After Amazon, Target may now be the biggest threat to struggling retailers

The Minneapolis retailer goes from strength-to-strength while others stagnate.
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The successes enjoyed by Target in recent years may well be at the expense of its fellow big box retailers.

While much of the focus on the decline in bricks-and-mortar retail has been on the impact from online shopping, in particular Amazon, there are signs now that Target is proving a similar threat to other businesses.

The Minneapolis retailer's most recent third quarter results revealed a 5 percent growth in sales, generating revenue of $18.7 billion, and comparable sales growth of 4.5 percent.

Target also upgraded its guidance for the crucial holiday season, seeing its share price skyrocket by $16 as a result, and is now trading at the highest level in its history.

Its success flies in the face of the prevailing situation among some of its fellow big box retailers.

This month also saw Macy's post its Q3 results, which saw a 4.3 percent drop in sales while profits plummeted from $62 million last year to just $2 million this year.

J.C. Penney and Kohl's posted similarly stagnant results, although Target's major rival Walmart managed to post same store sales growth of 3.2 percent, which was more than expected albeit less than Target's.

Per HFN Digital, Macy's said that the late arrival of cold weather, a drop in intentional tourism and lower-than-expected performance in "lower tier" malls were behind its downturn, but those same factors don't appear to have affected Target, which in recent has invested heavily in revamping its stores, upgrading its loyalty programs and boosting its customer pickup services to get more people through its doors.

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Seeking Alpha in turn has suggested that Target is now poaching shoppers from other big-box retailers, much like Amazon has done before, all the while not going down the route of aggressive price cutting adopted by its competition.

"If Target's revenue is growing then it is likely coming at the expense of other retailers. Traditional retailers have tried to beat back the Amazon threat for the year," the website noted. "The 'Target Threat' could now become the next narrative."

It adds: 

"Rising store traffic may have been the biggest differentiating factor between Target and other retailers. The company has always offered quality products at discount prices. Now, it has a respectable digital channel and same-day fulfillment options customers have come to demand. Several retailers have struggled to drive traffic to stores. They have had to rely on aggressive promotions to attract customers. This has crimped margins and in some instances, sapped liquidity. The more Target grows, the worse it could get for the competition."

Target heads into the Christmas period knowing it's now one of the country's premier toy retailers, having leapt at the chance of filling the vacuum created by the demise of Toys "R" Us by pumping huge sums into expanding and revamping its toy departments.

While it's not good news for other retailers, it's positive for Minnesota, not least because the other major state-based retailer, Best Buy, is another of those companies bucking the trend.

The Star Tribune reported last week that both companies are heading into the holiday season in a strong position, with Best Buy having undergone a successful turnaround in the past five years that has seen it survive as one of the few remaining electronics-only retailers.

The newspaper notes that the two retailers rely on differentiators to stand out from the crowd, with Target benefiting from its huge array of exclusive brands, and Best Buy its team of electronics experts in the form of the Geek Squad.

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