Target (NYSE: TGT) recently released its latest earnings report, revealing a 3% year-over-year revenue decline to $24.53 billion in the first quarter of fiscal 2024. Despite this, the figures met analyst expectations. However, the concerning note was the nearly 4% drop in comparable-store sales, marking the fourth consecutive quarter of decline.
Contrastingly, Walmart (NYSE: WMT) saw a 37% stock surge over the past three years, outperforming Target by a significant margin.
Image source: Walmart.
Walmart’s Superior Scale and Diversification
Walmart’s extensive reach across 19 countries with 10,607 stores and a robust e-commerce presence stands in stark contrast to Target’s dependence on the US market. Walmart’s diversified portfolio includes Flipkart in India and a significant stake in JD.com in China, giving it a global edge.
Strong Comps Growth
While Target struggled with declining comps, Walmart’s resilience in the face of macro headwinds and boycotts led to substantial growth, especially in its grocery segment. This difference in sales mix played a crucial role in their performance.
Superior Earnings Growth
Despite Target’s cost-cutting measures, Walmart’s proactive stance and streamlining efforts have propelled its earnings growth ahead. Walmart’s projected rise in EPS by 4% this year outshines Target’s modest 2% growth expectation.
Valuation Reflection
Although Target seems cheaper based on earnings multiples, Walmart’s stronger fundamentals justify its premium valuation. With diversified operations, robust comps, and solid earnings, Walmart earns its higher price tag.
Survivors of the retail upheaval, both Walmart and Target navigated the pandemic successfully. However, Walmart’s sustained growth trajectory in the US market positions it as the frontrunner over Target, especially in e-commerce and warehouse club segments.
Future Outlook
Given Walmart’s continued outperformance and strategic positioning, it’s likely to maintain its lead over Target for the foreseeable future, making it an attractive investment prospect.