(L) A customer pushes a shopping cart full of groceries outside a Wal-Mart in Ann Rogers, Arkansas, and (R) a pedestrian walks past a Target store in the Tenleytown neighborhood of Washington, DC.

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Target And walmart Both cater to frugal shoppers, but the two big-box retailers have seen very different results when it comes to Winning their dollars.

Target Wall Street sales missed expectations For the second quarter of the financial year. walmart Beat Wall Street’s revenue estimates for a period of three months. Target slashed its forecast for the year, while Walmart raised its outlook.

individual performance of companies Explain some of the basic differences between retailers.

Walmart, the nation’s largest grocer, earns more than half of its annual revenue from selling groceries — a category that shoppers flock to even in tough times. Target derives only about 20% of its annual revenue from grocery, making it heavily reliant on sales of items such as clothing, earrings and pillows that customers can skip if they’re feeling frugal.

target, which Tends to attract a more affluent clientele Compared to Walmart, could see more dramatic change in spending as consumers spend more taylor swift tickets And european holidays, Those shoppers may be trying to balance spending on services with shopping at Walmart or places considered cheaper. TJX Companies– owned by TJ Maxx, Marshalls and Home Goods, which Recorded year-on-year growth in sales and profit earlier this week.

Yet the contrasting results for Target and Walmart also show how some retailers are having more success than others. catering to the playful Dealing with consumer and economic adversity.

Wall Street added to the confusion with its own counter-intuitive moves. After the earnings report, it bought shares of Target on Wednesday and sold shares of Walmart on Thursday. The potentially surprising move may reflect the companies’ recent stock performance, as Walmart shares are up nearly 10% this year, compared to a nearly 13% decline in Target shares during the same period.

Despite the differences, the companies showed they still have a lot in common. Target and Walmart leaders offered similar descriptions of American consumers who now think twice before spending money on non-essential items while paying more for food.

“As we look at the consumer landscape today, we believe consumers are still challenged by the level of inflation they are experiencing in food and beverages and household essentials,” Target CEO Brian Cornell told reporters. are looking.” “So it’s absorbing a huge chunk of their budget.”

John David Rainey, Walmart’s chief financial officer, expressed a similar sentiment on a call with CNBC, describing consumers as “selective or discerning.”

Still, both executives said buyers may be persuaded to spend when they come up with a good deal or when they’re ready to celebrate holidays or seasonal events.

Here’s a closer look at three key ways Target and Walmart’s most recent quarterly results differed:

online winners and losers

As shoppers head out into the world again, some retailers have seen double-digit declines in online spending.

Target followed that pattern in the second quarter. Its digital sales declined by 10.5% year-on-year.

Walmart reversed the trend. Walmart US’s e-commerce sales grew 24% in the second quarter.

Both retailers point to curbside pickup as a key driver of online sales — a key differentiator from competitors. Amazon.

Walmart attributes the online sales advantage to in-store pickup and delivery as well as greater advertising revenue. It also credited its third-party marketplace, which is Walmart’s take on Amazon’s online business model. The online marketplace is made up of sellers who list items on Walmart’s website, which helps expand merchandise assortment and comes with a higher profit margin than selling items directly online.

Customers are also visiting Walmart’s website and app more often, says retailer’s CFO Renee said. Weekly active digital users grew by more than 20%, he said on the company’s earnings call. The number of customers purchasing items on Walmart’s Marketplace rose 14% in the second quarter, with double-digit growth in home, apparel and hard line, a category that includes sporting equipment and tools.

Target has fallen behind in online sales. But it is taking steps to try to reverse the trends.

Target Chief Growth Officer Christina Hennington said on Wednesday’s earnings call that the retailer will spend the next three months reshaping its digital experience. He added that the website will include “differentiated landing experiences, more personalized content, enhanced search functionality, ease of navigation and other updates to bring more enjoyment and convenience to our digital guests.”

(Walmart, on its part, refreshed the look Its website and app in the spring.)

Target will tout another advantage to attract more online business. it starts this summer Adding Starbucks drinks to curbside pickup at most stores.

Mixed Effects on Discretionary Spending

For more than a year, Americans have generally shown a reluctance toward new clothing, gadgets or other items they can’t live without.

This has made life difficult for retailers, who rely on big-ticket and impulse-driven purchases to drive sales. Merchandise has a higher profit margin than selling basic items like milk, bread, and paper towels.

Walmart CFO Rainey pointed to signs that could be changing. He said there was a “slight improvement” in discretionary items in the second quarter, although general merchandise sales still declined by low double digits year over year. He said sales of blenders, hand mixers and other kitchen appliances grew as some consumers cook more at home.

Lakshya did not get much relief. Sales of frequency categories, such as food and beauty items, weren’t enough to offset the retailer’s weaker discretionary sales.

Target’s Hennington said trends in the discretionary categories “remain soft overall.” He pointed to a few exceptions, including the popularity of Taylor Swift vinyl and the colorful Stanley tumblers he designed with Chip and Joanna Gaines.

However, both retailers said they were stocking essential items and placing more modest orders for discretionary items. For example, Target said that at the end of the second quarter, its overall inventory levels declined year over year — but it intentionally reduced discretionary inventory even further.

Optimism versus pessimism about what lies ahead

High food prices, rising interest rates, etc. are causing great concern to the retailers. student loan payment refund,

But Walmart and Target contrasted tones when talking about the months ahead.

Target CEO Cornell said sales trends improved in July, but it’s not enough to keep the company from cutting its outlook for the year. When Cornell and chief financial officer Michael Fidelke were asked about the back-to-school shopping spree, they insisted it was early in the season.

Walmart struck a more confident note. On the earnings call, CEO Doug McMillan said that general merchandise sales outperformed the company’s expectations. The popularity of GLP-1 drugs, such as Ozempic that are used for diabetes and weight loss, could also drive further foot traffic and revenue, he added.

And, he added, “the trends we see in general merchandise sales make us feel more optimistic about those categories in the back half of the year.”

McMillan said the start of back-to-school has been better than the company predicted. The spending correlates with year-end consumer spending — which could be a positive sign for the crucial holiday season, he said.

“Usually when back-to-school is strong, that bodes well with Halloween and Christmas and GM [general merchandise] In the back,” he said.

Target also shared similar hopes that customers will open their wallets as pumpkin spice and gift-giving season approaches and reverse the retailer’s sales decline. July saw an improvement in traffic and sales trends, attributed in part to the spending of the Fourth of July holidays.

“We know our guests want to celebrate culturally and seasonally-relevant moments and will be engaging in those moments in a big way throughout the third quarter and the upcoming holiday season,” Hennington said.


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