United Parcel Service Inc. and FedEx Corp. could be facing significant risk to their business after Wal-Mart Stores Inc. said it would offer discounts to some online orders if customers choose in-store pickup rather than home delivery. Analyst Ravi Shanker at Morgan Stanley said Wal-Mart's move marks "a seminal event" in the evolution of last-mile parcel delivery for e-commerce. "This announcement shows that [Wal-Mart] has realized that omnichannel logistics is significantly cheaper than individual parcel delivery and that moves of this nature will allow brick-and-mortar stores to see if customers prefer price or convenience," Shanker wrote in a note to clients. Given UPS's and FedEx's exposure to non-Amazon.com Inc. e-commerce businesses, he believes a shift to click-and-collect model could have a large impact on package delivery companies. Shanker rates UPS underweight, saying the company faces more risk than FedEx, which he rates equal weight. UPS's stock, which shed 1.4% Wednesday after Wal-Mart's announcement, slipped 0.1% on Thursday toward a 10-month closing low. FedEx shares tumbled 3.5% Wednesday and fell another 0.5% on Thursday. UPS shares have lost 9.1% year to date, while FedEx's stock has lost 0.5% and the S&P 500 has gained 4.4%.
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