Wal-Mart Stores, Inc. (WMT), Amazon.com, Inc. (AMZN), eBay Inc (EBAY): Retailers Continue to Struggle Due to E-Commerce Competition

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Once again, retail giant Wal-Mart Stores, Inc. (NYSE:WMT was listed as the top company in America on Forbes’ recent list of the top 500 companies (by annual revenue). With revenue for the TTM topping $469 billion, the company might have experienced more bad news than good after its first-quarter earnings. However, they weren’t alone.


Wal-Mart Stores, Inc.Wal-Mart Stores, Inc. (NYSE:WMT) fell 1.7% on Thursday last week after reporting disappointing revenue and profit in Q1. Although Wal-Mart’s revenue increased about 1% from the year-ago quarter, this was not as much as was expected. The store was not alone in this area, as J.C. Penney Company, Inc. (NYSE:JCP) actually lost $348 million in the first quarter alone. This was on top of the nearly $1 billion lost throughout the course of last year. Its revenue dropped 16% from the year-ago period.

Despite Same Store Sales (SSS) falling 17% for Penney’s, it was less than they fell a year ago. It actually lost 2% more last year than this quarter. Wal-Mart Stores, Inc. (NYSE:WMT)’s SSS also fell, but only 1.4% from one year ago.

Further disappointments

Unfortunately, this wasn’t where the issues stopped for Wal-Mart Stores, Inc. (NYSE:WMT). The retailer failed to meet expectations with earnings per share of $1.14, $0.01 less than expected by analysts. This leads to a earnings yield of 6.4% for Wal-Mart Stores, Inc. (NYSE:WMT).

E-commerce continues to rise

So what’s happening to these retailers? Where are consumers shopping? Where did the money go? The obvious answer to these retailers struggling is the advancement of e-commerce companies. For instance, Amazon.com, Inc. (NASDAQ:AMZN)‘s earnings once again beat expectations by just enough to keep investors interested. Yes, the company’s net income dropped 45%, but their net sales increased 22%.

Again, the company saw positive results in regards to its cash flow, as it increased  39% to $4.25 billion. This was $1.25 billion more than the previous year, and net sales reached levels of $16.07 billion compared to $13.18 billion last year. The company continues to attract customers because of its cheap prices (generally speaking), convenience, and variety. I don’t think there is any doubt that Amazon.com, Inc. (NASDAQ:AMZN) is playing a role in brick and mortar retailers’ woes.

eBay Inc (NASDAQ:EBAY saw income increase 19% in Q1, which was slightly lower than expectations. This just goes to show the power of e-commerce, as brick and mortar stores are losing income by almost as much. eBay Inc (NASDAQ:EBAY) may offer more opportunity to those investors willing to wait for it. With a 21% increase in transaction volume from PayPal and a 25% increase in merchant services. PayPal accounts for more than 40% of eBay Inc (NASDAQ:EBAY)’s total revenue.

eBay Inc (NASDAQ:EBAY)’s current marketplace customer count is at 116 million, 3.9 million than one year ago.Earnings per share for this e-retailer were right in the middle of expectations. Analysts were expecting between $0.62-$0.64/share and the company posted figures of $0.63.

A different point of view

eBay Inc (NASDAQ:EBAY)’s CEO, John Donahoe said after the company released its earnings:

“We had a strong first quarter, with accelerating user growth across both Marketplaces and PayPal. Technology is creating a commerce revolution, and we are in the forefront with strong mobile leadership and a focus on helping retailers and brands engage consumers anytime, anywhere.”

While J.C. Penney’s Chief Executive, Myron Ullman, had a slightly different tone when speaking of his company’s earnings:

“This won’t happen overnight. Rest assured, we recognize the magnitude of the challenges that we face.”

As the saying goes, there are two sides to every story. This is a perfect example of how true that saying is.

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