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Wal-Mart is ‘under siege’ by Amazon, trader warns

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Wal-Mart is 'under siege' by Amazon and Whole Foods: Pro

Increasing competition in the grocery space spells big trouble for Wal-Mart, trader David Seaburg argues.

"Wal-Mart is under siege here," Seaburg, head of equity sales trading at Cowen and Co., said Friday on CNBC's "Trading Nation. " "Their biggest revenue driver — the grocery segment — is under attack by Amazon and the acquisition of Whole Foods. "

On Thursday, Amazon announced that it will complete its acquisition of Whole Foods on Monday and will immediately cut prices on a range of items in the high-end grocery stores. Shares of Wal-Mart fell by as much as 3 percent in reaction.

"With these cost cuts, Whole Foods is going to be able to go after Wal-Mart's market share, because they're going to attack and go after the customer and take them from Wal-Mart," Seaburg said. "They're going to be able to compete on price and provide a much higher-quality product, and Wal-Mart's going to suffer."

In addition, Seaburg points to the competition posed by Aldi, a German discount supermarket chain that has embarked on an aggressive U.S. expansion.

Aldi is "a discount provider that offers a high-quality product. I think Wal-Mart is going to be under siege from them as well."

While Wal-Mart has been seen as a "relative safety trade," the competitive pressure will soon "come to a head," Seaburg predicted. "I think the stock's expensive here and I don't see much upside."

Not everyone is concerned about the Amazon impact, however.

"I don't think it's a big concern," MKM Partners research analyst Patrick McKeever told CNBC in a phone interview Friday. "Wal-Mart's grocery business is pretty well-differentiated."

"Lower prices will probably attract some new customers into Whole Foods, but I don't think they go low enough for that core Wal-Mart customer," McKeever said.

In addition, Whole Food stores tend to be "in more affluent areas." And while Whole Food's prices may come down, Wal-Mart has done "a pretty good job of improving its overall grocery business – particularly fresh foods."

All in all, the Whole Foods concerns merely represent "a little noise here," said the analyst, who has a neutral rating on Wal-Mart.

Even after a tough end to the week, Wal-Mart shares remain nearly 14 percent higher year to date.

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