Walmart and Target’s quarterly results lay bare retailers’ differences

Walmart‘s stock surged this week. Target‘s shares plunged.

The rival big-box players are both known for selling an array of products including food, clothing, home goods and kitchen appliances. Both their CEOs — Walmart’s Doug McMillon and Target’s Brian Cornell — stepped into their roles in 2014.

But the retailers issued starkly divergent outlooks this week that underscored their differences, most notably in how much each relies on grocery sales.

On Tuesday, Walmart raised its financial outlook for the year after U.S. same-store sales in the third quarter rose 8.2% from a year ago when excluding fuel. A day later, Target slashed its forecast for the holiday quarter after comparable sales rose just 2.7%, with executives noting weakening trends heading into the season.

Here’s a rundown of four key factors that help explain the split in the earnings results:

Grocery routine vs. Occasional stop

Low prices vs. Fun finds

Walmart is known for its mantra of “everyday low prices” and its focus on value has become synonymous with its name. Founder Sam Walton built the company on a no-frills approach aimed at making groceries and other products more affordable.

As Americans increasingly watch their budgets, the big-box retailer’s reputation as a discounter is giving it an edge. And the company has flexed its ability to use its size and scale to keep prices low.

Walmart’s McMillon speaks often about the company being a price leader — and more recently, an inflation fighter. For Thanksgiving, the company said it would hold down the price of foods like turkey and ready-to-heat macaroni and cheese to last year’s levels.

The low prices are attracting new customers, including more higher-income households.

For the past two quarters, the company said about 75% of its market share gains in groceries have come from households with an annual income of more than $100,000 a year.

Walmart vs. Target

  • Groceries as a percentage of sales:
    Walmart: 56%, Target: 20%
  • U.S. same-store sales in the third quarter vs. year ago:
    Walmart up 8.2%, Target: up 2.7%
  • U.S. store count 
    Walmart: More than 4,700,  Target: More than 1,900

Source: Company filings

Planned purchases vs. Impulse buys

Shopper spending power

Source: https://www.cnbc.com/2022/11/17/walmart-and-targets-quarterly-results-lay-bare-retailers-differences.html