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This Missed Opportunity Shouldn’t Hurt Walmart Stock Too Much

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The demise of toy retailer Toys R Us was supposed to be a boon for Walmart (NYSE: WMT ). While rivals like Amazon.com (NASDAQ: AMZN ) and Target (NYSE: TGT ) were certainly salivating as well when the rumors were confirmed earlier this year, Walmart stock owners were licking their chops.

Being the biggest brick-and-mortar retailer in the United States as well as the world, it was presumably best positioned to win the business about to be abdicated by Toys R Us.

As it stands right now though, it doesn't look like Walmart captured as much of that toy business as had been hoped/expected.

The evidence is anything but conclusive, to be fair, and none of the major retailers dish out much in the way of departmental details. To the extent the matter can be measured, however, Walmart appears to have missed out on the opportunity by not acting aggressively enough.

Amazon Wins Round One

The decision was made public in March, after a disappointing fourth quarter of 2017 that made it clear Toys R Us couldn't dig its way out of trouble . By June, the last of its remaining stores had been shuttered .

It took other toy-sellers roughly two nanoseconds to decide they'd do whatever it took to draw in more displaced toy shoppers to their venues. For Target and Walmart, that largely meant doing more of the same , but bigger and better.

For Amazon.com though, which lacks much of a retail presence (and no retail square footage dedicated to selling toys), the company printed its first-ever toy catalog in time for this year's holiday shopping season.

Amazon's gambit seems to have worked better than Walmart's, or Target's. Ecommerce analytical outfit Edge by Ascential reported earlier this month that the company's toy sales jumped 30% during the third quarter of this year.

No reliable data regarding Walmart's year thus far is available, but it's not a stretch to say the company's not seen as much growth as its bigger rival has in the toy category.

Underscoring that idea is a recent report from consumer-shopping analytical outfit Field Agent.

Survey Says…

The Field Agent report's data says displaced Toys R Us shoppers were looking to Walmart as their next-best option, but not by a wide margin.

Of the more than 700 consumers polled, 40% of the "one toy" shoppers said Walmart was most likely to win Toys R Us' former business this year. But, a respectable 34% of those one-toy shoppers felt Amazon was the more likely source.

Source:Field Agent

Given Walmart's sheer brick and mortar footprint and its depth of toy selection, that's not an assuring differential.

Reframing the question didn't help.

Widening the poll to shoppers looking for multiple toys in more than one place, 83% said they'd search Amazon.com in the absence of Toys R Us versus only 76% when Toys R Us was an option.

The number of consumers willing to shop Target for toys grew from 76% last year to 80% this year with Toys R Us out of the way. Walmart, conversely, only saw an improvement from 86% to 87% in terms of the number of toy buyers that would choose it now that Toys R Us isn't around.

Source: Field Agent

It's a poll that measures presumptions and intent rather than raw spending data, but the message seems an uncomfortably credible red flag all the same, particularly in light of post Black Friday comments made by former Walmart CEO Bill Simon.

"I thought Target was a winner last night in the toy area ," he said.

Bottom Line for Walmart Stock

It's not a disaster, to be clear, and certainly not a reason in and of itself to shed Walmart stock if you own it. While toys are an important part of Walmart's revenue mix, they still only account for about 7% of the company's total business.

Walmart is also already the world's biggest conventional toy distributor, commanding roughly a third of the total market according to data from Kloster Trading. There's not a great deal of growth potential left for the company in this category.

Target and Amazon both have more room to log relative market share growth.

Nevertheless, Walmart was arguably best positioned to nab the lion's share of the $11 billion worth of Toys R Us business that's been put up for grabs.

It operates three times as many U.S. stores as Target does, and to the extent a hands-on buying experience matters to shoppers, nobody's got a better venue than Walmart. The company just didn't handle the opportunity all that well.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter , at @jbrumley.

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The post This Missed Opportunity Shouldn't Hurt Walmart Stock Too Much appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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