Target 'needs to do a little more work on the food side': analyst

Target (TGT) could hit another bulls-eye when the company reports second quarter earnings before the bell on Wednesday.

In an interview with Yahoo Finance’s On The Move, Karen Short, a Barclays managing director, said the company has managed to get momentum back with strong online and in-store traffic and said that its omni-channel selling strategy is working. Even when it comes to food it remains competitive in pricing to rivals like Walmart (WMT).

But “I”m not so sure its a destination for food, its kind of, if you’re already there you’re going to buy food,” she said, adding that Target needs to shore-up its approach to food. “I would say they’ve definitely strengthened the rest of their business but they probably need to do a little more work on the food side.”

On Monday, Target announced it will be launching a private food label called “Good & Gather.”

Meanwhile, Target faces stiff competition from not just Walmart, but also Amazon — who are locked in a battle to bring one-day shipping to the consumers across the country. In Walmart’s second quarter results last week the company revealed its NextDay shipping program - launched in May — now covers 75% of the U.S. population.

A newly constructed Target store is shown in San Diego, California May 17, 2016. REUTERS/Mike Blake/File Photo

Meanwhile, the U.S.-China trade war looms and the threat of tariffs on more consumer goods pose a threat to all retailers which have exposure to rising costs. Though headwinds from trade the spat worry investors, Short said Target has a lot of negotiating clout and is important to its vendors, which could insulate it from the worst of the trade war.

But Short noted that in the past when Target had to raise prices due to increased costs, the retailer saw a dampening in demand. “Target from an investors’ standpoint is not fully in the winner camp,” she said.

Yvette Killian is a producer for Yahoo Finance’s On The Move.

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