{"id":112312,"date":"2017-09-06T10:40:25","date_gmt":"2017-09-06T14:40:25","guid":{"rendered":"http:\/\/countingpips.com\/?p=112312"},"modified":"2017-09-06T06:40:58","modified_gmt":"2017-09-06T10:40:58","slug":"this-walmart-plan-is-stranger-than-fiction","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/09\/this-walmart-plan-is-stranger-than-fiction\/","title":{"rendered":"This Walmart Plan Is Stranger Than Fiction"},"content":{"rendered":"
September 6, 2017<\/div>
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By WallStreetDaily.com<\/u><\/a> \"This<\/p>\n

\"LouisDoes this feel desperate to you?<\/p>\n

Walmart has partnered with Uber to expand its grocery delivery service business.<\/p>\n

The notorious big-box retailer now offers grocery delivery in Dallas, Orlando, Tampa and Phoenix.<\/p>\n

So if you live in one of those four cities\u2026<\/p>\n

Uber will deliver your online Walmart grocery orders for $9.95.<\/p>

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If you\u2019re not amused yet, consider this\u2026<\/p>\n

Earlier this summer, news broke that Walmart was enlisting its own staff to deliver online orders on their way home from work.<\/p>\n

It\u2019s a classic example of truth being stranger than fiction.<\/p>\n

According to a Walmart spokesman\u2026<\/p>\n

\u201cWalmart is uniquely qualified, uniquely positioned, to be able to offer this,\u201d since 90% of Americans live within 10 miles of a Walmart store. \u201cThere is really strong overlap between where our associates are already heading after work and where those packages need to go.\u201d<\/p>\n

Bespoke Investment Group isn\u2019t impressed.<\/p>\n

The critically acclaimed research firm has Walmart listed on its \u201cDeath by Amazon\u201d Index.<\/p>\n

So will Walmart write itself into history alongside the likes of Polaroid, the XFL, RadioShack and Hummer?<\/p>\n

Let\u2019s see what my top two analysts think and then I\u2019ll render a decision at the end.<\/p>\n

The Beginning of the End<\/h2>\n

\"JonathanLife must sting a little bit for Walmart.<\/p>\n

It wasn\u2019t too long ago that the big-box heavyweight was being publicly blasted by mom and pop retailers around the nation for barging into their towns and undercutting their prices with cheap, foreign-made goods.<\/p>\n

Now the company is being undercut by Amazon\u2019s margin-killing delivery model \u2014 which requires no storefronts\u2026 or the overhead that goes with them.<\/p>\n

Unfortunately for Walmart, the company arrived way too late to the digital-shopping and delivery party.<\/p>\n

In the last 10 years, Amazon\u2019s market value has increased tenfold, to just under half a trillion dollars.<\/p>\n

Walmart, on the other hand, has outperformed the S&P 500 by just six percentage points over the same period. And the nation\u2019s largest retailer sports a market capitalization less than half the size of Amazon\u2019s.<\/p>\n

And by offering Prime membership discounts to low-income Americans, Amazon is going after Walmart\u2019s key demographic.<\/p>\n

Bottom line: Walmart is dying a slow death at the hands of Amazon. Things are going to get a whole lot worse \u2014 not better.<\/p>\n

Walmart\u2019s Fate Is Sealed Either Way<\/h2>\n

\"MartinMy take on the Amazon-Walmart situation begins with a simple set of numbers.<\/p>\n

When looking at the trailing four-quarter figures for each company\u2026<\/p>\n

Amazon showed revenue of $485 billion, net income of $14.3 billion and a return on equity of 17%.<\/p>\n

Walmart showed revenue of $149 billion, net income of $2.0 billion and a return on equity of 10%.<\/p>\n

It\u2019s not clear to me why the larger and more profitable company should fall victim to the smaller.<\/p>\n

Yes, Amazon will continue to nibble at the edges of Walmart\u2019s dominance. But that\u2019s all it\u2019s doing.<\/p>\n

In spite of unfair sales tax advantages, Amazon has still not demonstrated that it can make a decent return from retailing. Remember, most of its earnings come from its cloud business.<\/p>\n

Bottom line: Walmart will eventually die. All retailers do (just look at Montgomery Ward and Sears). But it won\u2019t be Amazon that kills it.<\/p>\n

The Donald Trump of Retail<\/h2>\n

\"LouisMy knee-jerk reaction is to go ahead and play \u201cTaps\u201d for Walmart. After all, the survival rates for an expense-laden, low-margin business\u00a0aren\u2019t good.<\/p>\n

However, there\u2019s an interesting trend in the market that can\u2019t be ignored. E-commerce giants like Amazon and its Chinese counterpart Alibaba are moving into physical spaces.<\/p>\n

This shouldn\u2019t be happening. Not if e-commerce is going to disrupt the entire retail sector.<\/p>\n

Don\u2019t be fooled into thinking this is a fluke or fad, though.<\/p>\n

As Alibaba\u2019s Jack Ma has put it bluntly, \u201cWe must embrace physical space.\u201d<\/p>\n

Why? It\u2019s likely because a converged<\/i> model of online and physical stores is the ideal model to serve consumers. Or in Ma\u2019s words, the end goal is \u201cthe integration of online, offline, logistics and data across a single value chain.\u201d<\/p>\n

Amazon\u2019s acquisition of Whole Foods and the immediate changes after closing the deal certainly indicate that Jeff Bezos is simpatico with Ma.<\/p>\n

If any traditional retailer is positioned to compete in this new world, it\u2019s Walmart. The presidential election \u2014 yes, politics \u2014 underscores why.<\/p>\n

President Trump was largely elected because of voters outside urban centers. Go figure, that\u2019s also Walmart\u2019s competitive advantage. As it was mentioned above, the company has stores within 10 miles of roughly 90% of Americans.<\/p>\n

In contrast, Amazon\u2019s strength is in urban centers, where its services are most convenient and cost-effective. Drones promise to expand that circle of convenience. But not enough to take over where Walmart thrives.<\/p>\n

The end result? Amazon\u2019s dominance promises to continue. Accordingly, it\u2019s a must-own stock for investors. But it\u2019s not a zero-sum game. So Walmart isn\u2019t headed for an inevitable death. It stands to survive.<\/p>\n

As for its stock, I\u2019d rather own a thriving business, not a surviving one. So no thanks!<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese
\nChief Investment Strategist, Wall Street Daily<\/em><\/p>\n

The post This Walmart Plan Is Stranger Than Fiction<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com Does this feel desperate to you? Walmart has partnered with Uber to expand its grocery delivery service business. The notorious big-box retailer now offers grocery delivery in Dallas, Orlando, Tampa and Phoenix. So if you live in one of those four cities\u2026 Uber will deliver your online Walmart grocery orders for $9.95. If […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-112312","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/112312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=112312"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/112312\/revisions"}],"predecessor-version":[{"id":112315,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/112312\/revisions\/112315"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=112312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=112312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=112312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}