Target, Walmart Shares Take Hit After Amazon's Move to One-Day Shipping

By Khadeeja Safdar 

Shares of Target Corp. and Walmart Inc. dipped the day after Amazon.com Inc. said its Prime members would be getting free one-day delivery instead of its current two-day offer.

Target shares were down 5.65%, to $77.12, and Walmart shares declined 1.92%, to $101.53, on Friday. Both retailers offer free two-day shipping on orders $35 and up, as well as an array of other delivery and pickup options.

Amazon said Thursday the $800 million move to one-day shipping would add products and ZIP Codes throughout the world, but the company didn't specify when the policy would be implemented.

"It's a significant step, and it will take us time to achieve, and we want to ensure we have good delivery experience for our customers as we evolve this offer," said Brian Olsavsky, Amazon's chief financial officer.

Amazon shares inched up 2.54% on Friday.

The most profitable shoppers for bricks-and-mortar retailers are usually the ones who make purchases in stores, but that is no longer the preferred option for many people. Across the U.S., online shopping accounted for 9.7% of total retail sales last year and grew 14.2% from the previous year, according to the Commerce Department.

Last year, Amazon boosted its Prime membership cost to $119 a year, an increase of $20 to reflect the program's rising costs and expanded options.

Walmart and Target have invested heavily in their supply chains to offer faster shipping options, but they have also emphasized ways for shoppers to pick up orders in stores to defray shipping costs. Sales have increased at both retailers thanks to investments in stores and digital capabilities.

A spokesman for Target said Friday the Minneapolis-based retailer offers shoppers "numerous ways to shop same-day and receive their purchases within hours," including options to pick up orders at stores, which don't require a membership.

Walmart didn't immediately respond to a request for comment.

After Amazon's announcement, retailers are likely to make more investments that could impact profits, said Alice Fournier, an e-commerce analyst at Kantar. "Considering how quickly free two-day shipping became a baseline expectation in e-commerce, investors now see the possibility that free one-day shipping follows a similar trajectory."

Some analysts said large retailers won't have much difficulty competing. In a research note on Friday, John Zolidis, president of Quo Vadis Capital, said it would be a mistake for investors to sell shares of large retailers such as Target and Walmart on Amazon's announcement.

"They have anticipated this for some time and are already rolling-out corresponding services," he said. "The losers here are going to be retailers that are already behind the curve and don't have the financial strength to make the investments to develop these capabilities."

Chris Wack contributed to this article.

Write to Khadeeja Safdar at [e-mail]

(END) Dow Jones Newswires

April 26, 2019 16:43 ET (20:43 GMT)

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