MINNEAPOLIS — Third-quarter earnings are in, and Minneapolis-based Target sales are down while Walmart sales are up. Experts say it mostly comes down to how the two stores are viewed in the eyes of consumers.
Comparable sales for Walmart rose 5.3% beating expectations. While Target, with a comparable sales growth of 0.3%, fell short. The company's stock price also fell 21%.
Akshay Rao is the General Mills Chair in Marketing at the Carlson School of Management. He said Walmart's brand identity has been defined for decades.
"They're the low-price leader in the retail business," he said. "Target is a value store, which is the trade-off between price and quality. So you get good quality at a reasonable price, as opposed to we're the lowest price always."
But lately, Target has been massaging its brand, slashing prices on thousands of items to attract folks thinking of their pocketbook.
And more people did make their way into Targets last quarter. The retailer saw a bump in store traffic, but revenue didn't rise with it.
"This talk about inflation and high prices is all over the airwaves and has a psychological impact on everybody," said Rao. "The volume of transactions per customer has, in fact, not increased. You're selling inexpensive products to price-sensitive consumers, and these are relatively low-margin products."
To rub salt in the wound, last quarter 75% of Walmart's market-share gains were from households making more than $100,000.
Rao speculates that everybody, regardless of income status, is thinking of ways to save money.
All this comes during a key season for the two retailers.
"The time between Black Friday and Christmas Eve is where retailers make between 25 and 40 percent of their annual sales and profits," said Rao.
Target CEO Brian Cornell said on an earnings conference call that's precisely the reason why they will focus on holiday merchandising and marketing plans.
"While we aren't happy about the reduction in our outlook for the remainder of the year, we believe we're managing our business appropriately," said Cornell.
