24/7 Insights
- Target Corp. (NYSE: TGT) is the third-largest big-box retailer in America.
- Its troubles mean the company and its stock will likely fall further behind.
Target Corp. (NYSE: TGT) has long planned to be the second-largest big-box retailer behind Walmart Inc. (NYSE: WMT). That place has been taken by Costco Wholesale Corp. (NASDAQ: COST), and Target’s troubles mean it will likely fall further behind. While its shares are flat this year, Walmart’s are higher by 29%, compared to the S&P 500’s 15% gain over the same period. Costco’s are up about the same percentage as Walmart’s.
The perception of Target is based on more than just recent earnings. Revenue fell 3% in the most recent quarter to $24.1 billion, and net income was flat at $942 million. To be fair, it is better to look at Walmart’s U.S. figures and not its global total. That revenue rose 4.6% to $108.7 billion, and operating income (a proxy for net in this case) rose 7% to $5.3 billion.
Sheer size is Target’s problem. Walmart’s U.S. revenue is more than four times Target’s. Walmart has over 4,700 stores in America. The Target store count is just shy of 2,000. The chances of someone living close to a Walmart are exponentially higher.
It is hard to imagine what a company like Target does to gain market share. According to several pieces of research, Walmart.com is second only to Amazon in e-commerce retail traffic. Walmart also tops the nation in grocery store sales. Each offers discounts, so Target has no advantage there. All it can do is hope it holds onto the revenue it has today.
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