You’d think the two retailers Walmart and Target are very similar, but if you take a closer look, analysts say there are some differences. One of the two companies is currently in the lead.
• Walmart in Q2 with sales and profit growth – Target with more profit but less sales
• Companies differ in some important aspects
• Walmart benefits from strong grocery business
Q2 figures vary
The largest US retailer Walmart increased its sales in the second quarter by 5.7 percent year-on-year to $161.6 billion. Compared to the same period last year, Walmart saw a 6.4 percent increase in same-store sales. Net income climbed by more than half to just under $7.9 billion. After this unexpectedly good second quarter, the company is confident for the year as a whole. The annual results for sales and profits are likely to be slightly higher than management recently expected.
Meanwhile, Target’s revenue fell 4.9 percent to $24.8 billion in the second quarter. However, net income rose 356.5 percent to $835 from $183 million in the same period last year. This reflects a significant earnings recovery after last year’s inventory measures, the company wrote in its press release accompanying the figures.
Also, according to Yahoo Finance, footfall at Walmart increased 2.8 percent in the second quarter, while at Target it declined 4.8 percent. The value of the average receipt was up 3.4 percent at Walmart in the current quarter, while it fell 0.7 percent at Target.
Walmart benefits from focus on food and beverage category
As Bernstein analyst Dean Rosenblum told Yahoo Finance, Walmart and Target differ in a number of key ways, including their size, business segments, and customer base. For example, Walmart’s food and beverage category accounts for 60 percent of its US business – at Target, this category only accounts for about 20 percent of sales. But “in an environment where consumers are overwhelmed and only trying to cover the bare minimum, a retailer like … Walmart, the world’s largest grocer, will benefit tremendously from this disproportionate focus on stable spending,” Yahoo Finance quoted Rosenblum as saying.
According to Yahoo Finance, Morningstar analyst Noah Rohr believes that Walmart acquired customers with a similar strategy in 2008 and 2009 – although the current economic situation is not comparable to that during the financial crisis. “We’ve seen Walmart gain a lot of market share over this period,” Rohr said. “The grocery store was doing really well.” Walmart has also taken from Target “a small share” of the market with higher-income shoppers in suburban and urban markets, which Target is more likely to cater to.
According to Goldman Sachs analyst Kate McShane, “due to the general improvement in merchandise at Walmart in the second quarter […] Expect some questions about Target’s discretionary trends to arise.”
Nevertheless, one should not write off Target. “I don’t necessarily see it as some kind of zero-sum game where everyone else loses if Walmart wins with the higher income,” says Yahoo Finance Rosenblum. “We’ll see how it goes.”
Walmart stock in focus
Walmart’s current share price on the NYSE is $162.64 and its market capitalization is $434.08 billion. This year, Walmart shares have already increased by 14.70 percent (as of the closing price on August 31, 2023).
At TipRanks, 30 Wall Street analysts have issued a 12-month target price for Walmart over the past three months. 26 of the analysts recommend the stock as a buy, while four of them recommend holding the stock. Analysts’ average target price is $178.32, around 10 percent higher than the current share price.
Target stock at a glance
Target stock is currently trading at $126.57 on the NYSE and has a market capitalization of $56.98 billion. Since the beginning of the year, it has lost 15.08 percent in value (as of the closing price on August 31, 2023).
Over the past three months, 29 Wall Street analysts at TipRanks have issued a 12-month price target for Target stock. Of the 29 analysts, 14 recommend buying the share and 15 recommending holding it. Analysts’ average price target is $149.56, which represents upside potential of 18 percent from the current share price.
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