Headed into the holidays, the outlooks for Walmart and Target are veering in different directions as inflation-weary consumers continue to buy cautiously.
Walmart shares soared to an all-time high this week after it raised its full-year profit forecast Tuesday. Target’s stock tumbled 21% Wednesday after it lowered its earnings outlook for the year, with shares now trading at their lowest level in the past year.
Walmart and Target are economic bellwethers and the largest big-box discounters in North Carolina and the U.S. Target CEO Brian Cornwell said on an analysts’ call that “consumers tell us their budgets remain stretched and they’re shopping carefully.’’
Comparable-store sales by the Minneapolis-based retailer edged ahead 0.3% in the quarter ended Nov. 2, while Walmart’s U.S. same-store sales, excluding fuel, climbed 5.3% in the third quarter. “In-store volumes grew, pickup from store grew faster, and delivery from store grew even faster than that,” Walmart CEO Doug McMillon said.
Bentonville, Arkansas-based Walmart operates four times as many stores in North Carolina as Target. As of Feb. 3, Minneapolis-based Target reported 53 stores in the state, compared with Walmart’s 216, according to a securities filing for the fiscal year through Jan. 31, 2023.
In North Carolina, Walmart operated 143 super centers, six discount stores, 45 Neighborhood Markets and other small formats and 22 Sam’s Club warehouses through January 2023.
Looking ahead, Walmart increased its full year projection for adjusted per-share earnings to $2.42 to $2.47. That’s up from $2.35 to $2.43 in August. For the year, Target lowered its adjusted EPS forecast to $8.30 to $8.90 from an August projection of $9 to $9.70.
“Target disappointed once again, with the company not only missing estimates but also guiding lower,’’ Zacks said in a third-quarter note. “This is in sharp contrast to what we saw in Walmart’s beat-and-raise quarterly report, where the company’s positive commentary about trends in its general merchandise category had raised hopes of strong results from Target.’’
Target is more reliant on discretionary spending, which over the past two years has “favored travel, leisure, dining, and other ‘experiential’ services in the post-Covid period,’’ Zacks said. “Walmart is more into must-have groceries.’’
Walmart also appears to be operating more effectively than Target, analysts said. ln the third quarter, softer-than-expected sales of discretionary and the timing of the receipt of merchandise due to the East Coast ports strike “led to higher-than-expected costs in our supply chain,’’ Target’s CEO said.
Target’s gross profit margin shrunk 0.2 basic points to 27.2% in the quarter. By contrast, Walmart’s margin edged up 0.2 points to 24.2%.
In mid-Thursday trading, Target’s shares were little changed, while Walmart gained 1.5% to $88.45, a record high.
