Stock Market Votes for Walmart Over Amazon as Holidays Start

By Douglas A. McIntyre Published Nov 22, 6:10AM EST

Amazon.com (NASDAQ: AMZN) is supposed to thrash Walmart (NYSE: WMT) in sales increases this holiday season. That should make Amazon the better investment. Wall St. believes otherwise, though. Over the past month, shares in Walmart are flat, while those of Amazon are down 20%. Amazon’s approach to gain sales has hurt investor perceptions. Bricks-and-mortar has an edge over e-commerce for the first time in years, at least in the eyes of shareholders.

The major criticism of Amazon is that, despite its anticipated growth, management says it is happy to operate on low margins to gain market share for products like its Kindle Fire tablet. Industry analysis shows the world’s largest e-commerce firm will lose money on each unit it ships. Amazon also offers free shipping for many other products, another large expense. And the company will keep prices on most other items it sells low to match sharp discounts retailers like Target (NYSE: TGT) and Best Buy (NYSE: BBY) will offer.

Walmart’s advantage, in the view of investors, is that its U.S. store sales have begun to rise for the first time in more than two years. The company is so large that the revenue increase should be leveraged into better earnings per share. But that perspective may prove to be mistaken. Walmart is no more immune to the bottom-line effects of discounts than any other retailer. Walmart may not have a flagship product like the Kindle Fire, but the level of discounts it will offer on other items will similarly effect its profits.

Holiday sales will yield small margins for most of America’s large retailers — e-commerce and store companies alike. The market’s perceptions of Walmart may be better than that of Amazon, but consumers have little discretionary income now, and that will show up in the fourth-quarter results.

Douglas A. McIntyre

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.