Consumer liquidity woes remain the basic constraint on broad economic activity in the United States, which remains heavily consumer oriented. Without real growth in income and/or debt expansion and willingness to take on new debt, and with consumer confidence and sentiment at levels consistent with a significant portion of consumers under financial stress, there has been no basis for a sustainable economic expansion since the Panic of 2008. – John Williams, Shadowstats.com
The lively retailing industry expert Howard Davidowitz was on Bloomberg Tuesday (May 19) to discuss retail sales and Walmart’s quarterly results.
We’re closing a record number of stores. We’re going to close a record number of malls. Vacancies are gonna be up. More chains are going bankrupt than I’ve ever seen.
Davidowitz is known specifically for his remarkable insight on the retail industry and consumer behavior. And he’s known for having an unfiltered willingness to call it like is, which probably why he has not been a guest on CNBC for quite some time.
Everybody is in the tank, I mean the whole economy is in the tank. We’ve had five months straight of down [negative] industrial production – you gotta watch that number. The biggest thing we got going up is the [Treasury] debt.
You can watch part of his segment on CNBC by clicking on the pic below:
They spend time comparing Walmart’s on-line business to Amazon.com. Davidowitz asserts that Walmart can’t compete with Amazon because AMZN has an enormous technology advantage. He states that AMZN has spent billions on its technology.
This is indeed true. However Howard has not spent time dissecting AMZN the way I have. As I’ve demonstrated painstakingly in my AMAZONdotCon research report, AMZN’s business model loses money because it does not charge enough per sale to cover the entire “cost accounting” all-in cost of getting a product from the AMZN’s website to the customer’s mailbox. The more it spends on technology and fulfillment, the more it loses.
Of course Walmart can’t compete with AMZN. No one can compete with AMZN because AMZN plays the game to lose money. It has been forced to issue $9 billion in debt over the last two years in order to fund its money-losing operations. AMZN has been in business for 20 years and it still has not figured out how to make money. In fact, its operating margins and net income have been steadily eroding since 2004. It lost money on a net income basis in 2014.
And now Walmart has announced that it will ramp up its spending on e-commerce into the billions, including testing free shipping: WalMart Eyes Costly E-Commerce Battle With Amazon. This is a spending war that could put a dagger in AMZN, given that AMZN is bleeding cash flow (per my research report).
You can access my research rreport here – AMAZONdotCON – to understand why AMZN will be an incredible short-sell play when reality finally grips the stock market. In fact, the S&P 500 has recently been hitting all-time highs again and AMZN has declining since it’s absurd spike up to $450 in late April.