Stock market volatility this year has rocked nearly every industry, and retail is no exception. In fact, the top 25 global retailers by market capitalization lost $846 billion in their cumulative valuation in the 2022 second quarter, according to GlobalData research.
Three of retail’s top dogs have seen some of the sector’s biggest valuation drops: As of June 30, Amazon’s market capitalization plummeted 34.9 percent to $1.08 trillion, the steepest fall of any of top 25, the London consultancy found.
Amazon was the only top 25 retailer that lost more than $500 billion in its second-quarter valuation, said Ragupathy Jayaraman, GlobalData business fundamentals analyst.
Despite the setback, Amazon’s market cap was still more than triple that of the second-largest retailer, Walmart, which stood at $333.3 billion after an 18.7 percent decline. Although Walmart’s market cap as of Thursday reached approximately $350.2 billion, its guidance update in July sent retail stocks into a tailspin amid sector-wide concerns that the industry will have to rely more on aggressive markdowns to hit sales, particularly in discretionary items like apparel.
Walmart president and CEO Doug McMillon outlined the current issues in the lowered guidance.
“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” McMillon said. “We’re now anticipating more pressure on general merchandise in the back half.”
And the last company in retail’s “big three,” Target saw a collective market cap drop of 33.3 percent to $65.5 billion. Like Walmart, Target saw its biggest drop in May on te news that it lowered profit guidance in the wake of an expected $1 billion in incremental freight costs. The mass merchant saw first-quarter net income plummet 51.9 percent to $1.01 billion as costs further eroded margins. It also dialed up promotions and cut back on orders to deal with a pileup of product people weren’t quick to purchase.
As the three top retail players feel the heat, so too does the rest of the pack. The top 25 global retailers by market capitalization reported a 19.4 percent decline in their cumulative valuation in the 2022 second quarter, according to GlobalData.
The retailers have seen a decline in value amid major financial headwinds including global inflation, constrained supply chains and an ongoing war in Ukraine—all contributing to economic uncertainty that has dominated headlines this year. With inflation hitting forty-year highs of 9.1 percent in June, it appears consumers are looking to keep more money in their wallets until concerns of a full-blown recession are put to bed.
The declines also come after consumers have returned to spending habits that many may not have expected so soon, putting major pressure on businesses that rely heavily on a strong e-commerce operation to thrive.
“Due to the stringent lockdowns resulting from the Covid-19 pandemic, retail firms were able to enhance their e-commerce options,” Jayaraman said in a statement. “However, normalcy is returning to markets as more consumers are visiting physical stores.”
High-growth tech companies have gotten the worst of the market selloff, and one such business that took advantage of the pandemic-driven retail shift is now issuing a mea culpa. Shopify, which has seen its valuation tumble more than 79 percent since Nov. 19, 2021, is laying off 10 percent of its staff as the company’s two-year stretch of success cools off. Net losses in the second quarter amounted to $1.2 billion for the e-commerce giant.
“It’s now clear that bet didn’t pay off,” said Shopify CEO and founder Tobi Lütke in a letter to employees. “What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point.
Rounding out those that have lost the most value are Nike with a 24.4 percent decrease to $160.8 billion and Adidas with a 20.4 percent drop to $38.3 billion, illustrating that few companies are immune to the market’s decline. Both have struggled in China, which has become a significant market headwind for Western companies with major exposure to the nation of 1.4 billion people, particuarly as Covid-19 lockdowns remain in place.
Valuation crunches have also hit U.S. supermarket Kroger (an 18.4 percent drop), Australian conglomerate Wesfarmers (a 16.9 percent dip) and warehouse club Costco (a 16.8 percent decline).
In total, six major U.S. companies—Amazon, Walmart, Home Depot, Nike, Costco and Target—each lost over $25 billion in valuation.
Growth persists across Chinese e-comm, fast-fashion and discount stores
It’s not all doom and gloom though, especially in China as the company’s top e-commerce businesses manage through the current conditions. Alibaba, the world’s third-most valuable retailer at $304.1 billion as of June 30, saw market cap growth of 2.7 percent in the second quarter.
Rival JD.com had an even bigger jump of 8.7 percent to $101.8 billion, while online grocery giant Pinduoduo bucked every trend possible with a whopping 55.3 percent growth trajectory in the period to $78.1 billion. The Chinese government’s regulatory authorities, however, have been cracking down on organizations, raising concerns for investors.
And if there’s one worldwide apparel subsector that is maintaining success, it’s fast fashion. Inditex and Fast Retailing, operators of industry titans Zara and Uniqlo respectively, saw noteworthy valuation spikes in the quarter. Inditex ticked up 9.2 percent to $79.6 billion, while Fast Retailing had a 12.8 percent jump to $71.1 billion—the second-largest leap behind Pinduoduo’s quarterly growth.
Inflation’s impact on apparel prices appears to be benefiting the major fast-fashion players, which also include global companies like H&M and Mango, both of which have seen outsized first-half growth as shoppers are willing to spend on clothing that brings more bang for their buck.
The final of the six companies in the top 25 that reported a market cap gain is Dollar General, which saw its valuation boost 9.3 percent to $55.7 billion. Like the fast-fashion chains, Dollar General will likely be a major destination for shoppers in a potential recession as they hope to spend a little and get a lot.