Jan Kniffen, a retail industry veteran, says Target Corp. (NYSE TGT) will likely face significant challenges to regain the market share that it has lost over recent quarters.
The big-box retailer fell short of analyst expectations for its fiscal third quarter results despite lowering prices and launching a holiday sale early last month.
Target’s stock fell more than 20% this morning, reaching a low of $121 for the year to date. This was largely due in part to the company’s lowering of its full-year guidance. This dampened hopes that a quick recovery would be possible.
Why does the US consumer choose Walmart over Target?
Target was once known as a store with a superior in-store experience.
Walmart Inc. (NYSE: WMT), however, has made some aggressive investments in recent years to catch up. Jan Kniffen, a CNBC analyst, said that the store now “looks as good” as Target.
Plus, it’s “cheaper” and “better selection”. He said that WMT has been successful in stealing Target’s household customers worth $100,000 or more.
Walmart attributes much of its recent quarter’s strength to this segment.
Jan Kniffen says that a more than 5.0% increase in Walmart’s comparable store sales year-on-year suggests “somebody has given up a lot market share” and it appears to be Target.
Target’s smaller footprint in the grocery industry is an advantage.
Walmart has an advantage over Target, as 60% of its sales come from groceries.
Spending priorities for Americans right now are based on this.
A full grocery experience also means that “you go to [a Walmart] every single week”.
Kniffen, on today’s “Squawk Box”, argued that this is a “real advantage” for Target because it makes customers more likely to buy the other items from Walmart instead of driving to another Target.
WMT has also made significant investments in the technology that drives customers to its stores.
Kniffen called Walmart the world’s best retailer because it “adopts AI faster than other retailers and that makes their distribution system more efficient”.
Should you buy Target stock at the current price?
Jan Kniffen says that while Target stock looks a little more attractive after today’s sale, “they are still going through a very difficult time.”
Walmart, on the other hand is recording solid quarterly results and is growing in ecommerce “twice faster” than Target.
Plus, advertising will boost its gross margins and overall growth rate by 2025.
The industry mogul said that WMT is a tough competitor because it has “the highest amount of money, the lowest capital costs, and does everything Amazon does.”
Kniffen concluded that the retailer’s ambition to be “just like Amazon” with only 5,000 stores may be enough to choose it over TGT.
This post Why is Target losing out to Walmart and will it ever catch-up? This post may be updated as new information unfolds
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