Target And Walmart Beat Amazon On Wall Street - Forbes

Brick and mortar retailers Walmart and Target are beating online retail giant Amazon on Wall Street.

So far this year, Walmart’s and Target’s shares are up 32.84% and 100.44% respectively, while Amazon’s shares are up 19.22%.

Target And Walmat Shares Beat Amazon YTD — koyfin_20191218_073224533
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That’s a big change from the previous years when Amazon’s shares were beating the traditional retailers’ shares by a huge margin.

Amazon Beats WMT and TGT Over The Long Run — koyfin_20191218_072027063
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This change in the fortunes of the three retailers on Wall Street may come as a big surprise to business strategists and equity analysts who were ready to write off traditional retailers.

What’s behind this change? Target and Walmart have got their business model right.

That's evidenced by the sequential rise in same-store sales reported by the two retail chains in recent quarters.

"Target results combined with those of other retailers demonstrate that consumers still do want to shop in stores if they are offered the right combination of merchandise, price, environment, and convenience (including digital options)," says equity analyst John Zolidis. "TGT, WMT, and TJX are getting this done. KSS, JCP and Macy's have not done so much."

Both Target and Walmart reported another blockbuster quarter recently, confirming that their strategy of fighting back against Amazon is working; and their big comeback in the retail space is for real.

Zolidis was particularly impressed with Target's results.

"I think the results in the third quarter were a repeat of the strong performance from the second quarter, thereby serving to dispel fears that its previous sales and profitability gains were a fluke," he says. "Accordingly, the stock's 14% increase reflects a more optimistic future about the company's earnings and cash flow and is justified, in my opinion."

Both retail giants have made big investments in product and merchandise technology that have changed the rules of the game in retailing, by merging in-store and on-line sales. And they have leveraged their local presence to provide same-day delivery.

Elaborating more on Target's strategy, Zolidis argues that the company is "taking share with a combination of compelling private label, attractive prices, a shopping environment that consumers like, and an enhanced offer via digital engagement and convenience."

Christian Selchau-Hansen, CEO and co-founder of Formation, provides further insight on how Target's strategy compares with that of Amazon.

"In looking at Amazon Prime and Target's Circle program, it's interesting to contrast the two programs in terms of their primary value to customers," he says. "With Circle, Target is giving customers pricing benefits for every purchase. At its core, the program is around increasing value. This is an interesting contrast to Amazon Prime, where the primary benefit is to enhance convenience by offering two-day shipping and, more recently, free returns. With Prime, Amazon is betting on making shopping online more convenient, increasing time saved for customers."

Meanwhile store closings by competitors has helped Target. "The company is also benefiting from the exit of numerous competitors," adds Zolidis. "We think we can make the case without too much difficulty that store closings and siphoning traffic from less-convenient enclosed shopping malls will provide ongoing share capture opportunity for TGT."

While it's still unclear whether store shopping will find its old glory days, one thing is clear: Target and Walmart have got their business model right, at least for now.

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