After Walgreens reported a disappointing quarter on Thursday, CNBC’s Jim Cramer told investors why he thinks Amazon is making it hard for the drugstore giant to succeed.
“The stock market can be a brutal, brutal, brutal task master. So can capitalism. I’m sure that Walgreens will come up with some way to make money before its debt position wipes it out,” he said. “But, right now, my money’s on the company with the stock on the all-time high list, not the one that’s on the new low list. My money is on Amazon.”
The stock hit a new 52-week low on Thursday, with shares tumbling 22% after the company’s earnings came in significantly below Wall Street’s expectations. The retailer also slashed its full-year guidance, with CEO Tim Wentworth saying in a statement that Walgreens continues to face “a difficult operating environment” due to “persistent pressures on the U.S. consumer” and “marketplace dynamics” that hurt the pharmacy business.
Cramer said Walgreens is more expensive than Amazon and less convenient, adding that there are not enough employees at its stores. He also discussed the chain’s ongoing theft issues and expressed frustration that many items are locked behind plexiglass.
He conceded that Walgreens’ back-of-store pharmacy business may currently have a slight edge on Amazon. But Cramer noted that pharmacists can be hard to find, and that the e-commerce giant does have its own pharmacy segment.
Cramer wondered whether Walgreens will end up like Borders, a now-defunct bookstore chain that saw its profits vanish as Amazon became more and more popular.
“Look, Amazon never set out to destroy Borders. They didn’t set out to destroy Walgreens, either,” he said. “But they do set out to get the best products with the best values at the most convenient places — the most convenient places meaning your home.”
Walgreens and Amazon did not immediately respond to requests for comment.
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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Amazon.
