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The Zacks Analyst Blog Highlights: Amazon and Walmart
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For Immediate Release
Chicago, IL – November 27, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Amazon (AMZN - Free Report) and Walmart (WMT - Free Report) .
Here are highlights from Friday’s Analyst Blog:
Amazon vs. Walmart: Which Will Win This Holiday Season?
Thanksgiving is over and Black Friday is here. We are officially in thick of the holiday shopping season. What that means is that all the retailers out there will be piling on the discounts, decorating the stores and selling the happy mood to get people inside their doors. And customers are expected to queue up.
But will they? Or will they sit in the comfort of their homes or elsewhere clicking away at their choices and waiting for the day when technology will make the experience even more engaging and enjoyable.
Yes, the online versus brick-and-mortar battle is still raging on and we finally have viable contenders on both sides. So what’s changed for Zacks Rank #3 (Hold) Amazon and Zacks Rank #2 (Buy) Walmart this past year that makes the holiday showdown particularly interesting? (You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here).
Amazon Has Whole Foods
Amazon forked out $13.7 billion for Whole Foods to build its position in the grocery supply chain, leverage Whole Foods’ 434 retail outlets for delivering an omnichannel experience and tap the growing number of people doing their grocery shopping online.
About 12% of grocery shoppers used online channels in 2016, but with millennials beginning to build their families, this percentage is on the rise. Moreover, Amazon really knows its customers on the basis of the tons of data it has accumulated about its patrons over the years. It is therefore well positioned to cross promote its products, drive deals on its platform, sell more Prime subscriptions and increase sales.
Besides, the deal strengthens Amazon’s position in the grocery market versus market leader by far Walmart as well as German food retailers Aldi and Lidl (focuses on discounts). Walmart, which generates $170 billion in grocery sales annually, or more than half its revenues, has been doing a lot in response to the acquisition in an attempt to protect its revenue stream. Technology investments (especially for inventory management), changing the store layout and omnichannel are some of the initiatives that appear to be working well for the company.
Amazon Has Widest Selection
Amazon offers more variety than any other retailer in the U.S., with around 480 million products across brands, categories, genres and prices. Around 50 million products qualify for free two-day shipping to Prime members. Walmart on the other hand offers just a few million products online and offers free two-day delivery on them if cart value crosses $35. It’s also viewed as an old, uncool company, trudging along forever.
So Walmart has a lot of catching up to do, both in terms of what it offers and how it offers it. And the company has been working on it. Building on its strength in low-cost household goods, appliances, electronics and clothes, it recently added brands like Bose, KitchenAid and apparel brands. The increased selection and focus on better brands can also change its perceived value to customers.
Amazon Isn’t the Only One with Good Logistics
Prime Air, Trucks, pickup locations and artificial intelligence are all driving efficient logistics at Amazon. Fulfillment by Amazon (FBA) is also part of this.
But there’s no reason to think that Walmart is far behind. The retailer has been working on efficiencies in its delivery network for over a decade with particular focus on equipment, drivers and operational changes for improved loading, reduction in unproductive miles, fuel efficiency and minimal down time/maintenance.
In fiscal 2016, these measures helped the company deliver one billion more cases, driving 460 million fewer miles reducing carbon dioxide emissions by 650,000 metric tons (equivalent of removing 140,000 cars from the roads) and saving nearly a billion dollars compared to 2005. Walmart’s technology investments don’t stop there. The company has decided to add to its 6,000 strong fleet and will be one of the first to test a Tesla Semi trucks. This could further increase efficiency.
Walmart Acquired Jet.com
What Walmart didn’t have in an online selling platform, it imbibed through the controversial acquisition of Jet.com for $3 billion. Jet had the stated goal of taking down Amazon and had a pricing model that sought to better Amazon prices, whatever they were. Everyone doubted its success given the difference in size of the two companies.
But once part of Walmart, the startup could generate quite a bit of digital energy at the retail behemoth. Plus Walmart could add scale to its efforts. As it turns out, the acquisition worked very well for Walmart, which has saw a 50% increase in sales in the last-reported quarter.
Walmart Leveraging Physical Stores
Walmart has stores practically everywhere and it is leveraging this presence to deliver same-day, in-store pickup and returns of online orders (dedicated kiosks handle the function in some places). Dedicated, reindeer hat-clad employees handle the customer service. Plus, you qualify for a pickup discount if you agree to have the products on your online order delivered at the closest Walmart store. This makes for the perfect omnichannel experience that can work really well for groceries.
Conclusion
Both these players are celebrated discounters, so it’s likely to be a level playfield on that front. Both offer two-day shipping. Both recognize the value of an omnichannel approach and are doing what they can to offer that experience. But while Walmart has a greater physical presence, Amazon has mastered the digital channel.
On the one hand, it’s really hard to acquire a physical presence like Walmart and the Whole Foods stores, the few Amazon book stores and Kohl’s stores taking over some return functions may not really do the trick for Amazon. This may be partly the reason for Amazon lockers at different premises.
On the other hand, Amazon’s digital prowess (especially considering how much it is invested in data collection and artificial intelligence and how it is using that to capture digital customers is a feat seconded none.
So, it’s game on.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Amazon and Walmart
For Immediate Release
Chicago, IL – November 27, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Amazon (AMZN - Free Report) and Walmart (WMT - Free Report) .
Here are highlights from Friday’s Analyst Blog:
Amazon vs. Walmart: Which Will Win This Holiday Season?
Thanksgiving is over and Black Friday is here. We are officially in thick of the holiday shopping season. What that means is that all the retailers out there will be piling on the discounts, decorating the stores and selling the happy mood to get people inside their doors. And customers are expected to queue up.
But will they? Or will they sit in the comfort of their homes or elsewhere clicking away at their choices and waiting for the day when technology will make the experience even more engaging and enjoyable.
Yes, the online versus brick-and-mortar battle is still raging on and we finally have viable contenders on both sides. So what’s changed for Zacks Rank #3 (Hold) Amazon and Zacks Rank #2 (Buy) Walmart this past year that makes the holiday showdown particularly interesting? (You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here).
Amazon Has Whole Foods
Amazon forked out $13.7 billion for Whole Foods to build its position in the grocery supply chain, leverage Whole Foods’ 434 retail outlets for delivering an omnichannel experience and tap the growing number of people doing their grocery shopping online.
About 12% of grocery shoppers used online channels in 2016, but with millennials beginning to build their families, this percentage is on the rise. Moreover, Amazon really knows its customers on the basis of the tons of data it has accumulated about its patrons over the years. It is therefore well positioned to cross promote its products, drive deals on its platform, sell more Prime subscriptions and increase sales.
Besides, the deal strengthens Amazon’s position in the grocery market versus market leader by far Walmart as well as German food retailers Aldi and Lidl (focuses on discounts). Walmart, which generates $170 billion in grocery sales annually, or more than half its revenues, has been doing a lot in response to the acquisition in an attempt to protect its revenue stream. Technology investments (especially for inventory management), changing the store layout and omnichannel are some of the initiatives that appear to be working well for the company.
Amazon Has Widest Selection
Amazon offers more variety than any other retailer in the U.S., with around 480 million products across brands, categories, genres and prices. Around 50 million products qualify for free two-day shipping to Prime members. Walmart on the other hand offers just a few million products online and offers free two-day delivery on them if cart value crosses $35. It’s also viewed as an old, uncool company, trudging along forever.
So Walmart has a lot of catching up to do, both in terms of what it offers and how it offers it. And the company has been working on it. Building on its strength in low-cost household goods, appliances, electronics and clothes, it recently added brands like Bose, KitchenAid and apparel brands. The increased selection and focus on better brands can also change its perceived value to customers.
Amazon Isn’t the Only One with Good Logistics
Prime Air, Trucks, pickup locations and artificial intelligence are all driving efficient logistics at Amazon. Fulfillment by Amazon (FBA) is also part of this.
But there’s no reason to think that Walmart is far behind. The retailer has been working on efficiencies in its delivery network for over a decade with particular focus on equipment, drivers and operational changes for improved loading, reduction in unproductive miles, fuel efficiency and minimal down time/maintenance.
In fiscal 2016, these measures helped the company deliver one billion more cases, driving 460 million fewer miles reducing carbon dioxide emissions by 650,000 metric tons (equivalent of removing 140,000 cars from the roads) and saving nearly a billion dollars compared to 2005. Walmart’s technology investments don’t stop there. The company has decided to add to its 6,000 strong fleet and will be one of the first to test a Tesla Semi trucks. This could further increase efficiency.
Walmart Acquired Jet.com
What Walmart didn’t have in an online selling platform, it imbibed through the controversial acquisition of Jet.com for $3 billion. Jet had the stated goal of taking down Amazon and had a pricing model that sought to better Amazon prices, whatever they were. Everyone doubted its success given the difference in size of the two companies.
But once part of Walmart, the startup could generate quite a bit of digital energy at the retail behemoth. Plus Walmart could add scale to its efforts. As it turns out, the acquisition worked very well for Walmart, which has saw a 50% increase in sales in the last-reported quarter.
Walmart Leveraging Physical Stores
Walmart has stores practically everywhere and it is leveraging this presence to deliver same-day, in-store pickup and returns of online orders (dedicated kiosks handle the function in some places). Dedicated, reindeer hat-clad employees handle the customer service. Plus, you qualify for a pickup discount if you agree to have the products on your online order delivered at the closest Walmart store. This makes for the perfect omnichannel experience that can work really well for groceries.
Conclusion
Both these players are celebrated discounters, so it’s likely to be a level playfield on that front. Both offer two-day shipping. Both recognize the value of an omnichannel approach and are doing what they can to offer that experience. But while Walmart has a greater physical presence, Amazon has mastered the digital channel.
On the one hand, it’s really hard to acquire a physical presence like Walmart and the Whole Foods stores, the few Amazon book stores and Kohl’s stores taking over some return functions may not really do the trick for Amazon. This may be partly the reason for Amazon lockers at different premises.
On the other hand, Amazon’s digital prowess (especially considering how much it is invested in data collection and artificial intelligence and how it is using that to capture digital customers is a feat seconded none.
So, it’s game on.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performancefor information about the performance numbers displayed in this press release.