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Business/Finance See other Business/Finance Articles Title: WALMART -vs- AMAZON (Amazon winning) Warren Buffett nearly bailing out of Wal-Mart Stores Inc. only adds to the big-box chain’s list of concerns. Mr. Buffett’s Berkshire Hathaway dumped $900 million worth of Wal-Mart stock at the end of 2016, the fourth consecutive quarter it has pared its position, according to federal filings. The move supports the concerns Mr. Buffett and others have voiced about the world’s largest retailer and its uphill battle against online behemoth Amazon.com Inc. Amazon “is a big, big force and it has already disrupted plenty of people and it will disrupt more,” Mr. Buffett said last year at Berkshire’s annual shareholders meeting. And while Wal-Mart has taken substantial steps to improve its e-commerce operations, Tuesday’s earnings report for the key holiday season will likely show just how much further it still has to go. Analysts polled by FactSet estimate fiscal fourth-quarter earnings of $1.29 a share, down from $1.49 a year earlier. Revenue for the period ending in January is expected to have risen 1% to $131.1 billion. The good news is that Wal-Mart finally is refining its approach to the Amazon threat. Last month it wisely dropped a program that offered customers free two-day shipping for a $49 annual membership free, electing instead to offer free shipping on more items. Such a decision, which isn’t cheap, comes after Wal-Mart bought Jet.com last year for $3.3 billion, the largest purchase ever of an e-commerce startup. Jet.com helped boost Wal-Mart’s e-commerce sales by 21% in the third quarter. And just last week, Wal-Mart bought outdoor internet retailer Moosejaw for $51 million, its second small-scale e-commerce purchase of 2017. But Wal-Mart has a long road ahead. The company generated $3.6 billion in e-commerce sales in the third quarter, only 3% of its total revenue. By comparison, Amazon logged $43.7 billion in its most recent reported quarterly revenue. And political turbulence, which already has taken a toll on Wal-Mart’s shares, threatens to make business conditions more difficult. The strong dollar has hurt Wal-Mart internationally since it gets roughly one-quarter of its total revenue from overseas, with Mexico being a key contributor. Wal-Mart has 2,373 stores in Mexico, roughly 20% of its locations. Retailers including Wal-Mart have plenty to lose if President Donald Trump imposes new tariffs on trade or a border-adjusted tax. That is because many of them rely heavily on overseas factories for the goods they sell. That helps explain why Wal-Mart shares are essentially unchanged since the presidential election even as the market has raced higher. Wal-Mart has underperformed Amazon by 8 percentage points and the Dow Jones Industrial Average by 13 percentage points since Nov. 8. Bargain hunters won’t find much of a deal here, either. Fetching 16 times projected earnings over the next 12 months, Wal-Mart’s multiple remains above its five-year average. It is little wonder Mr. Buffett isn’t waiting for a price rollback on this one. Post Comment Private Reply Ignore Thread
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