Why Target's latest results should make Amazon nervous

Brian Sozzi
Editor-at-Large

Investors that quickly pounded Target’s (TGT) stock Tuesday following a surprising third quarter earnings shortfall are missing the bigger picture.

That is Target is emerging as one of the bigger threats to Amazon among traditional bricks-and-mortar retailers. Credit Target’s push to remodel 1,000 stores by 2020 and it now being able to offer same-day delivery to millions of people in 46 states. An effort started in 2017 to be more competitive on prices with Walmart and Amazon and offer better customer service has helped, too.

Target. (Flickr / Mike Mozart)

Target’s third quarter sales numbers only fuel the debate that it’s a growing Amazon nemesis.

  • Same-store sales increased 5.1%, marking four straight quarters above 3% growth. For a legacy retailer operating thousands of stores, that type of growth borders on making magic. Walmart U.S. same-store sales rose 3.4% in the third quarter, for perspective.
  • Target’s online sales spiked 49% in the third quarter, quickening from the 41% pace in the second quarter. Walmart’s online sales rose 43% in the third quarter.

Some on Wall Street will focus in on Target’s 3 cents a share earnings miss for the quarter and be upset. Others will lock in on pressured profit margins on the back of efforts to invest in worker hours and training. The disappointment is understandable as Target’s stock has enjoyed a nice 16% move higher this year, so the market is expecting a lot from the discounter.

Ultimately, Target’s third quarter goes a long way to showing that it’s carving out more than a niche in the future of retail. And that’s likely to be rewarded with a higher stock price over time.

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Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

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