Amazon's Supercenter Expansion Intensifies Competitive Threat to Walmart

What happened

Amazon has secured approval to build a 225,000 square-foot supercenter near Chicago, combining in-person shopping with e-commerce fulfillment in a direct mimicry of Walmart's model. This move escalates competitive pressures in Walmart's core markets, where the DeepValue report already flags Amazon as a key rival amid thin retail margins and high valuation. Walmart's current stock price, up 23% over 12 months with a P/E of ~39x, embeds optimistic assumptions about automation and ecosystem growth, leaving little margin for error. Amazon's physical retail push could accelerate share loss in grocery and e-commerce segments, undermining Walmart's growth narrative and pressuring already-strained operating margins. Thus, the development highlights the critical need for Walmart to demonstrate tangible benefits from its tech investments to defend its market position.

Implication

Investors should closely monitor Walmart's U.S. comp sales and e-grocery share trends, as Amazon's supercenter could directly challenge Walmart's dominance in these areas. The elevated valuation of Walmart, with a P/E of ~39x and EV/EBITDA of ~22x, offers minimal downside protection if competition intensifies, making any misstep costly. This news validates the DeepValue report's warning about Amazon as a structural threat, suggesting that Walmart's execution on automation and retail media must now deliver faster to justify its premium. Near-term, stock volatility may increase as markets reassess Walmart's ability to fend off Amazon's omni-channel advances. Long-term, Walmart's scale and store density provide some defense, but investors should remain patient, awaiting clearer signs of operational leverage before committing new capital.

Thesis delta

The news reinforces the competitive risks highlighted in the DeepValue report, particularly Amazon's growing physical presence, which could pressure Walmart's market share and margin expansion efforts. It does not change the core valuation overhang, but it underscores the urgency for Walmart to prove its tech investments can drive sustainable operating income growth above sales. Consequently, the 'WAIT' recommendation remains intact, with increased emphasis on monitoring competitive dynamics and execution milestones.