Only Walmart and Amazon Will Exist in the Future of Retail
Walmart and Amazon, co-existing and dominating the sector.

With death coming to retail seemingly the anthem on Wall Street this week, Barclays just revealed how an-already bleak situation for bricks-and-mortar players could get even worse.

Amazon.com Inc.'s (AMZN) proposed $13.7 billion acquisition of Whole Foods Market Inc. (WFM) has caused investors to pull back from almost all the companies operating in the grocery space, including Kroger Co. (KR) , Costco Wholesale Corp. (COST) and Target Corp. (TGT) . But not Walmart Stores Inc. (WMT) .

Since the announcement of the blockbuster deal on June 16, shares of Walmart gained 7.2%, indicating that Wall Street doesn't view e-commerce giant Amazon as competition to the big-box, discount retailer. Rather, both companies, together, will wreak havoc on the retail industry, Barclays analyst Karen Short said in a research note on Friday.

"We believe the stock's outperformance is at least partially related to a view from the investment community that only best-in-class retailers will win, and Walmart is viewed as one of the few retailers in this camp," Short wrote.

With Walmart boosting acquisitions of online apparel retailers, including its most-recent purchase of men's fashion retailer Bonobos, department-store retailers should not just be fearing Amazon.

"While Amazon continues to be the most significant concern, Amazon's focus is on higher income, urban customers, while Walmart's focus is more suburban and middle/lower income in nature," Short wrote. "As a result, we believe both Walmart and Amazon can continue to disrupt without clashing—for now."

Friday ended a disastrous week of second-quarter earnings from traditional retailers such as Macy's Inc. (M) , Nordstrom Inc. (JWN) , J.C. Penney Co. Inc. (JCP) and Kohl's Corp. (KSS) . J.C. Penney was the latest, reporting on Friday morning an alarming adjusted net loss of 9 cents a share and same-store sales decline of 1.3%.

Short wrote that she expects Walmart's first-quarter online sales growth of 63%, driven by Jet.com, to be just as strong in the second quarter, which is set to be released on Aug. 17.

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