Target is Hiking Backwards and Walmart is Enjoying it

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Before Target’s earnings they were doing solid after hitting lows in around October from their highs in 2021 but it now just looks like Target likes to take two steps back for every one step forward and Walmart is doing amazing as always. But I’m not completely cynical about Target because they seem like they want to climb the mountain and compete with the big guy but just like many struggles, especially with the unsteadiness of the current economy. But let’s take a step back and see what happened.

Target released their earnings on 05/22 and we not only saw an earnings miss of $2.03 vs $2.06 but also a decline in sales of about 3% YoY, which is never good. This comes after earlier in the week when Target said they plan to cut prices on about 5,000 goods that are frequently purchased. And ironically these goods like food and household goods happen to be the big ones that affected their decline in sales.

So where does this leave us with a market that is lately in love with stocks like Walmart and Costco which are both up over 20% YTD, while Target lags. Well, the way FatNarwhal sees this is pretty simple: companies like Walmart and Costco are obvious players that have offered consistent gains in a market plagued with uncertainty over inflation and international factors that haven’t necessarily helped the retail or wholesale companies a ton. But what we do see is still an opportunity as Target even though they have erased some of their positive gains from November, they are still making competitive moves to keep their market share in this tough industry and fight against the fable Walmart. So with still fairly solid fundamentals this retreat Target made the other day because of disappointing earnings could just be a spot to get in as they attempt to crawl back to their 2021 highs. Finally, I suggest simply going through some of the big retailer statements and looking over how even though Walmart is great and safe as always Target could potentially be a play.