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Amazon is still not a huge threat to Walmart in the grocery game, this investor says

It’s still early innings for Amazon’s (NASDAQ:AMZN) foray into bricks and mortar retail but the ongoing food fight between the e-commerce giant and retail behemoth Walmart Stores (NYSE:WMT) is shaping up to be one for the ages.

Shares of Walmart rose almost ten per cent in trading yesterday in response to the company’s second quarter earnings report which beat analysts’ expectations on a number of fronts. Walmart posted total revenue for Q2 of $128.03 billion, compared to the $125.97 billion consensus, while its same-store sales in the United States shot up 4.5 per cent versus the expected 2.4 per cent increase (all figures in US dollars).

The sterling numbers are a reflection of a US economy currently firing on all cylinders, while management guidance offered more good news, projecting 2018 earnings of between $4.90 and $5.05 per share, compared to the prior $4.75 to $5.00.

It was Walmart’s spike in grocery sales — the best in nine years — that garnered much of the attention, however, as the company’s redoubled efforts to stay ahead of the pack, including Kroger and Amazon, seem to be paying off.

“We’re pleased with how customers are responding to the way we’re leveraging stores and e-commerce to make shopping faster and more convenient,” Walmart CEO Doug McMillon said. “We’re continuing to aggressively roll out grocery pickup and delivery in the U.S., and we recently announced expanded omni-channel initiatives in China and Mexico.”

And taking it to Amazon on its own turf, online sales for Walmart grew by 40 per cent for the quarter, with the company now predicting a similar 40 per cent digital uptick for the year.

That battle is likely to heat up, says Andrew Pyle, portfolio manager for Scotia Wealth, as shoppers get more acquainted with Amazon’s grocery offerings, including WholeFoods, last year’s blockbuster acquisition for Amazon at $13.4 billion.

“[Walmart] is clearly dominating the grocery space in the US and that’s where a lot of the revenue increase is coming from,” Pyle told BNN Bloomberg Thursday. “But as we all know, there’s competition entering that area, including Amazon.”

“Amazon doesn’t occupy the same amount of space as Walmart, but if you look at the shoppers that go to Walmart, 86 per cent of all shoppers at Walmart also shop on Amazon,” he says. “But we’re talking three per cent versus 25 per cent market share for Walmart. So, at this point, not a huge risk.”

Amazon has not been particularly forthcoming about how its WholeFoods acquisition is progressing, preferring to lump its quarterly sales numbers into the company’s overall “physical stores” results. Yet the company put the promotion of WholeFoods front and centre in the company’s latest Prime Day event, offering Prime members a $10 credit if they spent at least $10 at WholeFoods.

A recent poll by online coupon specialist RetailMeNot found that 70 per cent of US shoppers don’t currently buy groceries and household goods online, but 43 reported that they are likely to start now that these offerings are associated with Amazon Prime.

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About The Author /

Jayson MacLean
Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.

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