Why Amazon should take Target and Walmart seriously

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Not a lot other than all things Amazon (AMZN) keeps the Jeff Bezos-led C-suite up at night in Seattle. After all, it’s Amazon — decades long dominator of e-commerce and the cloud.

“Amazon doesn’t worry about anything that anybody else does, ever,” said Jon Reily, e-commerce strategist at Publicis Sapient, on Yahoo Finance’s The First Trade. “Amazon is its own animal, it doesn’t look quarter to quarter or year to year — they do what they are going to do.”

But strong second-quarter earnings results from two old-school retail rivals suggest Amazon better be watching its back.

Holy grail of retail

The overall synopsis from Target’s (TGT) and Walmart’s (WMT) second quarters: Each is beginning to reach the holy grail in modern day retailing. That is by successfully offering a seamless shopping experience both online and in thousands of physical stores, each retailer is able to drive strong sales and profits.

For its part, Target reported Wednesday second quarter adjusted earnings of $1.82 a share, trouncing forecasts for $1.62 a share. Same-store sales rose 3.4%, ahead of estimates for 3% growth. The stock touched a record on the session.

The retailer cited a surge in same-day fulfillment as driving sales growth. Its order pick up, drive up and Shipt services accounted for nearly 1.5 percentage points of Target’s overall comparable sales growth during the quarter. Online sales jumped 34% during the quarter.

A tip of the hat also goes to hundreds of Target store remodels and vastly improved food departments. Both are helping to get people in the door more often — and perhaps shopping less on Amazon.

“So we are seeing our Target guests visit us more frequently, shop more categories. They are enjoying the changes we have made in the store experience, but they are also taking advantage of the convenient fulfillment options that we are offering,” Target CEO Brian Cornell told analysts during a conference call.

Target also hiked its estimates for the third quarter, seeing adjusted earnings of between $1.04 per share to $1.24 per share, better than current expectations of $1.16.

The story was similar at Walmart in the quarter.

This Nov. 9, 2018, photo shows a checkout scanner at a Walmart Supercenter in Houston. Retailers will once again offer big deals and early hours to lure shoppers into their stores for the start of the holiday season. But they'll also try to get shoppers out of their stores faster than ever by minimizing the thing they hate most: long lines. (AP Photo/David J. Phillip)
A checkout scanner at a Walmart Supercenter in Houston. Retailers will once again offer big deals and early hours to lure shoppers into their stores for the start of the holiday season. (AP Photo/David J. Phillip)

Walmart’s earnings beat analyst forecasts by 5 cents on the back of 2.8% same-store sales increase at U.S. stores. Online sales grew an impressive 37% at Walmart U.S. and 35% at Sam’s Club.

The retailer slightly lifted its full-year same-store sales outlook.

“We’re favorably positioned as we leverage our expansive supercenter network to deliver a robust omni-channel experience,” Walmart CEO Doug McMillon said. “More than ever, we’re innovating across the business. We’re experimenting with emerging technologies to improve store operations and reduce friction in our customers’ lives. The initiatives we have underway provide extended access to our brand and position the company to earn a greater share of our customers’ wallet over time.”