Key takeaways
- Walmart and Target recently reported earnings that beat analyst estimates, but investors reacted differently to their results.
- Walmart's stock price jumped after the retailer released its first-quarter financial results, while Target's stock price fell after it released its earnings report.
- Both retailers highlighted how inflation is affecting customer habits, with spending focused on necessities amid a pullback in discretionary items. However, those trends seemed to benefit Walmart more than Target.
- Walmart's revenue and profit rose from the same period a year earlier as it said it benefited from “value-seeking behaviors,” while Target's revenue and profit declined.
Two of the largest U.S. retailers, Walmart (WMT) and Target (TGT), recently reported earnings that topped analyst estimates, but only Walmart's stock price jumped on news of its performance. Target's stock price plummeted when it released its results.
Both companies highlighted how inflation is affecting customer habits, with spending focused on necessities and less on discretionary items, a common theme in recent earnings reports from other retailers such as Lowe's (LOW) and Home Depot (HD). . However, those trends seemed to benefit Walmart more than Target.
Objective affected by the decline in discretionary spending
While Target's first-quarter earnings came in slightly above analyst estimates, its report on Wednesday showed profits and revenue declined from a year ago as the retailer said it continued to be negatively impacted by a pullback. in discretionary spending as inflationary pressures weighed on consumers.
Target shares fell 8% on Wednesday after the company's earnings release and have lost more than 9% of their value this week, erasing most of their gains since the beginning of the year.
Walmart says it benefited from customers' 'value-seeking behaviors'
By contrast, Walmart's report last week showed first-quarter revenue and profit rose from a year ago, and the retailer suggested it benefited from consumers' “value-seeking behaviors” and The retail giant's focus on offering lower-cost options as inflation “stretched” many consumers' budgets. Walmart also noted that it increased its share of higher-income consumers earning more than $100,000 a year.
Walmart shares rose about 7% last Thursday after the company's results were released, and have risen about 2% since then.
Drastically reduce prices to stimulate sales
In an attempt to appeal to price-conscious shoppers, Target announced Monday a plan to lower prices on about 5,000 of its popular items over the course of the summer. The announcement came after Walmart said last week that it had lowered prices on nearly 7,000 items.
“While near-term sales remain pressured, we believe TGT's focus on value positions it well for future stock gains,” Bank of America analysts wrote in a Wednesday note, reiterating a rating “buy” rating for Target shares with a price target of $190. .
Bank of America analysts also reiterated a “buy” rating for Walmart after the company's earnings report last week, and raised their price target for Walmart shares to $75 from $67, citing the “strong supply of value” from Walmart and its “momentum across all income cohorts.
Target shares are up about 2% year to date to $145.23 as of Friday's close, while Walmart shares are up more than 24% over the same period, finishing at $65.38 on Friday .
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