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Target has spent $1 billion building out its next-day delivery capabilities over the last two years. Sounds like a lot of money right?

Wrong.

If you do the math, Wal-Mart and Amazon are spending multiples of Target’s next-day delivery initiative, says Retail analyst Brian McGough.

“Over the last two years, Wal-Mart has spent $10 billion. So Wal-Mart is outspending Target by a factor of 10,” McGough says in this excerpt from a recent edition of The Macro Show. “Amazon spent $12 billion. So you’ve got $22 billion of embedded cost just over a two year time period between Amazon and Wal-Mart in this battle for next day delivery. Target goes ahead and spends $1 billion.”

Meanwhile, Target is spending too much money remodeling its stores with little to show for it. “Target is putting a lot of money into the wrong part of PnL and balance sheet – taking operating asset turns down and margins down which is ultimately going to be an earnings hit and multiple depressor,” McGough says.

Watch the full clip above in which McGough breaks down these numbers in more detail.

Target: Losing The Battle To Amazon & Wal-Mart - investing ideas