Wal-Mart Stores, Inc. (NYSE:WMT) downgraded their full-year earnings expectations today as the retailer struggles to ignite growth at their iconic big-box stores. They are just the latest in a series of retailers to temper expectations in a retail environment that hasn’t improved as many industry executives and analysts had anticipated.
If there’s a giant elephant in the room when discussing the continuing tepid sales numbers being both exhibited and forecast by retailers across the nation, according to Jim Cramer, that elephant’s name would be Amazon.com, Inc. (NASDAQ:AMZN).
The CNBC presenter, while discussing the downgraded forecast provided by Wal-Mart during a segment on Squawk on the Street, said he believes that the Amazon.com, Inc. (NASDAQ:AMZN) effect is conspiring to overwhelm retail stores at this point and demolish their sales and margins.
In fact, Cramer’s resignation over the power of Amazon.com, Inc. (NASDAQ:AMZN) led him to recently dump Costco Wholesale Corporation (NASDAQ:COST) stock from his charitable trust portfolio, which he addressed during the segment.
“We think Costco is the finest retailer, but we just look at Amazon and we just think that Amazon has decided to wreck everybody’s margins, and as long as their stock doesn’t get hit, it just; even the best of the best, which is Costco, it’s a very tough stock to own,” Cramer said.
Cramer later added that he had owned Costco for years, but that after yesterday’s announcement that Amazon.com, Inc. (NASDAQ:AMZN) was releasing their own mobile payment system to compete with Square and PayPal and get them into an advantageous position within retail stores, he simply had thrown his hands up in the air and had said “you can’t go against these guys.”
Amazon.com, Inc. (NASDAQ:AMZN)’s new payment system will undercut the entrenched competition by as much as 1% in per-transaction fees charged to merchants until 2016, which should make it especially attractive to small businesses.