Walmart Inc.: CEO History

The single most dangerous thing about Walmart's position is how little room there is for error. A 3.1% net margin on $713 billion means the company earns about $22 billion in net income. Sounds like a lot — until you consider that labor costs alone run north of $100 billion annually. A 2% wage increase across 2.1 million employees costs roughly $2 billion. A bad holiday season with excess inventory requiring markdowns can erase a full quarter's profit improvement. The margin of safety is razor-thin.

Amazon is the existential competitive pressure, but not in the way most people frame it. Amazon doesn't need retail to be profitable — AWS generates enough cash to subsidize delivery losses indefinitely. That means Amazon can offer faster delivery, lower prices, and broader selection simultaneously while losing money on every package. Walmart can't do that. Every dollar Walmart invests in faster delivery or lower prices comes directly from operating income. There's no cloud computing business backstopping the retail operation.