Target Corporation (TGT) is looking to take over market segments vacated by "losers" in the retail industry like the recently shuttered Toys R Us franchise, turning its focus to the toy and baby market as the calendar speeds ahead towards the holiday season.
CEO Brian Cornell explained that the company has and will continue to poach on the market share left over from ailing or defunct retailers.
"There are clearly winners and losers," he said on the earnings call on Wednesday. "We think we are migrating toward the winners' column."
He even called Toy's R Us and Babies R Us out by name, as the market gap left behind by their "losing out" will be an area the company will continue to target.
Toys R Us declared bankruptcy in September 2017, shutting down around 800 stores in June.
"As companies like Toys R Us and Babies R Us exit the market, we have the opportunity to gain that market share," he explained, building upon his statement that "both toys and babies are key categories for [the company] and we expect to see continued growth."
For context, even the ailing Toys R' Us was able to generate over $7 billion in sales in its final year of business, 36% of which came from the sale of baby products.
Analysts were inclined to agree that this area posed a unique opportunity for a retailer like Target.
"In the first quarter, TGT had strategically increased inventory within the toys and baby categories to take advantage of Toys R Us closings," Credit Suisse analyst Seth Sigman wrote in a note this morning. "We expect a meaningful impact from incremental sales in these categories during the second half."
Inventory overall increased 7% for the business in the second quarter, down from 9% in the first quarter.
To be sure, this will not be a one-horse race, as Walmart (WMT) has been open about its race to fill the same market gap leftover from Babies R Us and Toys R Us.
Specifically for babies, Walmart has been revamping its website in order to take advantage of the market gap and further to help fend off Amazon's (AMZN) advance on the Babies R Us customer base.
In an announcement posted to its website late last month, the company announced a "broader commitment to baby online", adding 30,000 baby-targeted items to its catalog in order to help it gain market share in the nearly $74 billion industry.
Increasing competition from Walmart and Amazon, both in toys and babies and more broadly, is something that Target CEO Brian Cornell thinks about every day.
With billions of dollars are up for grabs in the niche market, it is clear to see why.
