Traditional retailer Walmart is coming back big time. And it is beating on-line retailer Amazon in the last three to six months.
On Wall Street that is.
Walmart’s shares have gained 6.55 percent in the last three months and 19.71 percent over the last six months compared to 6.55 percent and 15.67 percent of Amazon.
*doesn’t include dividend payments
Source: Finance.yahoo.com 8/10/2017
That’s a big change from a few months ago, when Amazon was the undisputed winner on Wall Street, both on short-term and long-term basis.
Amazon.com versus Wal-Mart Stores
*It doesn’t include dividend payments
Source: Finance.yahoo.com 5/3/2017
John Zolidis, President of Quo Vadis Capital, Inc. attributes Walmart’s strong Wall Street performance to investor enthusiasm over its ability to compete effectively against Amazon, and on US “grocery inflation,” which has helped the performance of traditional retailers, and especially Walmart which relies heavily on grocery sales.
“I believe WMT shares have risen as investors are increasingly optimistic that the company can prove to be an effective competitor to AMZN,” says Zolidis. “In addition, grocery inflation is a huge positive for WMT reported same-store sales. The company has experienced a significant headwind to reported comps due to deflation over the past two years. Grocery prices are now turning higher in several categories which should help reported same-store sales at WMT (and other grocers). Grocery is 55% of WMT U.S. sales. Lastly, retailers have reported better 2Q results, starting with Target which pre-announced comps turning positive and including Kohl’s and Macy’s which reported this morning. Since WMT had previously been outperforming each of these, it follows that WMT trends likely improved on a sequential basis in the second quarter as well.“
Still, investor enthusiasm may be short lived, as grocery inflation is a seasonal rather than cyclical phenomenon. Besides, Walmart has little chance of beating Amazon in on-line space. For a simple reason: it isn’t a technology company. It’s a retailer using technology, and that’s not good enough to attract software developers—the ultimate source of competitive advantage in the Internet space, as discussed in a previous piece here.
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