Amazon Shares Crush Walmart This Year

By Douglas A. McIntyre Updated Jan 30, 10:12PM EST · Published Apr 12, 6:20AM EDT

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Amazon Shares Crush Walmart This Year — © Chris Hondros / Getty Images

Walmart Inc. (NYSE: WMT | WMT Price Prediction) seemed in the midst of proving to Wall Street that it has made progress against e-commerce juggernaut Amazon.com Inc. (NASDAQ: AMZN) as it announced earnings for its most recent quarter and a number of initiatives to drive both store and online traffic. Investors have not bought into the story. Walmart’s shares have woefully underperformed Amazon’s this year and are even short of the S&P 500’s rise.

So far in 2019, Amazon’s shares are higher by 20%, almost exactly matching the S&P 500’s performance. Investors continue to be supportive of Amazon’s mix of a movie studio, e-commerce provider and the world’s largest cloud enterprise. Unlike many other retailers, it has built a new business as strong as its primary one. Amazon Web Services (AWS) makes more on its bottom line than Amazon’s North American and International businesses do together.

Walmart’s progress has been a combination of acquisitions and new initiatives using its massive brick-and-mortar platform. Walmart recently bought Polymorph Labs. The small company allows Walmart to track online activity and helps advertisers better identify Walmart customers. Walmart says it will start to “retrofit” hundreds of stores to make them lighter, more modern and easier to navigate. The company will use more robots at its facilities, which should make them more financially productive, although it may cost Walmart “associates” their jobs. It has even set up a Google voice-enable system to help shoppers.

Walmart’s Achilles’ heel, ironically, is its massive store system. It is the largest employer in many states and has over a million employees in the United States. The capital costs to cover the expenses of these stores and the employees who may make little more than minimum wage. But same-store sales continue to be little better than flat. That means e-commerce has to offset this massive raft of costs that Walmart will never be able to eliminate.

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Amazon still troubles Wall Street because of its low margins on e-commerce. But this is usually forgiven because of The company’s rapid growth. Its revenue rose from $188 billion in 2017 to $233 billion last year. Founder Jeff Bezos has convinced investors that an investment in growth and market share is worth the wait for better margins. He has accumulated 100 million subscribers to Amazon Prime, the free shipping and video streaming system. Investors like the recurring revenue these subscribers bring.

And finally, AWS is the largest cloud business in the world. The division’s revenue rose from $17 billion in 2017 to $26 billion last year. More impressively, operating income rose from $4.3 billion to $7.3 billion over the same period.

The case for Walmart as an investment has simply not gotten better enough for investors to buy.
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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.