It was something of a feat of business management for Amazon.com to actually lose money in a quarter on $20.58 billion in sales.

Skip the complex explanations, it's really pretty simple. Amazon's leadership spends more money than the company takes in, and easily feels justified in doing so.

So what's it like for Target to compete against a company that doesn't think it needs to make money?

A Target spokesman sensibly steered clear of directly discussing this high-profile competitor, but we already know what it's like.

It's a lose-sleep-at-night, stomach-constantly-churning challenge.

Amazon has earned good profits in the past, but lately it seems to find more and more things to spend money on. Last year earnings per share had fallen to 59 cents and this year, with ventures like a new smartphone called the Fire, Amazon is expected to lose money.

Even with these losses Amazon was still valued in the market last week at about $140 billion, although the stock price has declined more than 20 percent this year.

"Can you tell us, or remind us, what financial measures are important to you?" asked veteran analyst Aram Rubinson of Wolfe Research on Amazon's recent quarterly conference call with analysts. "Because it's a little hard to see any of it making positive progress."

The company's chief financial officer responded that free cash flow and return on invested capital, hallmarks of financial discipline, are what really matters.

Rubinson said thanks, and then put out a sharply critical research report under the headline "This Is Getting Old."

It's easy to think Amazon's recent spending makes it an irrational company, said analyst Mark Miller at the Chicago investment firm of William Blair & Co.

"Retailers do. If you asked [Target CEO] Brian Cornell, he would say yes," Miller said. "But investors don't view them as irrational."

The company justifies its spending as nothing more than trying to realize some of the great opportunities it sees. That's why today Amazon has many more moving parts than it did as just an e-commerce retailer shipping to customers from a warehouse.

Anyone reading through its long list of highlights of the third quarter, some of which cost a lot of money, could easily guess that Amazon is now a cable TV company or a manufacturer of consumer electronics.

"Retailers shouldn't feel too happy about" Amazon's recent quarterly loss, Miller said. "The core physical goods e-commerce business in North America, it actually accelerated. The piece that's lined up against Target and Wal-Mart actually grew faster in the third quarter."

A rational company

The reason Amazon lost money was in part because of issues like the write-off of inventory of a smartphone the company never should have built. And the reason most investors see Amazon as a rational company, Miller said, is the money Amazon is also spending on things that clearly help capture more market share.

For example, Amazon is adding a net of 13 new distribution centers this year, including ending the year with more than 15 of its new "sortation centers." These are different from a traditional warehouse where workers picked items and packed them up to be collected by a shipper at the loading dock.

Instead, Amazon workers deliver packages early in the morning to individual post offices to arrive in that day's mail. No more reliance on shippers who really can't be counted on.

"That's viewed as building competitive advantage," Miller said. "It's allowed Amazon to do two-day shipping, one-day shipping, even same-day shipping. Getting closer to the customer is viewed as something that's going to increase the rate of growth."

Investing capital into TV shows and other media content, a strategy to add high-spending customers, is also justifiable. Building a smartphone that's no better than Apple's iPhone, he said, and then selling almost none of them, well, that outcome speaks for itself.

But even as Miller argues that Amazon managers are rational in their spending behavior, he can't help but add that he's certainly noted the tag line that appears under the names of the Amazon employees who e-mail him.

It says "Work hard. Have fun. Make history."

Competing in the digital age

Target is competing against a company that's intent on making history. Target, meanwhile, has the more old-fashioned goal of making money.

It would be surprising to hear a Target executive describe Amazon as irrational. My suspicion is that Target knows very well that Amazon expects good returns from investing in 15 new distribution centers that partly take over the job of the post office.

The only question is how Target responds.

Target spokesman Eric Hausman pointed out that the company's 1,925 stores are an asset when competing online. The company has expanded the number of products customers can buy online and pick up at the store, and it's also using stores as small distribution centers that can ship items directly to the customer. Target also just announced free shipping through the busy holiday season.

"We are obviously looking to compete in this new digital age, in different ways for sure," Hausman added.

These seem like common-sense good steps to serve Target's online customers, because it's clear what Target can't do is match Amazon's spending.

Amazon in the most recent quarter invested $1.38 billion in property and equipment, and that includes internal-use software. It spent an additional $1.16 billion acquiring assets under capital leases and an additional $343 million acquiring property under a different form of lease.

Target in the first half of its fiscal year spent a little over $1 billion acquiring property and equipment, and of course that includes spending on its network of stores.

In theory, of course, Target could take a far more aggressive approach. It has the balance sheet to do it.

It could explain on its upcoming call with investors and stock analysts later this month that the operating income projected for the next fiscal year won't be the billions of dollars the analysts expected. More like zero.

It could tell people that it will be spending a lot more on its online business, tripling the budget for the website's continuing development, adding capability for same-day delivery for thousands more products and across the country, along with free shipping more or less forever.

The result would be silence, as the shareholders and analysts tapped out sell orders and sell recommendations on their keyboards.

Only Amazon gets to spend its way to not making money.

lee.schafer@startribune.com 612-673-4302