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Walmart could deal a big blow to Amazon if this new service launches soon: analyst

Brian Sozzi
·Editor-at-Large
·3 mins read

One of the only things the world’s largest retailer doesn’t sell is a subscription-based Amazon Prime rival.

But that may soon change with a Walmart subscription plan, dealing a fresh blow to Amazon (AMZN) and enhancing the case to invest in Walmart’s stock (WMT), Morgan Stanley retail analyst Simeon Gutman says.

“I think the interesting part of Walmart to us is the potential for Walmart+,” Gutman told Yahoo Finance’s The First Trade. “The reason why it’s intriguing is because I don’t think Walmart’s margin structure is going to be redefined anytime soon. And so the next catalyst we think is something that could sort of change the narrative, a membership program that puts them head to head with e-commerce giant Amazon. We think that could reshape the narrative for them. And we expect them to launch this program some time in the back half of the year.”

Multiple reports of a Walmart subscription plan surfaced in July.

Dubbed Walmart+, Recode reported the membership program will include fuel discounts, same-day shipping at no extra cost and other sweeteners. The price: $98 a year.

Shoppers walk through an empty parking lot of a Walmart in the Panorama City section of Los Angeles on Tuesday, Aug. 3, 2020. A technical problem has caused a lag in California's tally of coronavirus test results, casting doubt on the accuracy of recent data showing improvements in the infection rate and hindering efforts to track the spread. (AP Photo/Richard Vogel)
Shoppers walk through an empty parking lot of a Walmart in the Panorama City section of Los Angeles on Tuesday, Aug. 3, 2020. A technical problem has caused a lag in California's tally of coronavirus test results, casting doubt on the accuracy of recent data showing improvements in the infection rate and hindering efforts to track the spread. (AP Photo/Richard Vogel)

A subscription service would provide Walmart with a new steady stream of income. It could take that money and use it to lower merchandise prices even more, boosting sales. Or it could reinvest in the business to provide some form of future payback.

Either way, to Gutman’s point the service would over time likely support higher profit margins for Walmart (and a higher stock price).

A Walmart spokesman declined to comment on the company’s plans. But Walmart CEO Doug McMillion fanned the speculation of a debut on his earnings call Tuesday morning.

“We have been testing membership with delivery on limited subscription since late last year. That customer offer was limited to a grocery and consumables delivery service as the reason to sign up. Since that launch, we have proven to ourselves that we can pick and deliver a broad set of categories across the super center not just food and consumables, but a wide assortment of general merchandize. We think that assort breath and our ability to deliver with speed nationally combined with a few other benefits for customers will result in a compelling proposition. So, we have been moving towards a new membership launch. We’ll share more about that membership and timing when it’s appropriate,” McMillon said.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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