Amazon’s Biggest Threat

Greg Guenthner coming to you from Baltimore, MD… Via Rude Awakening

The brick and mortar retail apocalypse is getting worse.

Malls are crumbling. Shelves are bare. The kids aren’t hanging out at the neighborhood J.C. Penney anymore…

After all, your local shopping center is no place for a family. Why expose your children to the unwashed masses at the mall when Amazon Prime offers free same-day delivery? As more Americans opt to order their goods via smartphone, the Amazon apocalypse rages on at an alarming rate.

Sure, there are a few survivors buried in the retail rubble (we’ll get to them in a hot minute). But first, let’s take a quick peek at one of’s (NASDAQ:AMZN) victims that can’t seem to find a way around the e-commerce onslaught.

After a disastrous second quarter, Macy’s Inc. (NYSE:M) shares tanked double-digits this week.

I do not envy Macy’s shareholders. Shares plummeted more than 15% on Wednesday following the company’ second-quarter earnings report and extended their losses into Thursday. The stock is now pushing toward nine-year lows.



Much like Sears, JC Penny, and other dying retail ilk, I doubt Macy’s has much time left in this mortal coil. Since its peak in 2015, prices have fallen more than 73%. Now the only use for Macy’s is a place to buy cologne that’s on sale or teach your kid how to drive in its empty parking lot.

To make matters worse, tariffs have spooked everyone in the retail sector. According to CNBC, Macy’s already tried to raise prices on a few items in response to tariffs. In a statement that borders on painfully obvious, Macy’s CEO Jeff Gennette said that customers had “very little appetite for those cost increases.”

Amazon announced this week that its facial recognition software can now accurately detect fear. I’m guessing Jeff Bezos & Co. already know they have successfully squashed Macy’s and are already moving on to other brick and mortar retail prey…

Despite Amazon’s dominance, Walmart Inc. (NYSE:WMT) is one traditional retailer that’s showing it can thrive in the new economy.

Walmart CEO Doug McMillon said in July he admires Amazon for its innovation and customer focus.

At the time, I noted that we shouldn’t interpret these comments as a sign that Walmart is giving up the good fight. In fact, McMillon’s comments will probably serve as a rallying cry to make Walmart more ruthless than ever. After all, Walmart needs Amazon to motivate the retailer to do better by beating them at almost every turn.

We haven’t seen the end of the feud, either. In fact, Walmart is doing a heck of a job as it tries to keep up with Amazon’s roaring comeback this year.

Case in point: Walmart’s latest numbers.

While other retailers languish this earnings season, Wal-Mart did very well. The big-box retailer revealed strong second quarter profits and raised guidance, posting its fifth straight year of sales gains.

Ecommerce sales are also up a whopping 37%, reports CNBC. Walmart’s strong push to bolster its online offerings is clearly paying off…

Wal-Mart has a strong online presence and continues to make serious push into the grocery market — something even Amazon has failed to accomplish. Physical stores give Walmart an edge because it’s significantly easier to get groceries to customers. Options like delivery and in-store pickup allow customers to get whatever they need in a way that they choose.

Macy’s and the other mall-dwellers like JC Penney, Sears, and Bed, Bath and Beyond are getting left in the dust by older retailers like Wal-Mart who founds ways to innovate and figured out how to successfully operate in the internet economy.

The old-fashioned department stores are also getting crushed by online retailers like Amazon and Alibaba whose sheer weight and number of options suck in everything around them.

But there’s a reason I have both Walmart and Amazon in our model portfolio. Don’t sleep on these retail giants during the second half of the year…


Greg Guenthner

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