With Walmart and Target each posting strong earnings, especially online, in the second quarter, the picture looks a lot more nuanced than what popular narratives may suggest. On Wednesday, Target reported increasing revenue at $17.55 billion for the quarter, driven by a 6.4% increase in traffic and a 41% increase in online sales.
Meanwhile, last week, Walmart also beat revenue expectations and reported an increase of 4.5% in same-store sales, an outcome that also soundly beat analyst projections of 2.3%. Moreover, it reported that its U.S. e-commerce sales grew by 41% in the quarter, although it didn't release specific sales figures.
On Wednesday, Target shares rose 3.2%, Walmart fell 0.4% and Amazon increased 1.1%.
A strong economy is one factor driving a rosy quarter for Target (TGT) - Get Free Report , Walmart (WMT) - Get Free Report and Amazon (AMZN) - Get Free Report , which also saw bigger-than-ever Prime Day sales and an overall muscular quarter.
"You've got a favorable macro environment; consumers have money to spend and they're spending," said Moody's retail analyst Charlie O'Shea.
Another factor: The retailers play in slightly different sandboxes at least for now. As noted by TheStreet's Eric Jhonsa, the customer bases of Walmart and Amazon Prime are meaningfully different. And with e-commerce still accounting for just a relatively small slice of all U.S. retail sales, brick-and-mortar retail still dominates.
"Amazon is dominating online retail, but they're not dominating retail. Amazon's got 20-25% of online spend in the U.S., but online spend is only 15% of all retail sales," O'Shea added.
With both Target and Amazon posting strong growth in online sales, should Amazon be worried that primarily offline retailers are catching up? Not necessarily.
It's Amazon that may be playing catch-up, at least in one area: physical stores. The online giant is busy building its offline presence, including Amazon Go, which launched in the Seattle area with plans to expand in other cities; Amazon Books, with 16 physical locations nationwide, and a few dozen pop-up shops selling Amazon devices and other products in the U.S.
"There's a lot of retailers out there that are growing their online businesses massively, a lot growing at a pace faster than Amazon," O'Shea added. "Amazon doesn't have much of a brick-and-mortar presence. That's where the battle is going to be fought in retail."