By Teresa Rivas

What a difference a decade makes.

It was a simpler time in 2015: The internet was obsessed with figuring out the color of a dress, Pizza Rat was the most famous New Yorker, and Wall Street was sure that Amazon.com was the only retailer Americans would ever need in the future. Things couldn't look more different today.

Although Amazon had been making waves in retail long before, 2015 was the year when investors acted as if it would replace all its competition. Shares of many traditional retailers took a hit; old-guard names like department stores Macy's and Nordstrom hit peaks they have never recaptured; and the SPDR S&P Retail ETF went virtually nowhere from the start of 2015 until the pandemic. As the world's largest retailer,

Walmart was seen as one of biggest losers from Amazon's ascent: The shares dropped nearly 30% that year as investors worried its stodgy model would get left behind in the internet age.

Of course, that never happened. Amazon realized the value of physical stores. Meanwhile Walmart heavily invested in technology, allowing it to not only boost its online sales, but host a growing third-party marketplace and boast a growing advertising business.

Unlike Target, Walmart gets most of its business from selling things people need, like groceries, rather than things they want like home goods and apparel. As a result of these defensive characteristics and its increasing dominance, Walmart shares have outperformed both Amazon and the S&P 500 so far in 2025, as well as over the past one-, three-, and five-year periods, according to FactSet.

Looking ahead, many analysts say there's room for both companies to dominate retail -- 86% and 93% of analysts have Buy ratings or the equivalent on Walmart and Amazon stock, respectively.

"Long term, both Walmart and Amazon are structural e-commerce winners," writes Bernstein analyst Zhihan Ma in a new note Tuesday. "We expect Amazon to continue to lead in nongrocery categories and push the envelope on margin gains...while Walmart leads in e-grocery and improves its e-commerce profitability through automation and high margin alternative revenue streams."

Interestingly, while Amazon may have the first-mover advantage in e-commerce, the fact that Walmart's e-commerce business is just ramping up gives it an edge, Ma says. The analyst expects Walmart can continue to notch double-digit percentage growth in online sales, regardless of the difficult economic backdrop with signs of deteriorating consumer confidence.

That also makes Walmart's share price look more palatable, she writes. The stock's price-to-earnings ratio has been bumping up against highs and is around 35 times at present.

"Adding back its ecommerce-led profitability improvement potential, we believe that Walmart is trading closer to 28 times," she adds.

Ma notes that both companies have characteristics that make them attractive in a potential downturn.

Walmart not only leads in categories like groceries and essentials that consumers have to buy often, but its e-commerce and third-party offerings "have made it an attractive trade-down option for higher-income consumers."

Amazon, too, has been growing its share of defensive categories other than grocery. "Prime subscriptions should run defensive given the utility of competitive pricing and fast and free delivery for 180 million+ subscribers," Ma writes.

That said, looking back to 2015, Walmart still has work to do. Over the past 10 years, Walmart stock has more than tripled and outperformed the S&P 500, but it lags behind Amazon's roughly 725% gain. It's unlikely that Walmart will be able to bridge that major gap in the near term.

However, it's fair to say that the Walmart of today isn't the company it was a decade ago. Along with its growing e-commerce platform, it now has a Walmart+ subscription service (albeit a small portion of overall sales); its Sam's Club warehouse business is growing; and it has sold off underperforming overseas divisions to focus on more profitable ones, including its domestic business.

No one knows where things will end up in terms of consumer sentiment and the economy as long as a trade war looms. Nonetheless, it seems inevitable that Americans will have to continue to buy essentials, and that more of them are turning to Walmart and Amazon to do so.

Write to Teresa Rivas at teresa.rivas@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 22, 2025 13:33 ET (17:33 GMT)

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