Amazon Devices Out of Walmart Stores

The world's largest Internet retailer Amazon.com, Inc.’s (AMZN - Analyst Report) Kindle tablets and e-readers will no more be sold at Wal-Mart (WMT - Analyst Report) stores after the current stock is cleared.

However, Wal-Mart will continue to sell other tablets from Apple Inc. (AAPL - Analyst Report), Google (GOOG - Analyst Report), Barnes & Noble (BKS - Snapshot Report) and Samsung. This puts Amazon on the back foot, giving the other players an advantage heading into the holiday season.

However, it comes as no surprise given the growing animosity between Amazon and brick-and-mortar retailers over the past few years. In fact, another major retailer, Target (TGT - Analyst Report) also stopped selling Amazon devices earlier this year. Amazon will therefore have to contend with just Best Buy (BBY - Analyst Report) and RadioShack (RSH - Analyst Report). Although it remains unclear how these two will go, it is unlikely that these alliances will last much longer. Demand for Kindles this holiday season could be the only thing holding them back.

Amazon has crept up on these retailers, with its “free shipping” and products that were not marked up to include sales taxes. As popularity of the Kindles increased, these stores benefited from extra sales. However, they lost out in other areas because customers tended to examine many other goods in the stores and then complete the purchase online. Walmart also has a thriving online business, but it still lags market leader Amazon.

As retailers push out Amazon devices, the Internet retailer may be forced to set up outlets to showcase its products. This would drive up costs for the company and could also result in the incidence of sales taxes.

Amazon’s second quarter results were more or less within expectations. Reported revenue of $12.83 billion was down 2.7% sequentially and up 29.5% from the year-ago quarter. This was better than the guidance for the quarter of $11.9-13.3 billion (down 4.4% sequentially, or up 27.1% year over year at the mid-point) and in-line with consensus expectations. Year-over-year revenue growth was 32%, excluding an unfavorable currency impact.

Currently, Amazon has a Zacks #3 Rank, which implies a Hold rating in the near term.