are acting as a drag on consumer spending.The forecasting firm IHS Markit on Friday lowered its estimate of third-quarter consumer spending growth to an annual rate of just 0.4 percent, down from 12 percent in the second quarter, contributing to a sharp slowdown in overall economic growth.Automakers have tried to use the electronic components they have in stock for their most profitable vehicles, such as pickup trucks and large sport utility vehicles. But in recent months those models have been affected, too.With fewer vehicles rolling off assembly lines, dealers’ inventories have become skimpy. On Friday, Kenosha Toyota in Wisconsin had a single new vehicle for sale — a two-wheel-drive Tacoma pickup. Suburban Chevrolet of Ann Arbor in Michigan was displaying just 11 new models for sale on its website.Despite the shortage, automakers and dealers alike are reaping hefty profits because tight inventories have forced consumers to pay higher prices. J.D. Power estimated that the average selling price of a new vehicle in September was $42,802, up more than $12,000 from the same month in 2020.“It’s a bonanza for the dealers and the factories, despite the shortage of inventory,” Mr. Haig said.With new cars scarce, prices of used cars have also shot up. And the latest sales figures raise concerns that the inventory shortage is worsening and crimping sales.“There are simply not enough vehicles available to meet consumer demand,” said Thomas King, president of J.D. Power’s data and analytics division.At General Motors, sales were down 33 percent in the quarter. The automaker sold 446,997 vehicles, compared with 665,192 light trucks and cars a year earlier. In the same quarter of 2019, G.M. sold 738,638.Honda’s sales were down 11 percent in the quarter, to 354,914 cars and trucks. But a decline in September of nearly 25 percent from the prior year showed the increasing squeeze on production. Stellantis, which was formed by the merger of Fiat Chrysler and France’s Peugeot, reported a 19 percent drop in third-quarter sales. At Nissan, the decline was 10 percent.Toyota said its sales in the quarter were about 1 percent higher than a year earlier, at 566,005. But its sales for September were down 22 percent.General Motors does not report monthly sales figures. Ford is expected to report its third-quarter sales on Monday.The shortage of semiconductors has forced manufacturers to idle plants for weeks at a time. G.M. idled several pickup truck plants for parts of August and September. Toyota cut global production by 40 percent in September, and expects a similar cut in October.General Motors emphasized that a lack of potential buyers was not the problem. “Underlying demand conditions remain strong, thanks to ample job openings, growing pent-up vehicle demand and excess savings accumulated by many households during the pandemic,” Elaine Buckberg, G.M.’s chief economist, said in a company statement.And the company signaled that the chip supply was improving. “We look forward to a more stable operating environment through the fall,” said Steve Carlisle, the president of G.M. North America.At the end of September, G.M. had 128,757 vehicles in dealer inventories, down from 211,974 at the end of June and more than 334,000 at the end of the first quarter. In years past, the figure was often about 800,000.Toyota had 37,516 vehicles on dealer lots at the end of the quarter, and 61,208 at ports serving the U.S. market. At the current sales rate, that is enough to last about 18 days.Ben Casselman More

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    People Are Now Spending More Money at Amazon Than at Walmart

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    Proof that the online future has arrived: The biggest e-commerce company outside China has unseated the biggest brick-and-mortar seller.SEATTLE — Amazon has eclipsed Walmart to become the world’s largest retail seller outside China, according to corporate and industry data, a milestone in the shift from brick-and-mortar to online shopping that has changed how people buy everything from Teddy Grahams to teddy bears.Propelled in part by surging demand during the pandemic, people spent more than $610 billion on Amazon over the 12 months ending in June, according to Wall Street estimates compiled by the financial research firm FactSet. Walmart on Tuesday posted sales of $566 billion for the 12 months ending in July.Alibaba, the giant online Chinese retailer, is the world’s top seller. Neither Amazon nor Walmart is a dominant player in China.In racing past Walmart, Amazon has dethroned one of the most successful — and feared — companies of recent decades. Walmart perfected a thriving big-box model of retailing that squeezed every possible penny out of its costs, which drove down prices and vanquished competitors.But even with all of that efficiency and power, the quest to dominate today’s retail environment is being won on the internet. And no company has taken better advantage of that than Amazon. Indeed, the company’s delivery (many items land on doorsteps in a day or two) and wide selection first drew customers to online shopping, and it has kept them buying more there ever since. It has also made Jeff Bezos, the company’s founder, one of the richest people in the world.An employee sorting items into the robots at an Amazon warehouse on Staten Island.Chang W. Lee/The New York Times“It is a historic moment,” said Juozas Kaziukenas, founder of the Marketplace Pulse, a research company. “Walmart has been around for so long, and now Amazon comes around with a different model and replaces them as a No. 1.”Wall Street firms had been expecting this retail baton to change hands in the coming years. But the pandemic accelerated the timeline, as people stuck at home relied on deliveries. Walmart’s sales rose sharply during the pandemic, but it has not matched Amazon, which has added hundreds of new warehouses and hired about 500,000 workers since the start of last year.Walmart’s sales grew $24 billion in the last year, the company said Tuesday. During roughly the same period, the total value of everything people bought on Amazon rose by nearly $200 billion, analysts estimate.While the figures are calculated differently, analysts regularly use them as a rough comparison. Knowing the full value of Walmart’s sales is simple, because they nearly all come from its own inventory and are disclosed publicly each quarter. But analysts must calculate an estimate of the value of Amazon’s overall sales because most of what people buy on its site are products owned and listed by outside merchants. The company publicly reports only the fees it takes from those transactions.With Amazon’s success has come greater scrutiny. And the company has started to receive many of the same complaints — over its treatment of workers and impact on local and national economies — that Walmart faced during its biggest periods of expansion more than a decade ago.“The Big Bad Wolf is Amazon now,” said Barbara Kahn, a professor of marketing at University of Pennsylvania’s Wharton School of Business who has written several books on retailing.Amazon and Walmart declined to comment.Over the last century, very few companies could stake a claim to world’s biggest retailer. The grocery chain A.&P. was such a force that antitrust authorities pursued it in the 1940s. Sears overtook A.&P. as the largest retailer in the early 1960s by targeting middle-class shoppers in the suburbs and expanding the department store model.Then came Walmart.President George H.W. Bush awarded Sam Walton the Medal of Freedom in 1992, with Barbara Bush, at Walmart’s headquarters in Bentonville, Ark.J. Scott Applewhite/Associated PressThe original Walton five-and-dime store on the square in Bentonville.Terra Fondriest for The New York TimesIn 1962, Sam Walton founded the retailer in small-town Arkansas. Mr. Walton had “a true passion — some would say obsession — to win,” he wrote in his autobiography, and he sold a huge variety of products at low prices, including eventually fresh food. But his true innovation was building a vast logistics network that operated with such precision and efficiency that it crushed many competitors that couldn’t compete.By the 1990s, Walmart had surpassed Sears. And then it kept growing, opening thousands of stores and acquiring other retailers across the world.Just as Mr. Walton founded Walmart as Sears was ascendant, Mr. Bezos started Amazon in the early 1990s as Walmart was king.Guru Hariharan, who worked on Amazon’s retail business, said Amazon had eclipsed Walmart by playing a different game. Walmart has hardened its lock on physical stores and the grocery business. But shopping online is growing far faster than in physical stores, even as it accounts for only about a seventh of U.S. retail sales. Amazon captures 41 cents of every dollar spent online in the United States, while Walmart takes just 7 cents, according to eMarketer.Shopping in Walmart in 1996. Getty ImagesFriday night traffic in 1992.Getty Images“They have their own turfs that they are the kings of,” said Mr. Hariharan, who left Amazon and eventually founded CommerceIQ, which advises brands like Colgate and Kimberly-Clark on e-commerce.Amazon has ascended in part because it opened its website to let third-party sellers list their products alongside items that Amazon buys and resells itself. This marketplace greatly increased the assortment of available items. Almost two million sellers offer products on Amazon, and they account for 56 percent of the items sold.The marketplace makes it harder to determine Amazon’s true influence in the retail industry. The company captures and reports only the fees it charges sellers to list, ship and market their goods, not the total money that flows through its business. The model is more profitable, but produces less revenue.“It makes Amazon appear smaller,” Mr. Kaziukenas said. “They are obfuscating their reality.”Jeff Bezos, right, with David Robichaud, center, who became the company’s 10 millionth customer when he ordered golf clubs from Gregory Nixon, left, on Amazon in 1999.Paul Conors/Associated PressThat has led analysts at investment banks like J.P. Morgan, BMO Capital Markets and Cowen to estimate what is known as the “gross merchandise value,” calculating how much customers buy on Amazon, regardless of whether it comes from Amazon’s inventory or from a seller’s. The analysts make the estimates based on data the company releases, such as revenue it collects from sellers and the marketplace’s share of total units sold, and their own research. FactSet compiles and averages the estimates. In the last 12 months, Amazon reported total retail revenue of $390 billion. But total product sales, including third-party transactions, was nearly 60 percent higher, according to the analysts’ estimates.Amazon has not regularly disclosed its gross merchandise value, but in 2019, facing antitrust pressure, Mr. Bezos shared the measure — then $277 billion — for the first time as a way to show that the third-party sellers were growing faster than Amazon’s direct retail business. “Third-party sellers are kicking our first-party butt,” he wrote.When Mr. Bezos testified in Congress last summer, he pointed to Walmart’s size as evidence of a competitive retail industry. “We compete against large, established players, like Target, Costco, Kroger and, of course, Walmart,” he said, “a company more than twice Amazon’s size” — presumably referring to Walmart’s revenue.Walmart is still the largest private employer in the United States, with 1.6 million workers. And it sells more in the United States than Amazon, though J.P. Morgan estimates that Amazon will surpass Walmart in the United States next year.A Walmart worker delivering online orders in Charlottesville, Va.Eze Amos for The New York TimesDuring the pandemic, Walmart honed its ability to use its stores as mini-distribution centers, where shoppers drive to retrieve their purchase “curbside,” a far less costly way to fulfill online orders than delivery. On Tuesday, Walmart said it expected to generate $75 billion in total online sales this year. The company has been expanding its effort to build its own marketplace, but the vast majority of its online sales still come from its own inventory, Mr. Kaziukenas said.Edward Yruma, a retail analyst and managing director at KeyBanc Capital Markets, said Amazon had only started to come to grips with the reality of its size.“Walmart is big, and they know it,” he said. Amazon has long played the role of the upstart, even as it became enormous. Just this summer, when it already employed about 1.3 million people, it added a new leadership principle that acknowledged the responsibility of its scale.“We started in a garage,” the new principle starts, “but we’re not there anymore.” More

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    Airlines See a Surge in Domestic Flights, Beating Forecasts

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    U.S. carriers are reaping the rewards as a surge in domestic air travel has exceeded forecasts.The aviation recovery is gaining momentum.A summer travel bonanza is exceeding expectations, helping airlines earn profits again and brightening the outlook for the rest of the year. It’s a welcome relief for a battered industry and a sign that the rebound that began this spring appears to be here to stay.The economic upturn, aggressive cost-cutting and an enormous federal stimulus that paid many salaries have helped to improve the finances of the largest carriers, which took on vast amounts of debt and lost billions of dollars during the pandemic.This month, consumer spending on airlines briefly exceeded 2019 levels on a weekly basis for the first time since the pandemic began, according to Facteus, a research firm that monitors millions of online payments. Ticket prices have rebounded, too: In June, fares were down only 1 percent from the same month in 2019, according to the Adobe Digital Economy Index, which is similarly based on website visits and transactions.And on Sunday, the Transportation Security Administration screened more than 2.2 million travelers at its airport checkpoints, the most in one day since the start of the pandemic.“As people have gotten vaccinated and things have reopened, the demand is just very, very strong — and I think, in general, it’s stronger than people thought it would be,” said Helane Becker, an airline analyst at the investment bank Cowen. “People have money and time, and they’re using it to travel.”A full recovery rests on the return of two pillars of the business, corporate and international travel, but executives said they expected both to improve meaningfully over the coming months. And while the Delta variant of the coronavirus could still threaten the travel rebound, customers are so far undeterred.“We haven’t seen any impact at all on bookings,” Scott Kirby, the chief executive of United Airlines, said this week on a call to discuss quarterly financial results with analysts and reporters. “The most likely outcome is that the recovery in demand continues largely unabated.”His comments aligned with those of executives at American Airlines and Delta Air Lines, who said on similar calls that they had seen no drop in demand because of the variant. Both Delta and United added that a vast majority of employees and regular customers had received coronavirus vaccines, which appear to provide protection against the variant.The rising demand has prompted hiring across the industry. American said Wednesday that it planned to hire 1,350 pilots by the end of next year, a 50 percent increase over previous plans. Last week, the company announced that it planned to hire hundreds of flight attendants and bring back thousands who volunteered for extended leaves during the pandemic.Southwest Airlines said in June that it would increase its minimum wage to $15 an hour to retain and attract workers, while Delta is in the middle of hiring thousands of employees. United last month announced plans to buy 270 new planes in the coming years, the largest airplane order in its history and one that would create thousands of jobs nationwide.Southwest on Thursday reported a profit of $348 million for the quarter that ended in June, its second profitable quarter since the pandemic began. American reported a $19 million profit over the same period, while Delta last week reported a $652 million profit, a pandemic first for each airline. United this week reported a loss, but projected a return to profitability in the third quarter as its business improved faster than forecast.The financial turnaround has been buoyed by an infusion of $54 billion of federal aid to pay employee salaries over the past year and a half. Without those payments, none of the major airlines would have been able to report profits for the quarter that ended in June. The aid precludes the companies from paying dividends through September 2022.Each airline offered a hopeful outlook for the current quarter. American projected that passenger capacity would be down only 15 to 20 percent from the third quarter of 2019, while United projected a 26 percent decline and Delta forecast a 28 to 30 percent drop. Southwest, which differs from the other three large carriers in that it operates few international flights, said it expected capacity to be comparable to the third quarter of 2019.“We are just really excited about the momentum we’re seeing in the numbers,” Doug Parker, American’s chief executive, told analysts after the company delivered its earnings report.The financial results and forecasts for the rest of the summer are the latest sign of strength in a comeback that has been building for months. But the airlines have vast amounts of debt to repay — American, the most indebted carrier, announced a plan on Thursday to pay down $15 billion by the end of 2025 — and the rebound hasn’t been free of setbacks.Passenger volumes are still down nearly 20 percent from prepandemic levels, and airlines suffered widespread delays and cancellations as passengers returned in droves last month, according to data from FlightAware, a flight tracking company. About 17 percent of Delta’s flights were delayed at least 15 minutes in June, along with more than 20 percent for United, more than 30 percent for American and 40 percent for Southwest.Travelers at Miami International Airport last month. Airlines had many delays and cancellations as passengers returned in droves last month.Saul Martinez for The New York Times“While the rapid ramp-up in June travel demand provided stability to our financial position, it has impacted our operations following a prolonged period of depressed demand,” Southwest’s chief executive, Gary Kelly, acknowledged in a statement on Thursday. “Therefore, we are intensely focused on improving our operations as we restore our network to meet demand.”Carriers have also struggled to get workers in place to meet that demand. American suffered shortages of catering and wheelchair operators last month, while it also accelerated pilot training to bring more than 3,000 back from extended leaves. Last week, Ed Bastian, chief executive of Delta, said the airline had struggled to train new or long-sidelined employees.“It takes a few months, and the demand has come back at such a fast clip,” he said. “It’s taken us all a little bit of time to catch our breath. But we’ll be fully back over the next couple of months.”One form of travel, trips to visit friends or family within the United States, has generally recovered to 2019 levels, with Southwest saying such leisure travel exceeded 2019 levels in June.Surveys show that corporate travelers are increasingly eager to get back on the road this fall, when business travel typically picks up. Nearly two-thirds of companies that suspended business travel in the pandemic expect to bring it back over the next one to three months, according to a recent poll from the Global Business Travel Association, an industry association. If other companies follow Apple’s lead in delaying a return to the office, though, the corporate travel recovery could be held back.Delta said it expected domestic business trips to recover to about 60 percent of 2019 levels by September, up from 40 percent in June. Those figures roughly align with estimates from United.“The demand is recovering even faster than we had hoped domestically,” Mr. Kirby of United said on Wednesday.International travel has slowly started to recover, too, as more countries, particularly in Europe, open up to American travelers who can provide proof of vaccination or a negative coronavirus test. But airlines are lobbying the Biden administration to loosen restrictions in kind, which, they say, will allow the recovery to accelerate.“I think the surge is coming, and just as we’ve seen it on the consumer side, we’re getting ready for it on the business side,” Mr. Bastian of Delta said last week. “Once you open businesses, offices, and you get international markets opened, I think it’s going to be a very good run over the next 12 to 24 months.” More

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    Gap Sees Its Post-Pandemic Future Outside of Malls

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    The retailer’s first-quarter sales jumped 89 percent to $4 billion from a year earlier as its e-commerce continues to grow.Gap has long been among the biggest operators of mall stores in the country. But after the pandemic, it will have a much smaller presence in traditional indoor malls as it closes Gap and Banana Republic locations and bets on the expansion of its Old Navy and Athleta brands. More