Amazon’s Shares Surge as Walmart’s Falter

By Douglas A. McIntyre Updated Jan 12, 2:07AM EST · Published Mar 24, 8:20AM EDT

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Amazon’s Shares Surge as Walmart’s Falter — © Thinkstock

Walmart Inc. (NYSE: WMT) shares briefly rallied when it appeared its challenge to Amazon.com Inc.’s (NASDAQ: AMZN) e-commerce business showed some improvement. The excitement has dimmed. Walmart’s shares are down 13% in 2018. Amazon’s are up 26%, even after the recent market sell-off.

Amazon’s earnings showed that it can finally make a reasonable margin on its domestic e-commerce business. Amazon Web Services, the company’s cloud computing operations, dominate the industry. Amazon’s total sales for its fourth quarter rose 38% to $61 billion. Operating income was up 69% to $2.1 billion. North American e-commerce revenue was $37 billion, and operating income was $1.7 billion for the quarter. Founder Jeff Bezos often takes the margin for this part of the company to low levels, sometimes below zero, as he experiments with ways to drive the top line.

Among the focuses on the two companies this year are their grocery businesses. Walmart has been successful in this area for years, and it has been an important aspect of the world’s largest retailer’s domestic sales. Its primary competitor has been Kroger, which is not large enough to eclipse the Walmart effort. Amazon rocked that boat as it bought Whole Foods and upped its grocery delivery business, a direct challenge to Walmart’s success.

Another problem Walmart faces is the growing success of Amazon Prime. Walmart has nothing to match the wildly successful Amazon loyalty program, which is a combination of free shipping, streaming media and special prices on merchandise sold by Amazon. Prime has added special food delivery for customers in several cities. Presumably, the service will roll out across much of the country. Walmart has countered with a similar program.

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Walmart also does not have its own string of consumer electronics to draw customers the way that Amazon’s Alexa-powered products do. It is yet another product that builds a relationship between Amazon and its clients. Walmart will never have a way to compete with this.

Whatever optimism Wall Street had about Walmart has ended, at least so far this year. Meanwhile, the optimism about Amazon’s prospects has grown.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.